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Petrobras' Albacora divestment in Brazil on hold, sources say

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By Gram Slattery

RIO DE JANEIRO, July 29 (Reuters) - Efforts by Petrobras to sell the Albacora field to independent oil and gas producer PRIO have stalled, two people with knowledge of the matter said, which could mark the end of five years of major asset sales by the Brazilian state-run company.

In April, PRIO, formerly called PetroRio, announced it was buying the Albacora Leste oil field from Petrobras for $2.2 billion. Both companies have long acknowledged that talks are underway for the adjacent field, known simply as Albacora.

Reuters has previously reported that the two sides had struggled to reach a fair value for Albacora. But in recent weeks, those talks have effectively ground to an halt, said the people, who requested anonymity to discuss confidential matters.

One of the people, with knowledge of PRIO's thinking, said management turmoil at Petrobras had affected talks for the worse. The state-run company has had four CEOs this year and its board is set to be replaced at an August shareholder meeting. Until then, the person said, talks are on ice.

The same person added that the deal is not dead, and PRIO is optimistic that discussions will move forward again when a new Petrobras board is installed.

Industry website PetroleoHoje reported this week that Petrobras had removed Albacora from its divestment portfolio.

Petrobras denied this, saying in a securities filing: "There has been no decision to suspend the divestment process." The company did not provide additional comment to Reuters.

A PRIO spokesperson told Reuters that talks are ongoing.

In recent years, Petrobras has sold off dozens of oil fields, as well as refineries, pipelines, gas station chains and other assets in a bid to reduce debt and sharpen its focus on deepwater exploration and production.

Albacora, which was expected to fetch billions of dollars, is among the last divestments of significant size with a chance of going through before Brazil's October presidential election.

Leftist former President Luiz Inacio Lula da Silva, who is currently beating President Jair Bolsonaro in the polls, has been critical of Petrobras' divestment drive. (Reporting by Gram Slattery; Editing by Brad Haynes and David Holmes)