Brazil environment leaders join Petrobras to appeal refinery work stoppage

RIO DE JANEIRO -- Brazilian environmental regulators will join Petrobras in appealing an injunction that halted work on a major refinery project in Rio de Janeiro state.

Given the economic impact of the halt on the $8 billion Comperj refinery, the appeal is expected to be filed, said Marilene Ramos, President of Rio State Environmental Regulator (INEA). "The lawyers are meeting right now," Ms. Ramos said.

Petrobras, INEA and Federal Environmental Regulator (IBAMA), will appeal the decision together, Ms. Ramos said.

Petrobras said it had been informed that a federal judge suspended environmental licenses granted by INEA for the refinery under construction in Rio de Janeiro state. According to Ms. Ramos, the judge ruled that IBAMA had jurisdiction over licensing the project, forcing a halt in construction until IBAMA issued new licenses.

The suspension stems from a case brought by federal prosecutors in 2008 that regulators thought had been resolved in 2009, Ms. Ramos said.

"A substitute federal judge grabbed this case out of the drawer and made this decision," Ms. Ramos said, calling the decision strange and adding that the case was without merit.

"State regulators clearly have jurisdiction to issue these licenses," Ms. Ramos said.

Petrobras said that it was evaluating all possible measures related to the halt, which would stop work on one of the company's largest projects.

The Comperj refinery will have installed capacity to process 165,000 bpd of crude oil when it enters operation in April 2015, according to the company. A second phase, expected to be completed by 2018, would double capacity.

When completed, the refinery would ease Petrobras's dependence on expensive fuel imports that have undercut the company's profits over the past two years.

Petrobras's refineries are operating at 98% capacity and unable to meet growing demand for gasoline and diesel fuel in Latin America's largest economy, forcing the company to import gasoline and diesel to meet demand. But the company currently sells the imported fuels at a discount in the domestic market because of a controversial pricing policy that doesn't pass along international volatility to consumers at the pump.