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article imageBrazil ex-president backs Petrobras refinery enquiry

By AFP     Mar 23, 2014 in Business

Former Brazilian president Fernando Henrique Cardoso said Congress should investigate a growing scandal surrounding the controversial 2006 purchase by oil giant Petrobras of a Texas refinery.

The controversy has deepened in recent days over the nature of a purchase authorized in 2006, when current President Dilma Rousseff chaired the state firm's board of directors.

Estado de Sao Paulo daily said Cardoso favored the creation of a cross-party investigative commission to shed light on the purchase of Pasadena Refinery System Inc.

Estado reported last week that Rousseff authorized the deal without knowing key details surrounding the contract which saw Petrobras pay $370 million to Belgium's Astra Oil to take a 50 percent stake in Pasadena.

Astra Oil exercised within months an option to have Petrobras buy the other half. Petrobras refused but lost a 2012 case in the United States.

Interest and legal fees eventually saw the price of buying the second half of the refinery balloon to leave the Brazilians paying an overall $1.1 billion for a refinery that Astra had originally bought for just $42.5 million in 2005.

Cardoso, president from 1995 to 2002 and succeeded by Rousseff mentor Luiz Inacio Lula da Silva, last week suggested an investigation by sector experts would suffice.

But Sunday he said he believed Congress needed to intervene to establish the facts given that "Petrobras is a symbolic company when it comes to (Brazil's) technical and entrepreneurial capacity."

Rousseff's office said in a statement last week that the purchase document was flawed and "omitted any reference to clauses in the contract which, had they been known, would not have been approved" by the Petrobras board.

Petrobras saw its share price lose 34 percent last year as production sagged and profitability continued to suffer from the government's policy of operating de-facto fuel subsidies.

The share slide wiped some $30 billion off the company's market value.

Even so, Petrobras in February posted an 11 percent rise in net income for 2013 to 23.570 billion reais ($10 billion) on increased oil products production and price rises in diesel and gasoline.

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