Uruguay’s Ancap Explores Refining Venture to Gain Regional Clout

(Bloomberg) -- Uruguay’s state-run oil company Ancap has held informal talks with at least two refiners in South America to gauge their appetite for joining forces to gain more clout in the regional market, Chairman Alejandro Stipanicic said.

A potential deal could include agreements to jointly buy crude and export refined products, as well as the pooling of technical expertise, Stipanicic said in an interview at his office in Montevideo. That would allow them to offer more competitive products than as stand alone companies, he said.

“We have to make an effort so the refineries in the region become a refining complex,” he said. “Today, the stage is set for some kind of coordination between refining, logistical and maintenance activities.”

The talks come as Uruguay’s ruling coalition seeks to overhaul the country’s fuel market. If the latest version of a sweeping omnibus bill is passed, Ancap’s fuel prices will have to be competitive with imports starting next year.

Ancap’s La Teja refinery processed 15 million barrels of crude last year, or about 41,000 barrels a day.

Stipanicic declined to name the companies he has spoken to since taking office in March.

Administracion Nacional de Combustibles, Alcohol y Portland, as Uruguay’s largest company by sales is formally known, is trying to turn the page on a decade marred by losses and controversial investments. Though the 89-year-old company has been profitable since a $622 million bailout in 2016, it remains saddled with underperforming subsidiaries, including a chronically unprofitable cement maker.

To whip Ancap into shape, Stipanicic plans to update its information systems, rebuild a decision-making culture paralyzed by scandals, and overhaul the company’s 14 subsidiaries with a view to concentrate investment decisions at corporate headquarters.

Ancap has “to start to function like a corporation and not a basket of independent investments,” said Stipanicic, who didn’t rule out mergers and asset sales.

Stipanicic also wants Ancap to tap bond markets for the first time during the current administration to diversify its funding base and increase public oversight of the firm.

Ancap, which has a monopoly on refining and fuel imports in Uruguay, is starting to see early signs of an economic recovery as the country slowly emerges from almost three months of voluntary lockdown due to the pandemic.

Gasoline demand today is “around 80% of normal levels,” compared with as little as 30% during the depths of the pandemic, he said.

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