Petroleo Brasileiro S.A. has agreed to buy lubricants businesses and other downstream assets in Colombia, Paraguay and Uruguay from Royal Dutch Shell plc, the companies announced Thursday. A Petrobras official said the deal gives the Brazilian company an opportunity to expand its lubes operations in other parts of South America.
Petrobras, the national oil company of Brazil, said it will pay approximately $140 million to acquire Shells fuels operations in Colombia and all of Shells activities in Paraguay and Uruguay. The transaction includes a lubricant blending plant in Bogota, Colombia, with annual capacity of 38,000 kiloliters (33,600 metric tons) and assets in Paraguay and Uruguay that represent annual lube sales of 5,000 kiloliters and 2,000 kiloliters, respectively.
Those activities pale in comparison to the size of Petrobras existing lubricants business, but the companys coordinator for international commercialization of lubricants said they will boost its efforts to become more of an international player and a leader in Latin America.
The volumes are not huge, but this is an important acquisition in terms of experimenting in new markets, Renato C. T. M. de Oliveira said. Petrobras has exported lubes to Uruguay and Paraguay but has never had a local sales force. Now we will taste a different kind of business, not only with a local sales force but also with a sizable fuels network. In Paraguay and Uruguay, a gas station network is important as a sales channel for lubes and also for [brand exposure].
In Colombia, on the other hand, a fuels network is more important for [exposure].
The deal includes a blending contract calling for Petrobras to supply Shell Colombia with 31,000 kiloliters of lubes per year. Oliveira said Petrobras is currently in a venture that shares a Chevron blend plant in Colombia but that Petrobras will vacate it within a year.
Petrobras is currently the fourth-largest lubricant supplier in Colombia, but believes it can grab a third of the market in one or two years, moving ahead of Shell to occupy the top ranking. In Uruguay it plans to battle for the second position behind national oil company Ancap.
Shell said it decided to sell its assets as part of an ongoing process of managing its portfolio.