Political Pressure Mounts Against Lubnor Sale


Political Pressure Mounts Against Lubnor Sale
Petrobras logo on the facade of its headquarters building in Vitoria, Espirito Santo, Brazil. © SERGIO V S RANGEL

While Petrobras and Grepar Participacoes await the conclusion of a second regulator review of Grepar’s bid to buy the Lubnor refinery in Fortaleza, Brazil, an expanding chorus of the national government is calling for the deal to be cancelled.

President Luiz Inacio Lula da Silva this week made his strongest statement yet for stopping several Petrobras divestments that have been agreed to but not completed, suggesting that a political resolution will halt them. In an interview Tuesday with news organization Brazil 247, the president suggested that there may not be legal grounds for stopping those deals since agreements were already reached.

“There is a legal fight that we want to resolve, and we are going to solve it in politics and not [in the] legal area,” he said.

Before that, a government ministry called for the deal to be tabled for 90 days so that it may be reviewed in light of new energy policies set by Lula. Meanwhile, a union of refinery workers called a strike beginning later this week to protest Petrobras’ stated intention to follow through on the sales.

The sell-off of half of Petrobras’ refineries was one of the main initiatives of Lula’s predecessor, Jair Bolsonaro, who wanted to spur competition in the energy sector and to raise funds for the government. In the wake of his election victory over Bolsonaro last year, Lula vowed to halt the divestment initiative but suggested it was too late to halt deals that had already been entered.

Grepar’s purchase of the Lubnor refinery, which includes a naphthenic base oil plant with capacity of 1,290 barrels per day, cleared was seemed to be a final hurdle late last year when the Court of the Administrative Council for Economic Defense signed off on it. But objections were raised by companies in the asphalt and lubricant industries – the refinery also produces asphalt – and a counselor to the competition court said in January that the case should be reviewed again.

Lula has echoed critics of the divestment initiative, complaining that it gave up valuable government assets, that proper protocols were not followed and that the energy company was fleeced in the deals that were completed.

Petrobras agreed in May of 2022 to sell Lubnor, which is formally named Refinaria Lubrificantes e Derivados do Nordeste, or Northeastern Lubricants and Derivatives Refinery. Grepar is a consortium led by Greca Asfaltos, an asphalt company headquartered in Araucaria. Grepar has stated that it intends to make capital improvements to the refinery, including the base oil plant.

The department that called for tabling the agreed-to asset sales was the Ministry of Mines and Energy, which emphasized that Lula has revised national energy policies since entering office.

The Single Federal of Oil Workers called for the strike scheduled to begin Friday.

Petrobras officials stated last week that they believe the sales of Lubnor and two other refineries should proceed to closing. Some pundits have warned that the government could be sued if nullifies those deals now.