Page 7 - DMEA Week 30 2022

DMEA COMMENTARY DMEA

a policy matter. And [NNPC Ltd] is going to be Perhaps his position would be more secure
a supplier to the [federal government] at a fee. if Petrobras did not have to decide whether to
So the issue of at what price you sell petroleum exercise its right, which is formally protected by
[products] will be the decision of the state,” he Brazil’s constitution, to set prices for petroleum
said. products in accordance with global crude oil
He added: “The state has continued to main- prices and not with the government’s notions
tain that we must continue to pay subsidy on about what is best for consumers at any given
petroleum products. We are happy to do this, moment.
but as a commercial venture, we will have a ser-
vice-level agreement between us to render that The downstream factor
service.” If so, however, the dispute could shift to the ques-
tion of what the Brazilian government consid-
Avoiding disputes ers to be a fair fee for service – and whether that
Kyari did not mention Petrobras by name. How- fee should remain static at times when crude oil
ever, the Vanguard newspaper, which cited his prices change. (It is not out of the question, for
televised remarks, made note of the Brazilian example, that Brasília might ask for a discount
NOC’s recent disagreements with President Jair when petroleum is expensive, citing the dimin-
Bolsonaro on the subject of domestic fuel pricing ishment of its own resources.)
and speculated that the CEO did not want to find In the long term, Petrobras might be able to
himself or his new company embroiled in the endure a dispute of this nature, as it is looking
same kind of disputes that have led to repeated to shift its focus to its upstream business – espe-
firings and hirings. cially the development of its large offshore pre-
Petrobras’ board of directors recently elected salt fields, which have been and will be the main
Caio Mário Paes de Andrade as the company’s source of production growth. That is, over time,
new CEO. Paes de Andrade is the fourth per- it could reasonably expect the fee that it receives
son to hold this position at the Brazilian NOC from the government for handling fuel imports
since early 2019 and is also the second person to represent a smaller portion of its income.
nominated to the post this year, following José However, NNPC Ltd is in a different position.
Mauro Ferreira Coelho, who lasted less than two The Nigerian company may be switching to a
months. more corporate style of management, but it still
Bolsonaro dismissed both of Coelho’s prede- has a substantial downstream footprint, as it is
cessors – Joaquim Silva e Luna, a former mili- the operator of four idle refineries that it hopes to
tary officer with close ties to the president and no bring back on line soon, along with an extensive
direct experience in the oil industry, and Roberto chain of branded filling stations.
Castello Branco, an economist and experienced It will be involved in the downstream sec-
businessman – after they declined to cut diesel tor for a long time, if only by virtue of the fact
prices at his urging. that the fuel it imports will be loaded into its
Under these circumstances, Paes de Andrade own storage and distribution networks, which
might very well wonder whether Brazil should it will then have to repair and maintain. The fee
attempt to imitate Nigeria, with Petrobras act- it receives will, therefore, matter in a way that it
ing as the federal government’s fuel supplier in may not in Brazil.
exchange for a fee, without any involvement in So once again, the comparison will not be
the issue of domestic pricing. easy to make.™

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