Brazil: The strongest names to lead Petrobras under Lula da Silva

The market will keep a close eye on who President-elect Luiz Inácio Lula da Silva (Workers’ Party – PT, left) will put at the helm of Petrobras (PETR3, PETR4) to gauge how much the state-owned company’s business strategy will change under the new leftist government.

Da Silva, the former president who drove Petrobras’ expansion in the pre-salt, which now supplies about 70% of the company’s total oil and gas production, will begin talks with parties in his political alliance to reach a consensus on who to select to take the top jobs in the state-owned company and the Ministry of Mines and Energy.

Preferred shares fell 8% at the market’s opening on Monday (October 31) on the Brazilian stock exchange, B3. Around 11:30 AM, the drop was around 5%.

Petrobras’ top management has gone through a period of unprecedented turbulence in recent years.

President Jair Bolsonaro (Liberal Party – PL, right) has fired three CEOs of the oil company since the beginning of last year for failing to rein in fuel price increases.

During the campaign, Petrobras came under pressure from both candidates to contain prices in an environment of high inflation for consumers.

There is concern that the company may return to subsidizing fuels as it did in previous PT administrations.

Investors are also concerned about the possibility that Petrobras, under new management, will start investing in less profitable segments, such as refining, which could lower the stock dividend.

The main possible candidates for the post cited by industry participants include a senator aligned with Lula da Silva and a former Petrobras president during the PT’s first administration.

Da Silva also has deep ties to the business community, from which nominations may also come. The term of the current Petrobras president, Caio Paes de Andrade, ends in April 2023.

The main names are:

JEAN PAUL PRATES

A senator for the PT and a key figure in energy policy during Lula da Silva’s campaign, Prates served as legal counsel for the international arm of Petrobras in the 1980s and as a consultant in the oil and gas sector.

In 1997 he helped draft the Petroleum Law, which opened the sector to competition.

In an interview in August, Prates said that under da Silva, Petrobras would reverse the years of shrinkage that have occurred under the Bolsonaro administration. He cited refining, renewable energy, and international operations as target areas to increase investments.

JOSÉ SÉRGIO GABRIELLI

Economist and former Petrobras president Gabrielli led the company when it began exploring the pre-salt formation and discovered the largest group of deepwater oil fields on the planet.

He was also in charge when the corruption scheme uncovered by Operation Lava Jato took place. Gabrielli was investigated but not convicted of any crime.

MAURÍCIO TOLMASQUIM

An engineer and academic at UFRJ, Tolmasquim served as head of the Energy Research Company (EPE) from 2005 to 2016, when the Workers’ Party was in power.

In the position, he was responsible for conducting technical studies on the energy sector and helping shape government policy for the sector, especially on the supply planning front with auctions.

WILLIAM NOZAKI

A political scientist and leftist economist who participates in strategy discussions in the PT, Nozaki is also the coordinator of the Institute for Strategic Studies of Petroleum, Natural Gas, and Biofuels (Ineep), which is associated with the Unified Petroleum Workers Federation (FUP).

He favors increasing investments in Petrobras’ refining network and slowing down the sale of assets.

With information from Bloomberg

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