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[RIO DE JANEIRO] Brazilian state-run oil company Petrobras is looking to sell some of its biofuel assets as it tries to raise cash to cover investment for new offshore oilfields and service its debt, two sources told Reuters on Wednesday.
The company, whose US$125 billion of debt is the biggest of any oil company and the third-largest of any non-financial enterprise, plans to sell as much as US$13.7 billion of assets by the end of 2016.
The first source, who has direct knowledge of Petrobras'plans, said the company's ethanol plants, which transform sugarcane into fuel, were the most likely area of the business to be sold. Petrobras has nine ethanol plants and five biodiesel plants.
The plants are less profitable than its businesses that distribute or sell ethanol and other biofuels, the source added. The company, formally known as Petroleo Brasileiro SA, does not plan to exit the biofuels sector entirely, according to the source.
"There are various ways for you to take part in the biofuels market. One way is business the other is owning assets," the source said. "To be in the business you don't need to have assets."
Petrobras has already shown assets to potential buyers, a second source told Reuters after being briefed on the company's plans.
Both sources asked not to be named as final decisions on the future of its biofuel businesses have not been made.
Pressured by Brazil's government, Petrobras' expanded its ethanol and biodiesel operations in the last decade in support of policies aimed at boosting exports of rising offshore oil output by cutting domestic demand for fossil fuels.
Despite access to ethanol in all Brazilian service stations, the widespread use of cars that run on any mixture of gasoline and ethanol, and gasoline that has by law contained a fifth to a quarter ethanol, the market for the biofuels crashed, undermining Petrobras investments.
Seeking to control inflation, Brazil's government refused for years to allow Petrobras, the country's only refiner, to raise gasoline and diesel prices in line with world prices, causing fossil fuel prices to fall below those for biofuels.