In December 1999, Brazilian national oil company Petrobras bought refineries in the Bolivian cities of Santa Cruz de la Sierra and in Cochabamba. The operation of the refineries represented Petrobras first significant overseas activities in the refining and distribution areas.

While controlled by Petrobras, the Bolivian refineries recorded an accumulated net income of $139 million, of which $126 million was paid out to shareholders in the form of dividends. With the $112 million sale, announced June 26, the company said it was concluding its refining activities in Bolivia with an adequate return on invested capital.

Following the change in control of the two refineries, Petrobras is no longer able to control the quality of products supplied to end consumers in Bolivia, Petrobras said. The company has thus taken the decision to withdraw its company brand from the 26 service stations that bear the corporate logo in different regions of the country.

Renato Oliveira, lubricant coordinator for Petrobras, told Lube Report the Cochabamba refinery also has a finished lubricant blending and packaging facility and a simple grease production unit. Oliveira said the company had spent much time, money and manpower over the years upgrading the plants, improving their safety and efficiency. That included introducing modern management methods, training and technologies.

With our brand, Lubrax, we went from two percent market share in 2000, importing from Brazil, to a 30 percent market share in 2007, producing locally in Cochabamba since 2003, he said. The finished facility in Cochabamba was completely modernized with a $2 million investment package. The base oil production in the Cochabamba refinery was also improved and expanded.

YPFB had a market share of 30 percent when Petrobras originally received it. Since then the company managed it through a royalty contract. We are returning it to YPFB Oil Company with a 55 percent market share, Oliveira said.

The lubricants market in Bolivia is broken down roughly into 80 percent automotive oils and 20 percent industrial oils, according to Oliveira. If we put together Lubrax and YPFB, we could say we had around 85 percent of the market there, he added.

Petrobras said it obtained a commitment from the Bolivian authorities that existing jobs and labor conditions would be maintained, in keeping with a new insurance policy that only remains valid as long as no material changes are made in configuration of the labor force.

According to the company, the Bolivian government initially sought on May 1 to nationalize 51 percent of the shares of Petrobras Bolivia Refinacion. Oliveira explained the company went to the Bolivian government to ask whether Petrobras as a business partner would be allowed to continue to operate the refineries to guarantee the safety and environmental aspects of the facilities, as well as operational standards. The government declined, he said, saying it wished to operate the refineries.

So we decided not only to sell some part of the refineries, but also 100 percent, he said. Petrobras on May 11 submitted its final proposal, worth $112 million, to sell all shares of the subsidiary to the government.

Logistical difficulties make exporting lubricants to Bolivia risky, according to Oliveira, and Petrobras has decided not to do so. For a company to export products from Argentina or Brazil is not easy, he explained. You will find some very difficult roads, without pavement, so your products will probably reach the country with a lot of damage.