Petrobras Comperj project resuts in delays, cost overruns and reckless management

21-Oct-14

Petrobras's Comperj project listed numerous modifications that raised the cost of the project from US$6.1 bln to nearly US$50 bln. The project is riddled with delays, cost overruns and reckless management, as unearthed by a state audit, as per ICIS. Petrobras has decided not to comment on the audit since it was still awaiting final analysis by the Brazilian Federal Accounting Court (TCU), the entity that conducted the review. In the audit, the TCU did not mention corruption, embezzlement or theft. However, it did find excessive risk-taking and a disregard of standard operating procedures, causing significant effects on the timing and the cost of the project. Contracts worth reais (R) 7.6 bln (US$3.1 bln) were given without bidding. The audit warned that the project is threatening Petrobras with heavy losses. Currently, progress for the petrochemical portion of Comperj is stuck as Petrobras and Braskem continue to negotiate NGL supplies for the units. For Petrobras, the audit is among a series of mishaps: Paulo Roberto Costa, the company’s former director of downstream operations from 2004 to 2012, is facing charges of laundering public funds in relation to the construction of the Abreu e Lima refinery in northeast Brazil, and obstructing police investigations. Meanwhile, the cost of the Abreu e Lima refinery rose from US$4 bln to about US$20 bln. The 230,000 bbl/day refinery project - the Refinaria do Nordeste (RNEST), was initially supposed to start up in 2010. The date has since been moved to November.