UPDATE 1-Petrobras, PDVSA conclude Brazil refinery deal

CARACAS, Oct 30 (Reuters) - Brazil's state oil company Petrobras (PETR4.SA: Quote, Profile, Research) said on Friday that it has concluded a deal with Venezuela's PDVSA to construct and operate a refinery in northeast Brazil.

Petrobras said in a statement to the Brazilian securities regulator that it has concluded negotiations with PDVSA for a joint venture that will construct and operate the 230,000-barrel-per-day Abreu e Lima refinery in Brazil's Pernambuco state.

The deal was made by Petrobras' director of gas and energy, Maria das Gracas Foster, during Brazil's president Luiz Inacio Lula da Silva visit to Venezuela on Friday.

Petrobras will have a 60 percent stake in the joint venture while Venezuela will have 40 percent and each partner will supply 50 percent of the crude oil for the refinery.

Although the cost of the refinery was initially estimated at $4.5 billion, it is being revised and sources with knowledge of the project estimate that the cost may exceed $10 billion.

The refinery is expected to be completed by 2011, according to preliminary estimates, although Petrobras has not confirmed if that timeline is still current. Low sulfur diesel will be the main refined product produced at the refinery, the Petrobras said.

The refinery was conceived to process crude from a PDVSA-Petrobras joint venture in the Carabobo region of Venezuela's Orinoco belt, but it has taken years for the two companies to come to an agreement on the terms of the partnership. (Reporting by Denise Luna; Writing by Rebekah Kebede; Editing by Marguerita Choy)