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Petrobras targets domestic market for refining unit

05.23.2012  |  HP News Services

Costs associated with transporting oil products to hubs in Europe, the US and Asia make it less practical than using production domestically in Brazil, an executive said.

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By JENNY GROSS

BARCELONA -- A refining executive at Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, said costs associated with transporting oil products to hubs in Europe, the US and Asia make it less practical than using production domestically.

Claudio Romeo Schlosser, Petrobras executive manager of refining, said on the sidelines of the Global Refining Summit in Barcelona that investing in Brazil is the best way to cash in on the country's oil reserves.

Petrobras plans to build five new refineries in the next few years so it can meet Brazil's demand for oil products without having to import large amounts of gasoline and diesel.

The company reported last week that its first-quarter net profit declined 16% year-on-year.

Part of the reason Petrobras has seen its earnings fall in recent quarters is because Brazil doesn't have enough refining capacity, and it must import expensive gasoline and diesel fuel to meet booming domestic demand.

The distance between the Brazilian coast and major refining centers is at least 5,000 miles, Schlosser said, which would take between 16 and 33 days to ship product. Petrobras would focus on meeting the needs of the domestic market, he said.

Underpinning growth in the Brazilian market is demand for diesel and jet fuel, he said, adding that the company expects strong growth for those products to continue.

More than half of Brazil's goods are transported by trucks that use diesel, compared to much lower figures in countries such as the US, he said.

When Brazilian refineries come online, exports from Brazil, and Saudi Arabia and Russia, will help cushion diesel shortages in Europe, according to the International Energy Agency's most recent report on oil markets.


Dow Jones Newswires

Cover photo courtesy of Flickr user



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