Petrobras commits $6bn to Rio refining and petrochemicals in major downstream expansion

Petrobras (BVMF: PETR4) has unveiled plans to invest approximately R$33 billion (US$6.1 billion) in refining and petrochemical infrastructure across Rio de Janeiro state, with the centerpiece being a R$26 billion integration between the Boaventura Energy Complex in Itaboraí and the Duque de Caxias Refinery (Reduc). This large-scale capital allocation, included in Petrobras’s 2025–2029 Business Plan, underscores the oil major’s ambition to modernize domestic fuel production, support energy transition goals, and deepen Brazil’s petrochemical value chain. The remaining R$7 billion will be split between renewable fuel projects, thermoelectric generation, and strategic partnerships, including with its petrochemical subsidiary Braskem.

This marks one of Petrobras’s most ambitious downstream investment programs in over a decade, strategically timed as institutional investors push for low-carbon development pathways and efficiency upgrades in legacy assets. Analysts broadly interpret the project as a dual-track effort: preserving refining self-sufficiency while accelerating progress toward decarbonization through biofuels and process electrification.

What will the investment in Reduc and Boaventura integration include and why is it significant for fuel production capacity?

At the heart of the investment lies the planned integration of Petrobras’s Boaventura Energy Complex with the longstanding Duque de Caxias Refinery. This R$26 billion undertaking is currently in the procurement and bidding phase and is expected to boost S-10 diesel output by 76,000 barrels per day (bpd). Of this, 56,000 bpd will be achieved through product upgrading, while 20,000 bpd will come from expanded capacity. The integration will also raise production of aviation kerosene (QAV) by 20,000 bpd and Group II lubricants by 12,000 bpd, improving the national supply chain for transport fuels and high-margin specialty products.

A key innovation in the Boaventura site is a dedicated renewable fuel facility capable of producing 19,000 bpd of Hydrotreated Vegetable Oil (HVO) and Sustainable Aviation Fuel (SAF). These volumes are expected to enhance Brazil’s compliance with emerging global aviation fuel mandates, particularly in the EU and international cargo routes. Two new gas-fired thermoelectric plants are also planned within the complex, leveraging infrastructure from the existing Natural Gas Processing Unit (UPGN) to ensure self-sufficiency in power and qualify for reserve capacity auctions.

The investment not only responds to current fuel demand growth but also positions Petrobras to meet future environmental targets. Analysts have noted that fuel import dependence—particularly for diesel and jet fuel—has added cost and volatility to Brazil’s domestic energy market. The Boaventura-Reduc integration is designed to counter that risk through localized, modernized production.

What ancillary projects at Reduc will accompany the core integration and how do they support operational efficiency?

Petrobras is simultaneously pursuing modernization efforts at Reduc to improve energy efficiency and process reliability. A new thermoelectric power plant is slated for construction with an investment of R$860 million, replacing obsolete steam and electrical generation equipment. This upgrade is expected to bring the site in line with international energy efficiency standards, improving operational uptime and reducing carbon intensity.

In parallel, Petrobras is preparing for extensive maintenance shutdowns through 2029, budgeted at R$2.4 billion. These include major overhauls of the delayed coking and hydrotreating units planned for 2026. These critical systems handle heavy crude processing and emissions control, and their upgrades are expected to extend plant life while ensuring safety and compliance.

These initiatives feed into Petrobras’s broader effort to sustain refinery throughput while improving margins, particularly in a market where diesel spreads have narrowed amid global supply stabilization. Institutional investors have responded positively to the modernization narrative, seeing it as a signal of long-term capital discipline.

What is Petrobras’s strategy in exploring petrochemical production at Boaventura, and what raw materials are under consideration?

In addition to refining, Petrobras is studying the feasibility of launching domestic production of acetic acid and monoethylene glycol (MEG) at the Boaventura site. These two chemicals are fundamental inputs in Brazil’s consumer and industrial sectors: acetic acid is used in paints, adhesives, and plastics, while MEG is essential in the polyester and packaging industries. Currently, Brazil relies heavily on imports for both, with acetic acid being entirely imported.

If Petrobras proceeds with these projects, it would mark a significant vertical integration move and deepen its petrochemical portfolio beyond basic resins. This would complement Braskem’s R$4 billion expansion of its polyethylene production unit within the same complex. That project, pending final board approval, would add up to 230,000 tonnes of annual capacity using feedstock processed through Boaventura’s Route 3 gas system.

Analysts note that verticalizing these petrochemical supply chains not only reduces import dependency but also enhances resilience in domestic manufacturing—particularly relevant amid global trade realignments and supply chain disruptions. From a margin perspective, chemical derivatives can yield higher returns per barrel than transportation fuels, providing Petrobras with a natural hedge.

How are biofuel experiments at Reduc supporting Petrobras’s energy transition strategy?

Petrobras has already begun SAF co-processing tests at Reduc using up to 1.2 percent corn oil blended with conventional aviation kerosene. The National Petroleum Agency (ANP) has approved this production path, and commercial output is expected to begin soon with a target capacity of 10,000 bpd (equivalent to 50,000 m³/month).

Additionally, Reduc is authorized to expand its renewable diesel production through a new Diesel R7 formula, which includes a 7 percent bio-component. This follows successful deployment of Diesel R5 blends, reinforcing Petrobras’s leadership in drop-in biofuel integration across Latin America.

A lubricant re-refining project is also under evaluation at Reduc with a capacity of 6,300 bpd. If implemented, it would apply circular economy principles to process used oils into Group II lubricants, a high-value product class. The ANP has authorized co-processing tests for this route as well.

Taken together, these biofuel and re-refining initiatives form the foundation of Petrobras’s decarbonization roadmap. Institutional investors increasingly favor producers with credible transition pathways, and Petrobras’s incremental approach—favoring existing assets and co-processing—offers scalability without heavy sunk costs.

How are investors and institutional stakeholders reacting to the Capex announcement and what signals does it send?

Market response has been cautiously optimistic. Institutional sentiment suggests the capital plan aligns with both federal policy goals and ESG expectations. The timing of the announcement, which coincided with President Luiz Inácio Lula da Silva’s visit to the Reduc refinery, adds political backing to Petrobras’s regional development narrative.

Investors are particularly focused on execution, given Petrobras’s historical challenges with cost overruns and delays. However, analysts argue that the modular, phased structure of the Boaventura and Reduc upgrades reduces risk. The inclusion of biofuel and petrochemical elements also improves the investment case by increasing margin diversity.

Several fund managers have signaled that successful implementation of these Rio-based projects could strengthen Petrobras’s case as a dividend-generating national champion, capable of balancing returns and sustainability in the medium term.

How does this investment fit within Petrobras’s overall 2025–2029 strategic framework and fiscal direction, and what future growth does it signal?

The Rio complex expansion is part of Petrobras’s R$555 billion (US$111 billion) five-year plan through 2029. Of this, US$19.6 billion is allocated to refining, transportation, and petrochemical projects—a 17 percent increase from the previous cycle. Meanwhile, low-carbon initiatives have received a significant boost, with US$16.3 billion earmarked for biofuels, renewables, and emissions reduction—up 42 percent.

Petrobras leadership has emphasized a balanced capital strategy, aiming for robust dividend payouts in the US$45–55 billion range over the five-year period. Free cash flow remains a central metric, and asset divestments may be used to support non-core exits while prioritizing strategic builds such as Boaventura.

Future growth depends on successful commissioning of key facilities, firm offtake agreements for SAF and HVO, and progress in petrochemical studies. Analysts expect further commercial filings and regulatory updates in the second half of 2025.