(Updates with Ultrapar declining to comment)

SAO PAULO/RIO, Aug 26 (Reuters) - Brazil's Petroleo Brasileiro SA is set to receive binding offers on Thursday for its Presidente Getulio Vargas refinery, with local firms Raizen and Ultrapar Participacoes SA among the likely bidders, sources familiar with the matter said.

The sale is part of a multi-billion plan by the state-controlled oil company, known as Petrobras, to divest assets, with interest from ethanol and fuel distribution company Raizen and conglomerate Ultrapar powered by deep-pocketed foreign investment firms.

Based in the southern Brazilian state of Parana, Repar is Brazil's fifth-largest refinery, able to process 208,000 barrels per day, representing 9% of the country's capacity. It supplies the states of Parana, Santa Catarina, Sao Paulo and Mato Grosso, making it a good fit for both Ultra and Raizen, which have fuel distribution businesses in these areas.

Raizen, a joint venture between Royal Dutch Shell Plc and Brazilian ethanol producer Cosan SA, is teaming up with U.S.-based private equity firm Global Infrastructure Partners (GIP) to bid for various Petrobras refineries, Reuters reported in January. GIP has more than $50 billion in assets under management.

Raizen declined to comment. Petrobras didn't immediately reply to a request for comment.

Ultrapar could look to buy the refinery on its own or in a joint bid with Patria Investimentos Ltda, an investment fund backed by Blackstone Group Inc, which reached a 5% stake in the company in June, according to one source familiar with Ultrapar's deliberations.

Ultrapar and Patria declined to comment.

Another source said Petrobras was expecting additional offers for Repar, without naming potential bidders.

Indian conglomerate Essar Group had considered a bid in recent months, but it was not clear if the company would follow through, another source said. Essar didn't immediately reply to a request for comment sent outside regular market hours in India.

The Parana unit is the second of a group of refineries that Petrobras is putting on the block as part of government efforts to bring more competition to the sector. Petrobras is in talks with Abu Dhabi investment firm Mubadala about finalizing an offer for the first refinery put up for sale, Rlam, in the northeastern state of Bahia.

Repar produces mostly gasoline and diesel, up to 70%, combined, as well as asphalt base, aviation fuel and butane gas. The unit is being sold with five storage terminals, one in Parana state and four in Santa Catarina, and 476 kilometers (295 miles) of oil pipelines.

(Reporting by Carolina Mandl, Sabrina Valle, Gram Slattery; editing by Richard Pullin)