Petrobras intends to sell 90% of its stake in the Transportadora Associada de Gas (TAG) pipeline company as part of its US$21 billion divestment schedule over the next two years.
TAG has long-term permits to manage 4,500 km of natural gas pipelines that are concentrated in Brazil’s northern and northeastern regions. The network has a transmission capacity of around 75 mcm per day.
Petrobras said that TAG’s volume was "fully employed through long-term contracts with ship-or-pay clauses". Most of the operation and maintenance work on the network is carried out by Petrobras’ subsidiary Transpetro.
The state-run Brazilian oil firm is divesting itself of non-core assets to clear its debt pile and focus investment on key upstream projects, such as its pre-salt fields in the Atlantic Ocean. The company has already sold its southeastern gas distribution business Nova Transportadora do Sudeste (NTS) to Canada’s Brookfield Infrastructure Partners for US$4.2 billion.
The TAG deal could prove as controversial as the NTS sale amongst Brazil’s trade unions, however. The Federation of Oil Workers (FUP) laid out its objections to the TAG sale last week. "In addition to dismantling Petrobras’ transport logistics, the sale of TAG will leave the control of the country’s gas pipelines in the hands of foreign groups. The state company will have to submit to prices and conditions imposed by multinationals, as is already happening with NTS," FUP said.
The FUP argued that following NTS’ sell-off, Petrobras would end up spending US$1 billion per year to use pipelines in southeast Brazil. The group said this would mean the company ends up paying out the value of the NTS deal in four years of pipeline use and that a similar scenario would unfold in respect of TAG.
The unions’ opprobrium could see legal action follow over the TAG deal. Although a potential risk to investors looking at TAG, the legal threat is unlikely to scupper a sale. Lower courts in Brazil have managed to suspend some sales in Petrobras’ divestment programme, though they have been overruled by higher courts.
Furthermore, Petrobras’ CEO, Pedro Parente, is unrepentant over what he argues is the company’s need to sell assets to reduce its crippling debts.
The company has also launched the process to sell two fertiliser companies: Araucaria Nitrogenados, based in Araucaria in Parana state in Southern Brazil; and Nitrogen Fertiliser Unit III, in Mato Grosso do Sul state.
The Nitrogen Fertiliser Unit is under construction in Tres Lagoas and is around 80% complete, the company said in a statement, though work on the facility came to a halt in December 2014. Araucaria Nitrogenados (Ansa) produces ammonia and urea for the chemical and fertiliser industries.