Construction Of Oil Group’s Refinery At Açu Port Could Generate 2,000 Jobs, With Work Starting In 2021

The Construction of the New Oil Group Refinery at Porto do Açu Will Start in Q4 2021, with a Peak of 2,000 People Working on the Project

Recently, Oil Group made two announcements that shook the oil and gas market. The first was the announcement of the construction of a refinery at Porto do Açu, in São João da Barra, in the State of Rio de Janeiro. The second was the signing of a memorandum of understanding with EnP, to enable another refinery and a lubricants and asphalt factory in the state of Espírito Santo.

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According to Luiz Otávio Massa, downstream director of Oil Group, in an interview with Petronotícias, he states that the refinery at Porto do Açu is expected to start construction in Q4 2021, with a peak of 2,000 people working on the project.

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According to him, “the idea of the modular refinery is to bring a niche and logistical gain. That is, you establish yourself in a region close to a producing oil point, produce the derivative, and distribute it in the nearby region. This is a significant logistical gain.”

How Did the Opportunity to Invest in This Refinery at Porto do Açu Arise?

“Oil Group is a company that arrived in Brazil through its subsidiary SeaSeep, a data company, and quickly evolved into the exploration and production (E&P) market. Oil Group started with the E&P part and then, as it had its onshore blocks, the company wanted to add value to its oil by installing mini refineries for processing its production. This is not a very common practice in Brazil, as over 98% of refining here is done by Petrobras, but it is very common in countries like the United States, Colombia, and others. So, we imagined that it would be possible to apply the same model to process in our onshore fields [here in Brazil].”

“We had the 2016 oil price crisis, but even so, refining numbers became very interesting. We discovered that there was a market opportunity in downstream in Brazil. Not only mini refineries processing our own oil but also modular refineries. Thus, we decided to develop a project for modular refineries with some responses to risks that were quite interesting to attract investors. We managed to develop quite interesting projects and reached this initial number of up to six refineries in Brazil, within an investment model that we outlined over the past four years.”

Still talking about the refinery at Porto do Açu, is there already a forecast for when construction work will start?

“Currently, we are in the environmental licensing process. Concurrently, we are beginning to develop the basic project engineering, as the conceptual engineering is already ready. The data part for licensing is also already complete. We are in the process of developing the basic project. We will likely start construction in Q4 next year.”

You mentioned the capacity for production expansion. Will the refinery at Porto do Açu be able to expand its capacity at some point?

“The refinery at Porto do Açu is expected to produce 20,000 barrels. But we are already obtaining the environmental licensing for a refinery of 50,000 barrels because we believe this project will develop in a very positive manner. I hope that in the near future, we can develop this refinery from 20,000 barrels to 50,000 barrels.”

Is there a forecast for how many jobs will be generated with the construction of the refinery at Açu?

“We have an initial forecast divided into three parts. In the operation of the refinery, there will be between 80 and 100 people. In construction, we will vary between 500 and a peak of 2,000 employees per month. And the so-called income effect, which is what a project like this can produce in the region, is fivefold. In other words, 10,000 people being directly or indirectly benefited.”

Which companies will be involved in the project?

“We are negotiating with Shell Trading for oil supply. We have agreements for Engineering and Technology with Entrepose IKL and Axens. In Brazil, the agreements for construction are with Intech Entrepose and Tridimensional Engenharia. Our Owner’s Engineering is handled by Header Engenharia. For environmental licensing, we have closed an agreement with Biodinâmica.”

“These companies were chosen through a development process that occurred over time. We consulted various companies from each segment. Obviously, we will consult various companies in future projects. But today, for Açu, we have reached the best agreements with the companies I mentioned earlier.”

Now, I would like you to talk a little about the second project announced – the Espírito Santo Refinery (RefinES).

“We signed an agreement with EnP for the construction of the Espírito Santo refinery and the Capixaba Factory of Lubricants and Asphalt (LubCap). The idea is to build in northern Espírito Santo, but clearly, the areas are not yet defined. This is a very interesting agreement because Espírito Santo is a state that has shown very good financial health and a positioning in terms of economy and business development that is quite interesting. We see this project very positively. This project, unlike the Açu project, is still in its conceptual phase.”

The announcement of Oil Group refineries comes at a challenging time in the oil and gas sector. How do you assess this scenario and how are you preparing?

“What we have observed is that the risk responses we planned from the company’s inception have proven effective. We have heard many comments that companies working integrated in E&P and refining have a cash risk response much better than other companies. The interesting thing is that we designed Oil Group to provide this response to the risks of very high or low oil prices – which is what has happened now.”

“But when you operate in an integrated manner, refining margins relieve the company during barrel downturns. When prices are high, E&P margins ease cash flow.”

“We have been observing the situation very cautiously but with a lot of confidence that the responses we planned for the risks have been effective. Furthermore, we cannot think only in terms of a one-year period. The Porto do Açu project is expected to start in 2023/2024. A lot can happen between now and then. What matters is that the responses to the risks are consistent.”