Page 5 - LatAmOil Week 44 2022

LatAmOil COMMENTARY LatAmOil

As of press time, the incumbent has yet to make – and public policy-oriented.
an official statement conceding the race, but
neither has he publicly contested the results. He Transition goals
has expressed affection for the truck drivers who He is also more interested than his predecessor
have staged road blockades on his behalf – and in pushing Petrobras to focus on the diversifi-
this is hardly surprising, as independent truck- cation of Brazil’s energy industry, as well as the
ers have been one of his most loyal political con- transition to renewable energy sources.
stituencies. Even so, he has authorised his chief To date, the NOC has generally concentrated
of staff Ciro Nogueira to begin the transition on fossil fuels. It has worked (with some success)
process ahead of January 1, 2023, the date of the to reduce its emissions footprint and has devel-
next presidential inauguration. oped carbon capture and storage (CCS) technol-
There is, of course, still a possibility that Bol- ogies, but for the most part it has continued to
sonaro may seek to contest the election results, engage in upstream exploration and production.
as he hinted that he might do if he did not win. If Lula wants to change this. Indeed, his politi-
that is his plan, however, he has remained unu- cal platform makes an explicit statement to this
sually quiet about it. effect: “It is essential to guarantee the country’s The upcoming
As such, under the current circumstances, it energy sovereignty and security, with an expan-
seems reasonable to assume that Lula will take sion of the energy supply [and] a deepening in shift is sure to
office at the beginning of next year as scheduled. the diversification of the energy mix, through have an impact
If so, how will this transition affect Brazil’s oil the expansion of clean and renewable sources at
and gas industry? prices compatible with Brazilian realities.” beyond Brazil’s
Achieving this goal is likely to involve fur-
Change is coming ther redefinition of Petrobras’ core business to borders, since
The most important thing to note is that there include not just oil refining but also vertically
will be changes in the policy environment. Lula integrated natural gas operations (production, Petrobras is
has indicated clearly that he does not agree with transportation, distribution, processing and one of the
all of Bolsonaro’s efforts to liberalise the sector. petrochemicals), biofuel production, renew-
For instance, he has stated that he will not able energy projects (wind, solar) and green world’s largest
consider privatising Petrobras. He has also crit- hydrogen and ammonia production. The Lula
icised the state-approved sell-off of the NOC’s administration will not be able to do this with- hydrocarbon
refineries, and representatives of his campaign out investing a great deal of money in the energy
have suggested that Lula’s administration might sector, and it will be interesting to see how it pro- producers
try to buy back privatised plants or at least seek poses to raise these funds at a time when it wants
to ensure that the government secures seats on to process more crude oil in domestic refineries.
the boards of such facilities. In any event, changes are on the horizon. Lula
Additionally, the president-elect has called does not necessarily appear to be preparing to
for the NOC to stop focusing so narrowly on reverse all of Bolsonaro’s reforms. (He has not,
major upstream projects and invest more in the for example, suggested renationalising the gas
downstream realm. He has urged Petrobras to assets that Petrobras has shed.) But he does want
build more refineries and process more crude the NOC to work much more closely with the
from its own pre-salt fields. This plan, he argues, government than it has been doing.
would allow the country to achieve energy And that shift, in turn, is sure to have an
self-sufficiency while also bringing down fuel impact beyond Brazil’s border, since Petrobras
prices. (Lula has doubled down on this front one of is the largest hydrocarbon producers in
since the start of the campaign, saying that the world. ™
the energy crisis in Europe illustrates just how
urgently Brazil needs to reduce its dependence
on imported petroleum products.)
This would represent a significant change in
course, in that it would see Lula’s administration
using Petrobras as more of a policy instrument
than it has been lately. During Bolsonaro’s term
in office, the NOC has de-emphasised its posi-
tion as a state-owned entity and has functioned
more like a profit-driven corporation. It does
still answer to the government on key matters,
such as leaving the choice of its CEO in the
hands of the presidency, but it also has a great
deal of de jure independence, as the state does
not have the power to dictate its corporate strat-
egy or fuel prices.
Moreover, Bolsonaro seemed to want Petro-
bras to behave more like a money-making busi-
ness than a policy lever – at least, he did in times
when the economy was performing well enough
to keep his political supporters happy. Lula, by
contrast, is pursuing goals that are different Social media footage (unverified) said to show truckers’ road blockade in Brazil

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