Scandal involving refinery hits Brazil's Petrobras

Published on NewsOK Modified: March 21, 2014 at 2:35 pm •  Published: March 21, 2014

SAO PAULO (AP) — The directors of Brazil's state-run oil company Petrobras gathered Friday for a special board meeting amid a scandal over the company's 2006 purchase of a Texas oil refinery that threatens to involve President Dilma Rousseff.

A Petrobras official confirmed the meeting, but did not provide further details. She declined to be identified because she was not authorized to speak to the press.

In 2006, Petrobras paid Belgium's Astra Oil $360 million for a 50 percent stake of the Pasadena Refining System. One year later, Astra Oil exercised a so-called "put option" to get Petrobras to buy the remaining 50 percent stake. The Brazilian company refused, but in 2012 it lost an arbitration case in the United States. Interest payments and legal fees brought the price tag for the remaining stake in the refinery to $820.5 million

In the end, Petrobras paid $1.18 billion for a refinery that had cost Astra $42.5 million in 2005.

Rousseff was the chairwoman of the Petrobras board of directors at the time of the initial purchase and the O Estado de S. Paulo newspaper reported this week that she authorized it.

Rousseff's office said in a statement that her decision was based on a "technically and legally flawed summary" of the document drawn up for the purchase by Nestor Cervero, currently the financial director Petrobras' fuel distribution subsidiary.

The statement said the summary made no mention of the put option and that if she had known, she and the board would never have approved the purchase. A put option is the opportunity to sell a certain number of shares at a certain price and date in exchange for an upfront fee.

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