Page 4 - LatAmOil Week 26

LatAmOil COMMENTARY LatAmOil
Brazil takes more steps
towards oil and gas sector reform
Petrobras has of cially launched the sale of four re neries and is gearing up to exit the gas distribution business
WHAT:
Brazil’s NOC is looking to reduce its share of total re ning capacity to 50% and intends to sell more gas distribution networks.
WHY:
These moves appear
to signal the Bolsonaro government’s commit- ment to privatisation and increased competition, despite opposition in some quarters.
WHAT NEXT:
The conditions of the re nery sales should lay the groundwork for decentralisation in Brazil’s downstream sector.
PROPONENTS of free-market reform in the Brazilian energy sector heard some positive news last week, as the national oil company (NOC) Petrobras pushed forward with e orts to end its monopoly over crude oil re ning and natural gas distribution.
On June 28, the company o cially kicked o the sale of four oil-processing plants and said it intended to publish information on the other four plants slated for divestment before the end of this year. It did so within the framework of an agreement it struck last month with CADE, the Brazilian Justice Ministry’s Anti-trust Division. at deal will cut the rm’s share of national re ning capacity down from 98% to 50%. (See: Petrobras launches sale of four refineries under anti-trust deal, p. 6.)
Petrobras announced the re nery sales a day a er its CEO, Roberto Castello Branco, talked about the next steps in the NOC’s campaign to reform the country’s downstream gas sector. e company has already hived o two gas distribu- tion subsidiaries, he noted, and further sales are in the pipeline. It is also in talks with CADE on a deal that will allow it to exit the gas distribution business, he said.
Both of these initiatives will complement other campaigns launched by the government of President Jair Bolsonaro. Petrobras hopes that its exit from the gas distribution sector will bolster e orts to reduce the price of gas, thereby encouraging business and residential custom- ers to switch fuels. It is also optimistic that the re nery sales will strengthen competition in the downstream sector and pull petroleum product prices down in the long run.
Trade unions
ese reform drives enjoy broad support in Bra- zil, where many consumers have responded pos- itively to the prospect of increased competition and reduced fuel prices.
They have also drawn criticism in some circles. Last month, Brazil’s United Federation of Oil Workers, known by its Portuguese acro- nym FUP, reiterated its opposition to the gov- ernment’s plans for privatising some Petrobras assets. On June 14, FUP said it was joining a 24-hour nationwide strike not only because it
disapproved of proposed pension reforms, the ostensible reason for the work stoppage, but also because it disagreed with the privatisation programme. It stated that its members intended to stage a strike at port terminal facilities in Pernambuco and at nine re neries owned by Petrobras.
This was not the first time the union has protested against the government’s divestment plans. FUP has also led a lawsuit in the hope of derailing planned asset sales, and it will probably support the legislators who have condemned a Brazilian Supreme Court ruling that permits Petrobras to sell o subsidiaries without seeking the consent of the national parliament.
Other critics
FUP’s stance is no surprise, given that trade unions frequently oppose market-oriented reforms. But the trade union has not been the only critic.
Questions about the extent of Bolsonaro’s commitment to genuine policy changes arose in April. At that time, Brazilian media reported that Castello Branco had held o on a scheduled increase in the price of diesel at the behest of the president, who was said to be concerned about popular antagonism to fuel tari hikes.
Bolsonaro responded to these reports by issuing a statement declaring that he had few options for changing policy at Petrobras and did not intend to interfere in the company’s decisions.
Many Brazilian “ consumers
have responded positively to the prospect of increased competition and reduced fuel prices
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Renova Midia
P4
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Week 26 03•July•2019