Aug. 19 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, plans to build an $11.1 billion low-sulfur refinery in the country's northeastern Ceara state.

The plant will be able to process 300,000 barrels of oil a day, according to a release that Rio de Janeiro-based Petrobras distributed in Fortaleza, Brazil. Production is scheduled to start in 2014 with a processing capacity of 150,000 barrels a day. Full capacity should be reached in 2016.

The refinery will be the cornerstone of efforts to transform the port of Pecem near Fortaleza, in the northeast of Brazil, into a chemicals, steelmaking and industrial center for the country's poorest and fastest-growing region. It will also help Petrobras refine its growing oil output into fuels for export to Europe and the U.S.

``This is going to bring an enormous amount of jobs and economic development to the region,'' said Antonio Balhmann, the head of Ceara's state economic development commission. ``This is going to finally help create a modern infrastructure for this region.''

Petrobras will need at least five new refineries over the next decade to handle its growing oil output, Petrobras's refining chief, Paulo Roberto Costa, told reporters today.

Brazil's refining capacity of 1.9 million barrels a day is about half the amount of oil Petrobras expects to produce by 2015. Its existing refineries produce gasoline and diesel with more sulfur content than is allowed in the U.S. and Europe.

Higher Standards

``It's been 28 years since we built a new refinery in Brazil,'' Costa said. ``These new refineries will meet the higher environmental standards for gasoline and diesel required in the U.S. and Europe.''

Petrobras rose 3 percent to 32.63 reais in Sao Paulo trading today. The stock is down 26 percent this year, compared with a 16 percent decline of the Bovespa index.

Another company considering industrial operations in Pecem is Dongkuk Steel Co., which hopes to export steel slabs from a mill built close to the port. Reliance Industries, operator of the world's third-biggest refinery, is considering plans to build a petrochemical facility in Brazil's northeast to supply the country's textile industry, Costa said.

On Aug. 20, Petrobras expects to inaugurate Brazil's first liquefied natural gas import terminal at the port of Pecem. The terminal's regasification ship will increase Brazil's natural gas supply by as much as 11 percent with a capacity of 7 million cubic meters of gas a day.

Cheaper, Cleaner

The gas will be used to reduce dependence on Bolivia, the source of half of Brazil's supply. Much of the gas will be used to generate electricity when Brazil's hydroelectric dams, responsible for about 80 percent of the country's power, reduce output during regular droughts. It will also allow them to cut the cost of power by replacing fuel oil and diesel with cheaper and cleaner natural gas.

The first commercial gas from the ship is expected to be delivered to customers by Sept. 25, said Maria das Gracas Foster, the company's head of energy and gas. The terminal will be operated by Transpetro, Petrobras's transportation unit.

Petrobras is planning a second LNG import terminal for Rio de Janeiro. Main construction is expected to be complete by November, with commercial gas deliveries operating by the end of June next year.

The oil company will decide on the construction of other import terminals after an auction of new electricity generation capacity happens in October, Foster said.

In the future, Petrobras may seek to use these terminals, which will initially import LNG from countries such as Trinidad & Tobago and Libya, to deliver gas to Brazilian markets from its offshore Tupi and Jupiter fields.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net

Last Updated: August 19, 2008 18:34 EDT