June 5, 2012 / 4:11 PM / 5 years ago

UPDATE 3-Brazil fuel price nears world levels-Petrobras CEO

* Brent crude oil futures trading at 16-month lows

* Petrobras has not raised fuel prices since 2008

* CEO says no talks on lower Brazil content rules (Adds detail on implication of oil price move, background)

By Fabiola Gomes

SAO PAULO, June 5 (Reuters) - The gap between Brazilian and international fuel prices is narrowing as world oil prices fall, reducing the need to raise domestic gasoline and diesel prices, Chief Executive Maria das Graças Foster of state-led oil company Petrobras said on Tuesday.

Petrobras’ refining unit has been losing money as the government, seeking to control inflation, blocks the company from raising the price of gasoline and other fuels in line with increases in crude oil costs. The government is Petrobras’ main shareholder.

Benchmark Brent crude oil futures closed at $98.84 a barrel on Tuesday, practically unchanged from the previous session, after hitting a 16-month intraday low of $95.63 on Monday.

Petrobras has not raised the wholesale price it charges distributors for its main vehicle fuels since 2008.

The company’s refining division lost 4.6 billion reais in the first quarter as it was forced to buy oil from the exploration and production division at world prices and sell refined products at levels considered to be about 30 percent below global market values.

Since the end of the first quarter, oil prices have dropped by more than 20 percent. Petrobras’ pricing policies seek to make up for refining losses by not lowering fuels prices when crude falls, Foster said.

Petrobras preferred shares, the company’s most-traded class of stock, fell 1.62 percent to 18.80 reais in São Paulo trading. The Bovespa index of blue chip stocks in the Sao Paulo BM&FBovespa stock exchange fell 1.7 percent.

NEW INVESTMENT PLAN

Foster also told reporters in Rio de Janeiro that Petrobras will present its 2012-2016 investment plan within the next few weeks.

Petrobras’ current plan, through the end of 2015, calls for spending of about $225 billion on expansion, part of efforts to increase the company’s worldwide output to 6.42 million barrels of oil and natural gas equivalent daily by 2020.

Foster also said there was “no discussion” underway to reduce the minimum amount of Brazilian goods and services that oil companies must include in their offshore exploration and production programs.

Brazil requires that up to 65 percent of all new equipment and services in oil exploration and development be purchased from Brazilian-based companies and manufacturers.

The rule does not prevent foreign companies from selling to Brazil’s oil industry. It does, though, put pressure on foreign companies to set up local units to manufacture, assemble and supply goods and services in Brazil rather than importing them.

Foster said operations in Argentina, Peru, Colombia, Venezuela and Bolivia will continue to be equally important to Petrobras when the new investment plan is presented. (Writing by Jeb Blount; Editing by Reese Ewing, John Wallace and Marguerita Choy)

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