Petrobras Makes Changes at the Top

By Stephen Eisenhammer, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Having replaced two executives at the end of April, there are rumors of more to come, as Petrobras´ CEO, Maria das Gracas Foster, begins to oversee changes at the top of Brazil’s state-run energy giant after taking control in February. Refining chief, Paulo Roberto Costa, and Renato Souza Duque, Petrobras’ engineering chief, were replaced by Jose Carlos Cosenza and Richard Olm on April 27th.

Then, last Thursday, May 3rd, Edison Lobão, Minister for Mining and Energy, suggested on the sidelines of a conference in Brasília that Chief Financial Officer Almir Barbassa and international director Jorge Zelada would also likely be replaced.

Petrobras quickly refuted Lobao’s comment, saying that Barbassa is not in line to be replaced. “Petrobras is not considering the substitution of Chief Financial Officer and Investor Relations Director Almir Barbassa,” the company said in a statement.

Apart from displaying a seeming lack of coordination between the state and the CEO of the energy company it majority owns, some consider Zelada’s name significantly absent from the Petrobras’ refutation. The implication by some speculators is that his time at the company may be coming to an end.

In general the moves have been welcomed by the market, with widespread feeling that changes were needed with former CEO Sergio Gabrielli having surrounded himself with highly politicized executive appointments during his near seven years in charge. Notably, Gabrielli has now moved into the political arena and is expected to run for state governor of Bahia state in 2014.

Industry sources also told the Rio Times that the replacements have generally been welcomed inside the company, although the notion that the appointments are somehow less political is questioned. “When Lula was in power he put his people at the top, now it’s Dilma and she’s doing the same thing,” one source said.

However, importantly the executives being selected are cut from a different cloth. Whereas under the Lula and Gabrielli partnership the appointments were managers who shared their leaders’ political vision, the focus under Rousseff and Foster has shifted to the promotion of practical Petrobras engineers without obvious political leanings.

The shift mirrors the needs of the company. Having embarked on the largest investment plan of any energy company in the world this decade, expecting to spend US$224.7 billion for the period between 2011-2015, Petrobras is in need of results to show this massive splurge is working.

So far production has not risen dramatically and the increased investments are putting downwards pressure on the company’s share price and worrying investors. March was another disappointing month with production of oil and gas in Brazil at 2.3 million equivalent barrels per day, down 4.2 percent on March 2011 and eight percent from February, according to data released by the company.

The new appointments are designed to place increased emphasis at the top on production and developing the thirty to fifty billion barrels of oil that lie beneath the pre-salt.