The end of Petrobras’ gas, refining divestment commitments

Brazil’s antitrust authority Cade has approved amendments to the natural gas and refining divestment deals signed with federal oil company Petrobras. 

Inked in 2019, during the Jair Bolsonaro administration, the terms were designed to reduce the state-run firm’s dominant position in those markets. 

Last November, Petrobras asked to renegotiate the terms with Cade, which, according to local experts, could pave the way for the company to repurchase assets sold in recent years and resume a verticalization strategy.

With the amendments, the remaining divestment commitments were canceled, namely the sales of natural gas pipeline operator Transportadora Brasileira Gasoduto Bolívia-Brasil (TBG), as well as the refineries Abreu e Lima (RNEST), Presidente Vargas (Repar), Gabriel Passos (Regap), Alberto Pasqualini (Refap) and Lubrificantes e Derivados do Nordeste (Lubnor). 

Officially technical, Cade’s decision reflects the change in the strategic orientation of Brazil’s energy sector after Luiz Inácio Lula da Silva took over as president in January 2023. 

The termination of the divestments was a demand of local oil workers' unions such as FUP – a key Lula ally that was dissatisfied with Petrobras’ recently fired CEO Jean Paul Prates. 

Thiago Silva, a partner at law firm Vieira Rezende Advogados, said TBG remaining under Petrobras' control does not prevent the natural gas market from being opened up.  

"I believe that as long as transportation tariffs are strictly regulated and the regulatory agent [ANP] can intervene, guaranteeing indiscriminate access for any user, it's possible to mitigate the potential abuses of the dominant agents in transportation," he told BNamericas.

He added, however, that by allowing Petrobras to operate vertically, isonomy means that other companies can follow suit. 

"This affects discussions such as the case of the Subida da Serra gas pipeline," Silva said. 

The gas transportation project is in the hands of Cosan's Compass, which also owns São Paulo's gas distributor Comgás.  

Petrobras negotiated the sale of TBG with EIG Global Energy, but, according to the federal oil giant, the bid submitted by the group was 20% lower than the minimum value of its economic and financial evaluation of the asset. 

Addressing Cade, the company claimed that the sale of two other gas transporters that belonged to it – Nova Transportadora do Sudeste (NTS) and Transportadora Associada de Gás (TAG) – as well as the distribution holding company Gaspetro, were already enough to fulfill its commitments. 

NTS was sold to Brookfield/Itaúsa and TAG to Engie/CDPQ. 

Petrobras also sold its cooking gas distributor Liguigás to Itaúsa, Copagaz and Nacional Gás Butano. 

The amendment signed with Cade establishes additional safeguards for the process of electing independent members to TBG's board of directors. 

The agreement also provides for the independence of TBG's management board from Petrobras, as well as the impossibility of transferring employees from Petrobras or its subsidiaries to join TBG on the same board. 

With regard to refining, Thiago Silva believes the situation is different, starting with the fact that there is no legal obligation to de-verticalize as there is in the new gas law. 

In addition, the global reality is that producing companies own their own refineries, which are built in an integrated way to process hydrocarbons.

"Petrobras' refining park was built in an integrated and complementary way, and it is debatable whether such refineries, when analyzed individually, make sense for an entrepreneur," he said.  

Petrobras sold the Landulpho Alves (RLAM, now Mataripe) and Isaac Sabbá (Reman, now Ream) refineries to the Mubadala and Atem Distribuidora groups, respectively, as well as the SIX shale industrialization unit to Forbes & Manhattan. 

The company also signed a contract to sell Lubnor to Grepar Participações but the deal was canceled. 

The sale processes for the other refineries ended up not going ahead due to obstacles such as the COVID-19 pandemic, low market interest and the impossibility for the same buyer to purchase different assets, Petrobras told Cade. 

In return, the antitrust body ordered the creation of mechanisms to monitor data related to Petrobras' commercial activities in the oil and oil products markets, making it possible to verify the non-discriminatory nature of the company's prices. 

Petrobras will also have to disclose non-discriminatory guidelines for oil deliveries by sea to any independent refinery in national territory and offer contracts that allow 'cargo to cargo' negotiation to any independent refinery for deliveries by sea.

Marcus D’Elia, a partner at consultancy Leggio Consultoria, said Cade’s decision is a step backwards in the search for a free refining market.

“Cade’s position seems contradictory, since there is a rigorous assessment of the impact on competition of fuel distributor projects when there’s investment in new assets. However, in the refining market, where Petrobras owns around 80% of production and openly announces that it is seeking to negotiate a stake in competitors' refineries, there seems to be no concern about competition,” he said in a press release.  

In a statement, Petrobras said the amendments reflect the respect Petrobras has for the antitrust authority and the agreements signed, preserving the country's business environment.