Page 4 - LatAmOil Week 10 2023

LatAmOil COMMENTARY LatAmOil

Petrobras on the cusp of change

Brazil’s NOC is set to start following a different course with respect to fiscal policy,

privatisation, dividends and support for state policy under the Lula administration

PEMEX, the national oil company (NOC) of substantially. The latest available data show that
Mexico, currently possesses the dubious dis- as of the end of 2022, the NOC’s long-term debt
WHAT: tinction of being the most indebted oil firm in load stood at $44.67bn, equivalent to about 35%
The change in Brazil’s the world, with a debt portfolio that amounts of the peak level.
presidential adminis- to around $105bn. Less than eight years ago, But Petrobras has done more than reduce its
tration is likely to have though, that title was held by Pemex’s Brazilian debts. It also announced last week that its board
a significant impact on counterpart Petrobras. of directors had approved a proposal for paying
Petrobras.
As of September 30, 2015, Petrobras saw its out BRL35.8bn ($6.98bn) in dividends on prof-
WHY: long-term debt load reach a peak of $127.5bn its earned in the fourth quarter of 2022. This fig-
ure would make the company the second largest
after spending more than a decade taking on
The NOC became the
world’s most indebted oil cheap foreign loans in order to finance social payer of dividends in the oil sector, behind only
company during Lula’s welfare programmes, including $40bn in Saudi Aramco, Bloomberg noted.
first term as president.. domestic fuel subsidies. This arrangement was
unsustainable given that world oil prices began Political reversal
WHAT NEXT: to collapse in mid-2014, and Brazil’s national And now Petrobras’ fortunes may be on the cusp
Brazil’s new president is currency, the real, followed suit in 2015. of another change.
already showing interest Conditions did improve following Jair Bol- The impetus for this likely change is political.
in making the company sonaro’s victory in the presidential elections of Bolsonaro is no longer president. On January
more of an instrument of 2018. The right-leaning Bolsonaro took a gener- 1, 2023, he was succeeded by Luiz Inacio Lula
policy. ally market-minded approach to Petrobras. He da Silva following a remarkably contentious
backed calls for privatising many of the com- campaign.
pany’s downstream and midstream assets so as Overall, Lula’s ideology stands in direct con-
to free up resources for investment in the more trast to that of Bolsonaro. The new president
profitable upstream sector, especially large-scale leans left, while the former president leans right;
offshore fields in the pre-salt zone, and sup- the incumbent believes that state-owned com-
ported plans to eliminate the NOC’s monopoly panies such as Petrobras have a duty to support
over the natural gas sector. and help implement public policy goals, whereas
These efforts have paid off. Liberalisation his predecessor holds that such entities ought to
has not always proceeded smoothly, but Petro- be able to set their own course and follow the
bras has succeeded in trimming its debt load market if their managers choose to do so.

Lula (L) and Prates (R), shown on December 30, 2022 (Photo: Twitter/@LulaOficial)

P4 www. NEWSBASE .com Week 10 08•March•2023