CADE clears the sale of Petrobras' stake in GásLocal to White Martins

Last Wednesday (16 June), the Administrative Council for Economic Defense (CADE) conditionally cleared the sale of Petrobras' stake in GNL Gemini Gás Local to White Martins – a worldwide industrial gases and engineering company. As part of the deal, Petrobras' equipment in White Martin's liquefaction plant in Paulínia, state of São Paulo, will also be transferred to the multinational.

The clearance was conditional on a Merger Control Agreement signed between CADE and the state-owned enterprise, which compelled Petrobras to leave the Gemini Consortium, a joint venture formed alongside White Martins and GNL Gemini GásLocal that produces and markets liquefied natural gas (LNG) in Brazil. Under the consortium, Petrobras supplied natural gas, White Martins liquified the gas, and GásLocal distributed it.

The structure of the joint venture has long raised competition concerns and has been the subject of investigations into discriminatory practices and market foreclosure.

Commissioner Luis Braido, who served as the rapporteur of the acquisition case, warned the transaction mitigates – but does not entirely preclude – incentives to Petrobras' anticompetitive practices in benefit of GasLocal under their consortium. Thus, the Merger Control Agreement established the state-owned company should leave the consortium to prevent any competitive harm. The document provides for a final deadline, known only by the parties, for Petrobras to fulfil the agreed conditions.

In addition, the instrument signed with CADE established that, in case the Gemini Consortium ends during the term of the consortium agreement, Petrobras should renounce or concede its capacity in the exit zone where the Gemini's delivery point is located, in a size commensurate with the liquefaction plant's natural gas intake and in accordance with the legally required procedure.

CADE's ruling on the acquisition also provides for an amendment to the consortium agreement, establishing terms and conditions for Petrobras' supply of natural gas to the consortium, considering the company will divest its stake in GásLocal. The new provisions, however, will be assessed by the Office of the General Superintendent at CADE, which will verify whether the new consortium agreement complies with CADE's previous rulings.