BRAZIL PQU SALE MAY REST ON NAPHTHA PRICING POLICY

BRAZIL PQU SALE MAY REST ON NAPHTHA PRICING POLICY

Hoping to smooth the sell-off of petrochemicals producer Petroquimica Uniao SA (PQU), government and oil sector officials will meet with companies interested in the sale to discuss pricing policy for naphtha, one potential investor said.

''If we don't get an agreement there may still be an auction, but we won't be bidding," said Eduardo Gouvea, a director with Ipiranga Quimica, part of Companhia Brasileira de Petroleo Ipiranga SA. "Pricing policy is the key."Ipiranga is part of a consortium of petrochemical consumers interested in buying a 23 percent stake in PQU.

A 67 percent stake in PQU was due to have been sold on November 19. But the auction, which had already been delayed four times, was postponed at the eleventh hour.

The consortium includes the Brazilian subsidiary of Union Carbide UK, Polibrasil (a polypropylene producer in which Royal Dutch/Shell has a stake) and two local companies.

Banks backing the consortium could decide to buy as much as 16 percent of PQU, said Mr. Gouvea, declining to mention names.

Unipar, a Brazilian petrochemicals holding company, would maintain its 28.9 percent of PQU after the auction, Mr. Gouvea said in an interview.

The failure of the government and Petrobras, Brazil's state-owned oil monopoly, to come up with an acceptable naphtha pricing policy prompted the consortium to abandon last week's auction of PQU, he said.

Representatives of private petrochemical producers will discuss naphtha pricing with officials from the Economy and Mines and Energy ministries, the National Development Bank (BNDES) and Petrobras today, Mr. Gouvea said.

Petrobras currently pegs the price of naphtha in Brazil at 1.2 times the price of North Sea benchmark Brent crude.

But the private companies want the rule changed because Brazil does not import Brent, a light sweet crude which is generally priced at a premium to other crudes, and because the rule is often ignored anyway, Mr. Gouvea said. The companies will propose that naphtha be priced at 1.2 times the cost of crude imported by Brazil, he said.

He calculated that the current price of $150 a metric ton of naphtha would fall to $137 should the private sector proposal be accepted.

An official close to the privatization process said Petrobras was under

pressure to change its naphtha pricing policy following the failure of the auction last week.

"Petrobras doesn't want to lose any revenue," said the official who asked not to be named. "There is resistance within some sectors of Petrobras to the privatization."