Workers dismissed at suspended natgas plant project in Brazil – union

HOUSTON (ICIS)–The workers at a suspended gas processing plant project in Brazil have been dismissed amid a dispute between Petrobras and the project’s contractor, a union alleged.

Petrobras declined to comment about the union’s allegations. Earlier, Petrobras said that the contractor, SPE Kerui-Metodo, decided on its own to suspend work at the plant, which was supposed to start up in the second half of this year. Any work is being done solely to preserve equipment and facilities, Petrobras said.

The project is in Itaborai, Rio de Janeiro state at the site originally planned for Comperj (Complexo Petroquimico do Rio de Janeiro).

The gas plant would have a capacity of 18m cubic metre/day, and it would be part of a larger project that Petrobras has alternatively called GasLub and Route 3.

SPE Kerui-Metodo is a consortium controlled by Shandong Kerui Petroleum Equipment Co Ltd, a company based in China that is also known as Kerui Petroleum.

Kerui Petroleum did not immediately respond to a request for comment on Thursday during afterhours in China.

Kerui Petroleum’s Brazilian partner in the consortium is the construction company Metodo, which filed for judicial recovery in January 2022 after a sharp rise in costs for materials, shipping, equipment and services.

Judicial recovery is similar to bankruptcy protection, and it will allow Metodo to continue operating and to restructure its debts while being protected from its creditors.

Metodo did not immediately respond to a request for comment.

Petrobras declined to comment further about why the consortium suspended work.

WORKERS ALLEGEDLY DISMISSED
Work at the plant allegedly stopped after Kerui-Metodo failed to pay contractors at the plant, according to the union, Sindicato dos Petroleiros do Rio de Janeiro (Sindipetro RJ).

Sindipetro said that Kerui-Metodo has dismissed close to 2,200 workers.

Kerui Metodo started laying off workers a month ago because it could no longer afford to buy the equipment needed to finish work at the plant, according to allegations made by the union.

Petrobras has since raised doubts about the figures and amounts for the project that have been reported by Kerui-Metodo, the union alleged. As a result, Petrobras has suspended payments.

NEXT STEPS
Petrobras is now considering steps it could take that would minimise the consequences of Kerui-Metodo suspending work. It is reviewing whether it could still start up the plant and the Route 3 project as planned.

Route 3, also known as GasLub, is made up of a 355km pipeline that would deliver raw natural gas from Brazil’s pre-salt oil wells to the 21m cubic metre/day processing plant. The pipeline’s capacity is 18m cubic metres/day, smaller than that of the plant.

Petrobras had been considering plans of integrating the project in Itaborai with its refinery in Duque de Caxias, Rio de Janeiro state. A pipeline would to ship raw materials from the refinery to the complex in Itaborai.

Petrobras would process this raw material from an existing hydrocracker and other units left over from its much more ambitious Comperj project.

Under this project, Petrobras could produce 12,000 bbl/day of Group II base oils and 93,000 bbl/day of S-10 diesel and jet fuel.

Petrobras would not say if the dispute with Kerui-Metodo would affect any decision on the diesel and base-oils portion of the GasLub project.

LATEST SETBACK
The contractor dispute is the latest in a series of setbacks at the Itaborai project that go back to more than 15 years, when Petrobras began planning the Comperj project.

At one point during its long history, Comperj was proposed to be an integrated refinery and petrochemical project that would convert oil and natural gas from Brazil’s pre-salt reserves into fuel and petrochemicals.

Work came to a standstill in 2014 amid the fallout of the Lava Jato corruption scandal. An audit found that the Comperj project was riddled with cost overruns and reckless management.

SIGNIFICANCE OF ROUTE 3/GASLUB
Despite its smaller scale, the Route 3/GasLub project still holds significance for Brazil.

It should provide the country with more energy security when droughts limit hydroelectric production. Hydropower typically provides Brazil with 60% of its electricity.

In 2021, a historic drought caused Brazil to import large amounts of expensive liquefied natural gas (LNG) to offset the decline in power generation from its dams. At the least, Route 3 could displace future imports of LNG in the event of another severe drought.

In addition to natural gas, Route 3 could provide Brazil’s petrochemical industry with ethane and other natural gas liquids (NGLS) that it could use as feedstock to make ethylene.

Braskem has long had plans to increase the capacity of its gas cracker in Duque de Caxias in Rio de Janeiro state. Before the company could commit to the project, it needed competitive feedstock.

The new natural gas processing plant could provide that low-cost feedstock for a possible expansion.

Thumbnail shows a hard hat that construction workers wear. Image by Shutterstock.