Petrobras said it may invest in chemicals in an announcement that coincided with reports on the coming sale of what is not just Brazil and Latin America´s biggest petrochemical company but also North America´s biggest polypropylene producer, Braskem, where Petrobras is the top minority partner and will have first option when and if majority owner, Novonor, offers equity to any suitor.

Image courtesy of Lucas Monteiro, Pexels

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Petroleo Brasileiro SA (Petrobras) said in a statement dated June 13, 2023 that “its activity in the petrochemical sector is one of the strategic elements of its 2024-2028 plans, as approved by the Administrative Council, and was communicated to the markets on June 1, 2023.”

“At this time Petrobras is carrying out analysis to define the best alternative for the execution of its strategy, and there isn’t any decision from the executive director or the administrative council in relation to the process of divestment or increase in participation in Braskem,” it added.

A day after that publication, on June 14, officials at Braskem, also the biggest polyethylene producer in Mexico in a partnership with local group Idesa, told Brazilian stock authorities that it had itself reached out to Petrobras to learn more after the stock authority officials had requested information from management.

Luiz Inacio Lula da Silva, who was Brazilian president twice, first between 2003 and 2007, and then from 2007 to 2010, and a member of the Workers Party, won the closest elections ever in Brazil in October 2022 by defeating right-leaning opponent Jair Bolsonaro (2019-2022) and is currently in his third term in office.

Petrobras internal procedures

At Petrobras  “decisions over investment or disinvestment are taken based in analysis based on criteria and technical studies, in observance with government practices and applicable internal procedures,” it said.

“Facts judged as relevant about the matter will in time be divulged to the market,” said officials at Petrobras, founded in 1953. While owned in part by the state, the company also has equity traded in Brazil and as American Depositary Receipst (ADRs) in New York.

The company´s exploratory and production activities include works in the Gulf of Mexico and in Africa.

Oil and gas production at Petrobras

Petrobras total operated production reached just over 3.7 million barrels of oil equivalent per day in the January-March period.

As per its website, Petrobras owns 13 refineries in Brazil that process about 80% of the gasoline consumed in the South American country. Brazil has capacity to process just over 2.4 million barrels of crude oil per day into oil products.

The Brazilian fuel market is unique in that most vehicles run on 100% gasoline, or alternatively fully on sugar-cane based ethanol, or on any combination. Drivers can switch between the two depending on prices.

According to a Statista report from 2022, Brazil then had 47 million vehicles in circulation, an increase from 37 million in 2012. The development of dual ethanol-gasoline vehicles is a result of government-led efforts as far back as the 1970s when Brazil worked to improve its trade balance.

According to the Petrobras first quarter 2023 statement, the company exported 733,000 barrels per day of oil during January-March 2023. But it also imported 204,000 barrels per day of oil products during the same time.

Petrobras exported during all of the first quarter of 2023 a total of 132,000 barrels per day of fuel oil. It imported in the first quarter of 2023 as many as 70,000 barrels per day of diesel, 39,000 barrels per day of gasoline, and 34,000 barrels per day of LPG.

Braskem´s other suitors: ADNOC, Apollo and Unipar

Braskem has in past weeks informed about efforts by Abu Dhabi National Oil Co. (ADNOC) and its partner, the investment group Apollo, to buy Braskem.  

Braskem´s owners said in May that they did not even plan to hold talks with the ADNOC-Apollo suitors, according to Braskem´s management correspondence to stock authorities at the time.

Then on June 13 Braskem officials sent a correspondence to stock authorities to provide information about another potential buyer, the Brazilian-based chemical company Unipar Carbocloro.

According to that correspondence, Brazilian stock authorities had sought information from Braskem because on June 11 local Brazilian media had published reports that there had been an offer made to the Odebrecht family of about 10 billion reais for Braskem that had been “well” received by family shareholders and creditors. 

That report said the offer beat the 47 reais per share that had been offered by ADNOC, despite being equivalent to only about 35 reais per share, because in the case of Unipar, that payment would be “100% in money.” 

Unipar Carbocloro, founded in 1969 and which describes itself as leader in chlorine and caustic soda production, and also one of the biggest PVC producers in Latin America, published on March 20 a statement that said that its first quarter results were its best ever. Net revenue for the first quarter period was at 7.3 billion Brazilian reais.

Unipar describes itself as one of leading suppliers of South America´s paper, textiles, disinfectants, aluminum, pharmaceutical, and beverage industries. It has offices in Sao Paulo and Buenos Aires and its main production facilities in Bahia Blanca, Argentina, and in the Sao Paulo region, and Bahia, in Brazil.

Braskem has been informing the market for at least the past couple of years that its majority owner Novonor (formerly known as Odebrecht after the founding family last name) and its biggest minority shareholder Petrobras had been contemplating a sale of up to their entire stake in the company. Back in 2021 Braskem´s management explored whether the company would be worth more sold in one piece or in parts.

Novonor owns just over 38% of Braskem shares but 50.1% of its voting stock.

Brazilian Globo newspaper noted in November in a report that Petrobras will have first acquisition rights when Novonor offers Braskem.

By Renzo Pipoli

(US $1 = 4.78 reais)