Page 5 - LatAmOil Week 05 2023

LatAmOil COMMENTARY LatAmOil

Reactions to new CEO priority while leading Petrobras. He has said, for
Reactions to Prates’ accession reflected this mix example, that both he and the president want to
of practical experience and loyalty to Lula. see the NOC invest in the expansion of oil-pro-
On the one hand, some market observers cessing capacity so that Brazil can refine more of
viewed the changes in Petrobras’ management its own crude and produce more of its own fuel.
line-up – and there will be more changes, for Additionally, he has stated that both he and
Prates has reportedly been interviewing can- the president want the NOC to put an end to
didates for key leadership posts – as a relatively its campaign to sell off eight of its 13 refineries.
neutral development. For example, Fitch Rat- Even though the company is privatising these
ings said in a statement dated January 31 that it facilities as part of an agreement with CADE,
was making no changes to Petrobras’ credit rat- Brazil’s anti-trust regulator, Lula and Prates see
ing and cited the company’s strong connections the sales as a threat to Brazilian consumers.
to the government as one of the reasons for its
decision not to downgrade. Change is coming
On the other hand, some observers were less In practice, it remains to be seen what form this
sanguine. Hunting Alpha, a financial blogger opposition to downstream divestment takes.
who publishes on the Seeking Alpha platform, Prates has indicated that he will not oppose
predicted on January 31 that Prates’ time in sell-offs that are already in process. However,
office would be marked by a significant decline Bloomberg noted in early January the presi-
in shareholder earnings because of the new dent’s transition team had drawn up a report
CEO’s determination not to continue focusing in December that called for starting talks with
narrowly on upstream projects. CADE on the suspension of asset sales. Accord- Both Prates
Lula’s predecessor Jair Bolsonaro had taken ing to the news agency, that report specifically and Lula want
this approach – to the delight of his economic envisioned putting a stop to the planned divest-
team and Petrobras’ top managers, all of whom ment of additional Petrobras refineries, as well Petrobras
revelled in the extra profits that Petrobras earned as key midstream assets such as a 51% stake in
by taking this approach. However, Prates has TBG, the operator of a pipeline used to import to expand
made clear that he agrees with Lula that the natural gas from Brazil.
NOC ought to expand its focus beyond large- In any event, Petrobras’ staff appears to its refining
scale, high-earning development projects in the understand that change is coming – and may capacity and
pre-salt zone. have taken one last opportunity to exercise con-
In early December, for example, he remarked trol in one area of downstream operations. One end refinery
that the company ought to do more for the Bra- of the last actions the NOC’s board of directors
zilian people than “just keep tapping sub-salt oil took before voting on Prates’ nomination was to privatisation
and paying dividends.” consider an increase in fuel prices. According
to a company statement, members of the board
Petrobras’ new priorities approved a hike in refinery-gate gasoline prices
Instead, he and the president have said they want on January 24, two days before electing a new
to see the company develop its renewable energy CEO.
capacity and invest more in its own downstream This move, which marked Petrobras’ first
business. Both believe these steps will reduce gasoline price rise since June 2022, will boost
Brazil’s dependence on imported fuels and vul- refinery gate rates by 7.5% to BRL3.31 ($0.66)
nerability to fluctuations in world market prices. per litre. It gave the NOC’s stock prices a brief
Prates’ stance on these positions has not lift in trading on January 25, but Hunting Alpha
changed since Lula assumed the presidency. speculated that the company’s new management
Indeed, he has dropped a few hints that he may team might bring gasoline costs back down to
make refining and downstream operations a previous levels in short order. ™

Prates’ nomination was approved on January 26 (Photo: Petrobras)

Week 05 01•February•2023 www. NEWSBASE .com P5