Petrobras said the Abreu e Lima refinery, under construction in the northeastern Brazilian state of Pernambuco, had been budgeted at $4.05 billion. Now the cost is estimated at $12 billion, Petrobras said, with an accuracy margin ranging from 3 percent to 10 percent, the company said in a statement Tuesday.

A probe by the office of Brazil's controller general had detected irregularities such as over-invoicing and overpricing by companies contracted to build the refinery, the Latin American Herald Tribune reported Friday.

Petrobras, in a Tuesday statement, denied that there was any overbilling or overpricing in the earthwork for the proposed refinery and said that efforts are being made to reduce the cost of the project.

The Rio de Janeiro-based company said that during the conceptual project preparation phase, the expected capacity of Abreu e Lima was 200,000 barrels of oil per day, with a proposed building cost of about $20,000 per barrel capacity. When the decision was made to increase refinery capacity to 230,000 barrels a day, the cost rose to $12 billion, the statement said.

The budget for the refinery, it said, was also affected by the depreciation of the dollar as well as a new system proposed to reduce toxic emissions.

"Costs are compatible with current prices for refinery construction," Petrobras said, Bloomberg reports.

In late 2006 the company had projected the refinery would go on stream in the second half of 2010 and reach its full capacity in 2011. Petrobras said it now expects the project to come on stream in the first quarter of 2011.

The company's board has not yet approved the investment in the project. Brazil and Venezuela recently announced that obstacles to the Abreu e Lima Refinery agreement have been resolved and it would be signed during the next meeting between Venezuelan President Hugo Chavez and Brazilian counterpart Luiz Inacio Lula da Silva.

Until now, Petrobras has been building the refinery on its own accord. Construction of the buildings is under way, and 85 percent of the earthwork has been completed.

Bloomberg also reported Friday that Petrobras could get an injection of capital from the government of up to $54 billion. The funds would raise the government's voting stake to as much as 70 percent from the current 55.7 percent.

Petrobras, an integrated energy company and a global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe. It operates 112 production platforms and 16 refineries, with yield from its refineries at 1,937,000 barrels a day.

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