Page 5 - LatAmOil Week 14 2022

LatAmOil COMMENTARY LatAmOil

Two new picks BNamericas.
As of press time, Bolsonaro does seem to have
recovered from the derailment of his shake-up Status quo?
plans. If these analysts are correct, Bolsonaro’s choices
On April 6, the president announced his new represent (more or less) a maintaining of the
selections for the top two management spots status quo at Petrobras. That is, they indicate
at Petrobras. He named Jose Mauro Ferreira that the NOC will uphold its current priorities
Coelho, the current chairman of Pré-sal Petróleo of focusing on upstream development – and,
SA (PPSA), which represents the government in presumably, of privatising many of the assets
production-sharing contracts (PSCs) covering deemed to be non-core, such as refineries.
offshore fields in the pre-salt zone, as his choice They also indicate that Brazil’s domestic
for CEO and Marcio Andrade Weber, a civil petroleum product pricing regime is likely to
engineer who worked at Petrobras for 16 years, remain in its current condition – and that if any
as his choice for chairman. changes are made, they will not include the elim-
So far, these nominations have been well ination of the PPI. Instead, there may be changes
received among investors. Danielle Lopes, an made on the government side, such as the cre-
analyst and partner at Nord Research, told ation of a state-run fuel price stabilisation fund
BNamericas that Coelho had a good reputation or subsidy programme (and perhaps through
among market watchers. This is partly because a legislative or executive mandate compelling Bolsonaro’s latest
he backs Petrobras’ plan to focus on its core Petrobras to fund the relevant measures).
upstream assets, especially offshore pre-salt Even so, Coelho and Weber, with their years choices represent
fields, and partly because he consistently defends of experience in the oil and gas industry, might
the policy of import parity pricing (PPI), which very well object to any attempt by Bolsonaro or (more or less) a
brings domestic petroleum product prices into legislators to blunt the impact of the PPI pol- maintaining of
line with world market rates, she explained. icy. At the very least, they will probably defend
Weber, meanwhile, is an acceptable choice, Petrobras’ right to set its own fuel prices with the status quo
Lopes said. He will be able to move into his new reference to world market rates rather than in
position easily, as he has extensive experience in deference to government strategies – just as at Petrobras
the oil and gas industry and is already serving on Luna did, despite expectations that he might
Petrobras’ board of directors, she commented. defer to Bolsonaro’s calls for price controls on
BNamericas also quoted Gabriel Brasil, a risk fuel because of his own ties to the president.
analyst for the Southern Cone at the UK-based If they do – and if world crude oil prices
consultancy Control Risks, as saying that both remain high, keeping Brazilian fuel prices high
Weber and Coelho were likely to make a bet- – the level of dissatisfaction among the country’s
ter impression on the investment community consumers and businesses, including politically
than Petrobras’ outgoing CEO Joaquim Silva e influential groups such as truck drivers, is likely
Luna. Since neither of the two new appointees to remain high. This, in turn, would ensure that
is known to have extensive ties with the core high fuel prices remained a point of contention
parliamentary faction known as the Centrão, he during the run-up to the presidential election
said, the nomination process does not appear to scheduled to take place in October. Bolsonaro is
have been an overly political affair. likely to suffer as a consequence, as he will prob-
This, in turn, means that neither Coelho nor ably be blamed on some level for the high prices.
Weber is likely to bend under pressure from And if, as seems likely, he loses to his left-
the many legislators in the Centrão group who wing opponent Luiz Inacio Lula da Silva, it may
would like to see the PPI regime jettisoned, Bra- very well be a good thing to have experienced
sil said. As a result, Petrobras will probably retain managers such as Coelho and Weber on board,
its current pricing system and keep selling fuel at as they would probably resist attempts to turn
rates linked to world market trends, despite the the company into a mere instrument of state
widespread unpopularity of this policy, he told policy. ™

Petrobras’ outgoing CEO Joaquim Silva e Luna (Photo: Petrobras)

Week 14 07•April•2022 www. NEWSBASE .com P5