Iran and Brazil are in talks about a possible Iranian investment in troubled refinery projects controlled by Brazilian state-led oil company Petroleo Brasileiro SA, a Brazilian government source, said on Thursday.
Iran, which is boosting oil output after the end of sanctions over its nuclear program, is interested in exporting oil to Brazil, processing that crude at refineries in Brazil's northeastern region and then selling it in the Brazilian market, the source said, adding that talks are at an early stage.
Talks though are far from any result, the source was quoted as saying by Reuters.
"For this subject to be considered embryonic, it will still need to evolve a lot," said the source, who asked for anonymity because the inter-government talks are private.
Iran has shown interest in investing in the construction of the Premium I and Premium II refineries in Brazil's northeastern states of Maranhao and Ceara, the source said. The refineries are designed to produce low-sulfur fuels.
While plans for those projects were developed by Petrobras, as the state-owned oil company is known, they have been dropped from its investment plan. The source was not clear if any Iranian investment would include Petrobras.
Battered by financial problems, a corruption scandal and falling oil prices, Petrobras suspended work on both projects. Each is expected to cost more than $15 billion.
To help reduce its debt of about $130 billion, Petrobras plans to sell $15.1 billion of assets by the end of this year and it has long said it has been seeking partners for its refinery assets.
Earlier on Thursday, Brazilian Mines and Energy Minister Eduardo Braga said Brazil "is in talks with the Iranians about the question of refineries in Brazil" but he declined to give details.
Petrobras declined to comment on the possibility of Iranian investment in Brazilian refineries.
Expansionary Policy
Iran has committed to boosting crude production capacity by 500,000 barrels per day in the first step to regain lost ground in the global oil market after international sanctions targeting its nuclear program were lifted last month.
The Islamic Republic is looking beyond its traditional customers to ensure there will be room for additional Iranian crude in the long run in an oversupplied market.
It has initiated talks to build new refineries or buy stocks in existing refineries in Brazil, Spain, South Africa, India and Malaysia that would exclusively receive crude oil from Iran.
Negotiations with Spain, in particular, are in more advanced stages, as the two sides have reportedly hammered out a preliminary agreement to build a refinery in Spain with a processing capacity of 200,000 bpd.
$17b Investment
Iran is planning to invest nearly $17 billion in crude oil and gas condensates refineries by 2021, National Iranian Oil Refining and Distribution Company said in a statement.
"There are plans to build three new refineries and complete the construction of Persian Gulf Star Refinery by the end of the sixth five-year development plan (2016-21) at a cost of €15 billion ($16.9 billion)," the statement said, Mehr News Agency reported.
NIORDC added that 130 small- and large-scale oil projects are being carried out, requiring around $11.9 billion in investment.
"During 1,460 days under the sanctions, Iran produced the equivalent of 2.6 billion barrels of petroleum products, including gasoline, diesel, kerosene, mazut and liquefied gas," the statement added.
The establishment of new refineries is in line with plans to boost oil processing capacity in the long run. Oil Minister Bijan Namdar Zanganeh said this week Iran's processing capacity for crude oil will reach 3.2 million barrels per day by 2021.
The new refineries would put Iran on the path to become a major producer and exporter of gasoline, a major oil byproduct, in the Middle East. The Persian Gulf state currently imports around 8 million liters of gasoline a day to meet domestic demand.
