China’s Sinopec, Abu Dhabi’s state shareholder, and two Brazilian companies reach second round of bids for Petrobras refineries

Brazil’s government-controlled oil company Petroleo Brasileiro SA has picked four bidding parties for the second round for four up-and-coming refineries, including China’s Sinopec, Abu Dhabi’s state shareholder, and two Brazilian companies, according to four experienced individuals.

Sinopec, Mubadala Investment Co from Abu Dhabi, and Ultrapar Participaçes SA and Raizen from Brazil were selected for the next stage, they said. Brazil’s Raizen is a Cosan SA-Royal Dutch Shell Plc joint venture.

As the oil company is known, Petrobras received non-binding bids for the first block of refineries that it plans to sell at the beginning of November. It selected the groups that will advance to last week’s second round, added the sources, declining to be named as the details are confidential.

It is expected that the binding offers will be delivered by mid-January, two sources said. The first refinery block is the largest, with a joint capacity of 961,000 barrels of oil per day, or 40% of the total production capacity of Brazil.

Ultrapar and Ra, according to the sources? The two refineries in the southern part, REFAP and REPAR, and RNEST in the northeast state of Pernambuco may be bidden by Zen.

The people said that China’s Sinopec and Mubadala intend to compete for RLAM, the oldest refinery in Brazil, in Bahia’s northeastern province. RLAM needs major upgrades, and Sinopec is interested in forming a partnership with a construction company in China. It is expected that Mubadala will arrange a deal involving the Spanish oil company Cepsa, which as shareholders have Mubadala and Carlyle Group, two sources said.

Bidders can only acquire one refinery in each country, according to rules laid down by Brazil’s antitrust watchdog Cade.

The sources said companies eligible for the second round are in negotiations with commodities traders such as Glencore and Vitol, who signed non-disclosure contracts at the beginning of the process and are allowed to join the groups in the binding round. Glencore and Vitol refused to comment.

Natural gas pipeline operators are also in talks, they added, potentially joining groups to operate the logistics assets that Petrobras will sell with each refinery, such as terminals and oil and fuel pipelines.

Among these companies is Brookfield Canada, which owns the gas pipeline network firm NTS, which was previously sold to Petrobras, said the sources. Brookfield has refused to comment.

In addition to Singapore’s GIC, financial firms such as Canadian pension funds CPPIB and Caisse de Depot and Placement du Québec (CDPQ) might also participate, they added. There was no immediate comment from the companies.

The sources said that Oil behemoth Saudi Aramco, who had signed a non-disclosure agreement, dropped out of the process.

Brazil’s experience of enforcing price controls on oil and a pattern of privatization that will leave Petrobras with a strong presence in the poorest region of Brazil, the southeast, has limited the planned refining rivalry.