Petrobras’ more-aggressive pricing policy for diesel and gasoline is
helping the Brazilian state-led oil producer and refiner to regain market
share it lost to cheap imports last year, especially in diesel sales, the
company’s director for refining, natural gas and energy said Thursday.

“The increase in competition induced new practices in the market that
resulted in imports returning to normal,” Petrobras’ Jorge Celestino said
during a presentation of the company’s 2017 financial results.

A surge in fuel imports, especially diesel and gasoline, in the first
half of 2017 forced Petrobras to tweak its domestic policy to adjust
prices for transportation fuels on a near-daily basis in July, Celestino
noted. In addition, Petrobras in December modernized sales contracts with
distributors and optimized logistics to reduce costs and increase
margins, he said.

The measures are working, according to Petrobras CFO Ivan Monteiro.
“We’ve had a recovery in market share already visible in 2018 with the
measures implemented,” he said.

According to Celestino, diesel imports started 2017 at 730,000 cubic
meters in January before peaking at 1.56 billion cubic meters in
November. That reduced Petrobras’ share of the diesel market to an
average of 74% in 2017, compared with 83% in 2016.

Petrobras’ recent moves, however, have brought diesel imports down to
about 680,000 cubic meters in February, which has in turn fueled a
rebound in the company’s diesel market share to 79%, Celestino said.

Diesel is Brazil’s most-widely consumed oil product, with gasoline a
distant second, according to Brazil’s National Petroleum Agency, or ANP.
Brazil imports about 20% of its diesel needs and about 15% of gasoline

Brazil’s gasoline market, meanwhile, was more mixed, according to
Celestino. Gasoline imports remained relatively stable throughout the
year, starting 2017 at 320,000 cubic meters in January and falling to
300,000 cubic meters in November, he said. Petrobras’ gasoline market
share tumbled to 83% in 2017 compared with 90% in 2016.

Imports surged to about 360,000 cubic meters in February, which undercut
the company’s market share to about 77% in February, Celestino said.

“We’ve already started to recover market share,” he said. “Our
competitive position shows that we’re once again conquering the domestic
market and these operational results in February and March are
translating into higher profitability for the company.”

Petrobras continued to run its refineries at about 77% of installed
capacity, with most of the output earmarked for high-margin products such
as diesel, gasoline and jet fuel. Celestino indicated that Petrobras
doesn’t have any plans to increase output at its refineries, instead
focusing on profitability in the product mix.

Output from Petrobras’s refineries fell to 1.800 million b/d in 2017
compared with 1.887 million b/d in 2016, Petrobras said. Diesel output
slid 10.7% year on year to 692,000 b/d, while gasoline production dipped
1.8% to 439,000 b/d.

Brazil’s bumbling economy should also help Petrobras’ results, with Latin
America’s largest economy finally emerging from nearly three years of
recession to post 1% growth in 2017. Diesel and gasoline consumption
typically tracks the direction of GDP, which is expected to expand by
about 3.5% in 2018.

Petrobras’ oil-product sales fell to 1.94 million b/d in 2017 versus
2.064 million b/d in 2016, the company said. Diesel sales dropped 8.1%
year on year to 717,000 b/d, while gasoline sales sank 4.4% on year to
521,000 b/d.

— Jeff Fick,

— Edited by Kevin Saville,

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