Petrobras and Braskem Seal $17.8B Deals for Feedstock Supply

Petrobras PBR, Brazil's state-controlled oil and gas company, and Braskem BAK, the country's largest petrochemical company in Latin America, have entered into a groundbreaking set of long-term feedstock supply contracts valued at $17.8 billion. Announced in late 2025, the deals end years of negotiation between the two companies and lay the foundation for future expansion and modernization within the Brazilian petrochemical industry.These new contracts represent a strategic move by Braskem as the company pivots from using naphtha, a traditionally relied-upon feedstock, to more competitive natural gas liquids (NGLs) like ethane. The objective is to set Brazil as a key player in global petrochemical production while ensuring a steady, reliable supply of raw materials to Braskem’s plants across the country.Overview of the AgreementsAt the heart of the agreements are two major contracts: one worth $11.3 billion for the supply of petrochemical naphtha, and another worth $5.6 billion, covering the delivery of NGLs, such as ethane, propane and hydrogen. These long-term deals span multiple years, with the initial contracts expected to commence in January 2026.Naphtha Supply Deal: Strengthening Key Petrochemical OperationsThe first and largest portion of the deal, valued at $11.3 billion, focuses on the supply of petrochemical naphtha to Braskem’s facilities in São Paulo, Bahia, and Rio Grande do Sul, including the flagship Triunfo complex in Rio Grande do Sul. The deal spans five years and will be anchored to international naphtha benchmarks, providing a competitive pricing structure that allows Braskem to continue operating effectively in global markets.Under this deal, Petrobras will supply a total of 4.116 million tons of naphtha in 2026, with the volume increasing to 4.316 million tons by 2030. The contract includes a minimum monthly offtake volume, ensuring that Braskem receives the required amount of feedstock for its operations. This stable supply will significantly enhance Braskem's ability to meet the demand for its products, including polyethylene and polypropylene resins, critical to the global manufacturing sector.Ethane and Propane Supply: A Key Step Toward ExpansionThe second major contract, worth $5.6 billion, is pivotal for Braskem’s planned expansion of its Duque de Caxias facilities in Rio de Janeiro. This deal encompasses the supply of ethane, propane, and hydrogen, crucial feedstocks for Braskem’s petrochemical processes. Scheduled to take effect in 2026, the contract will run for 11 years and is expected to provide the raw materials needed for the company to significantly increase its production capacity.Historically, Braskem has sought to secure a more competitive and reliable feedstock supply to support the expansion of its operations at Duque de Caxias. With Petrobras, the dominant player in Brazil’s oil and gas sector, now supplying the required natural gas liquids (NGLs), the two companies are well positioned to advance the modernization of the Duque de Caxias facilities. According to Braskem, the collaboration could unlock nearly $800 million in investments, helping to drive the facility’s growth over the next decade.Ethylene Supply Commitment: Strengthening Long-Term OperationsFrom 2026 to 2028, the new agreement will secure an annual supply of 580,000 tons of ethylene equivalent from Petrobras’ Duque de Caxias refinery, locally known as Reduc. Beginning in 2029, this volume will rise significantly to 725,000 tons per year, supporting Braskem’s ambitious expansion plans. In addition, the expansion will be supported by feedstock from Petrobras’ Boaventura complex, ensuring a reliable and flexible supply of raw materials as demand for Braskem’s petrochemical products continues to grow.The new feedstock supply agreements are vital for Braskem’s long-term strategy, enabling the company to position itself more effectively within the competitive global petrochemical industry. As demand for polyethylene and polypropylene rises, securing a reliable supply of ethane and propane will ensure that Braskem is well positioned to meet market needs.Petrobras Takes Strategic Steps to Shape Braskem’s FutureIn addition to securing feedstock supplies, Petrobras has taken steps to solidify its influence within Braskem. While Petrobras has long been a major shareholder in Braskem, the company has shown increased interest in gaining more control over Braskem’s operations as Novonor, Braskem’s largest shareholder, plans to divest its stake.Petrobras' strategic involvement in this partnership is indicative of a broader trend in Brazil's energy and petrochemical sectors, where state-controlled entities are playing a larger role in shaping the industry’s future. By securing these feedstock supply agreements, Petrobras ensures that it maintains its position as a critical player in Brazil’s energy and petrochemical value chains.Propylene Supply Agreements Strengthen Braskem’s Diverse OperationsIn addition to the ethylene and NGLs agreements, Petrobras signed propylene supply contracts with Braskem. Valued at approximately $940 million over five years, these contracts, which will begin in May 2026, will help support Braskem’s diverse petrochemical production lines.Under these agreements, Petrobras will supply up to 140,000 tons of propylene annually from the Recap refinery, with additional deliveries from the Reduc and Refap refineries. This supply chain flexibility will ensure Braskem has access to the necessary feedstocks to maintain its competitive edge in the production of polypropylene, a versatile material used in various industries, such as automotive, packaging and textiles.A Bright Outlook for Braskem and PetrobrasThe signing of these significant feedstock supply contracts marks a new chapter for both Petrobras and Braskem. For Braskem, the agreements provide a stable foundation for growth and expansion, with access to competitive and secure feedstocks for its operations. Increasing the supply of ethane and propane supports the company’s long-term strategy to reduce naphtha dependence and improve cost efficiency.For Petrobras, the deal strengthens its role in Brazil’s energy and petrochemical sectors, while ensuring that its investments in upstream and downstream operations continue to provide long-term value. With an increasing global demand for petrochemical products, Petrobras’ ability to secure and supply feedstocks to major players like Braskem ensures its continued relevance in the global energy landscape.As both companies advance their growth plans, this partnership signals a promising future for the Brazilian petrochemical industry, with potential for additional investments and technological advancements. With billions of dollars at stake, the collaboration between Petrobras and Braskem is poised to reshape the trajectory of Brazil’s petrochemical sector for years to come.PBR & BAK's Zacks Rank & Key PicksCurrently, PBR and BAK have a Zacks Rank #3 (Hold) each.Investors interested in the energy sector might look at some better-ranked stocks like USA Compression Partners USAC and Oceaneering International OII, which sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.USA Compression Partners is valued at $2.78 billion. The company is a leading provider of natural gas compression services in the United States. USA Compression Partners specializes in the design, operation and maintenance of compression equipment for the energy sector, focusing on helping customers optimize their natural gas infrastructure.Oceaneering International is valued at $2.36 billion. The company is a global provider of engineered services and products to the offshore energy, aerospace and defense industries. Oceaneering International specializes in underwater robotics, remotely operated vehicles and subsea engineering solutions for offshore oil and gas exploration and production.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They includeStock #1: A Disruptive Force with Notable Growth and ResilienceStock #2: Bullish Signs Signaling to Buy the DipStock #3: One of the Most Compelling Investments in the MarketStock #4: Leader In a Red-Hot Industry Poised for GrowthStock #5: Modern Omni-Channel Platform Coiled to SpringMost of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.Download Atomic Opportunity: Nuclear Energy's Comeback free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report Oceaneering International, Inc. (OII): Free Stock Analysis Report Braskem S.A. (BAK): Free Stock Analysis Report USA Compression Partners, LP (USAC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks