Political hype is creeping into Petrobras’ future

The changes promoted by the administration of President Luiz Inacio Lula da Silva in the Brazilian company Petrobras provoked strong reactions in the local market.

The associations of oil and gas producers and suppliers, as well as consumers of electricity and natural gas, published open letters on Monday criticizing the halt to divestments from the state company.

The messages were sent by groups of independent oil producers ABPIP, service providers Abespetro, industrial electricity consumers Abrace and industrialists from Firjan. For them, confirmation of the sale of Petrobras assets is crucial to ensuring more competition and investment.

The associations defended divestments through signed contracts, such as the sale of the Lobnor Lubricant Oil Refinery; Poles Botiguar, North Capixaba and Bahia Tira; the sea poles Golfinho/Camarupim and Uruguá/Tambaú; and the Suape II and Brasympe thermoelectric plants.

However, the future of state-company divestments is just one of a series of issues that will generate friction between the federal government, industry, and financial players.

Also included is a possible change in Petrobras’ fuel pricing policy and an increase in investment in less profitable areas. This is the case for refining and alternative energy sources, such as offshore wind power and biofuels.

Another move that could cause controversy is if Petrobras contracts out larger local items, which are more expensive than those built in Asia, but would help revive Brazil’s shipbuilding industry.

All of this could hurt the oil company’s historical profits and the “super dividend” that is distributed to shareholders.

Meanwhile, oil unions are putting pressure on the Workers’ Party (PT) to apply a more state model to Petrobras’ management. Workers’ groups form an important part of the ruling party’s political base.

A halt to the ongoing divestment, even annulment of signed contracts, and a change in the current fuel price policy were part of the demands raised by the oil consortium FNP at the end of January to the CEO of Petrobras, Jean-Paul Pratis.

Meanwhile, the oil consortium FUP has complained to Petrobras’ board of directors about what it calls “dangerous remarks” by Minister of Mines and Energy Alexandre Silvera.

Of a total of seven members representing the government on the board of directors (including Prates, a member chosen by Lula), four are nominated by Silveira: the chairman, Pietro Mendes, Carlos Santos, Vitor Saback and Eugênio Teixeira.

They are related names [al expresidente Jair] Bolsonaro and the financial market are in favor of privatization.

The union leader fears that the new board of directors, if approved, will hinder the Lula government’s program, which, in addition to the fuel price policy, includes Petrobras’ dividend distribution system and the termination of liquidations.

One of the main targets for public investment is the sale of the Landulpho Alves Refinery (RLAM, currently Matribi), in the state of Bahia, to Abu Dhabi sovereign wealth fund Mubadala Capital.

On Tuesday, the Oil Workers Union filed a complaint with federal prosecutors investigating a possible link between $3.2 million worth of diamond jewelry given to Bolsonaro and former first lady Michelle Bolsonaro by Saudi Arabia and the sale of the plant.

The document highlights that Petrobras announced the sale of RLAM to the public on November 30, 2021, about a month after Bolsonaro’s trip to the Middle East.

RLAM and associated logistics assets were sold for US$1.8 billion. At the time, the Brazilian Institute for Petroleum Studies ENEP estimated that the refinery was transferred at half its market value. BTG Pactual analysts also said that the transaction amount was lower than their estimates.

The jewels, which were seized by the Federal Tax Service at Guarulhos Airport in São Paulo on October 26, 2021, were in the backpack of Marcos Andre dos Santos Suero, advisor to the then Minister of Mines and Energy, Bento Albuquerque, when he was returning. home from Riyadh.

The university said that while the lawsuit states that two different countries – Saudi Arabia and the UAE – donated and purchased the refinery, there is “geographical proximity and a strategic alliance between them”.

An executive from an engineering firm with several contracts in the Brazilian energy sector said, on condition of anonymity, that the main problem in the current context is the possibility of a sudden and radical change in Petrobras’ strategy.

“I even agree with many of the proposed changes that the government is considering. The problem is sudden changes, and that really creates repercussions. Then there will be a lot of noise,” he told BNamericas.