Rio de Janeiro's state government moved Tuesday to seize lands belonging to small Brazilian oil refiner Refinaria de Petroleos de Manguinhos SA (RPMG4.BR), with plans to revitalize the area with a housing project that would help ease overcrowding in nearby slums. The official decree was published after comments Sunday by Rio de Janeiro's governor, Sergio Cabral, who said that the government would spend 200 million Brazilian reais ($99 million) to take over the refiner's land, clean it up and build public housing at the site. "The Manguinhos Refinery has not operated as a refinery for a very long time, but instead as a large distributor of fuels such as oil derivatives and ethanol," the governor's office said. Rio state also said it was seeking BRL406 million in tax payments from the company, as well as BRL130 million in fines. Manguinhos Chief Executive Paulo Henrique Menezes said that the company was evaluating its next step after reviewing Tuesday's decree. Manguinhos will only comment on the government's plans "after studying the content of the decree, consulting with [the company's] lawyers and deciding on any measures that may be taken," Mr. Menezes said. The refinery is one of the few in Brazil not controlled by state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), which dominates local refining capacity. Manguinhos has the capacity to process about 15,000 barrels of crude oil a day, primarily into gasoline and fuel oil. Manguinhos's land also holds a large farm of storage tanks.

Rio state wants to build a planned neighborhood on the land to ease overcrowding in nearby shantytowns, the governor's office said. The development was unveiled after local police occupied the slums Sunday, part of ongoing pacification efforts in Rio de Janeiro to improve safety and remove drug gangs ahead of the 2014 World Cup and 2016 Olympics. Tuesday's decree will allow state workers to start evaluating the land and potential cost of cleanup efforts, the governor's office said.  On Monday, Manguinhos asked local stock regulators to halt trading in the company's shares while it investigated the possible expropriation of its land. Manguinhos's shares, which remain frozen as of Tuesday afternoon, closed at 66 Brazilian centavos ($0.33) Friday on the Sao Paulo Stock Exchange.

By Dow Jones Newswires