Petrobras will be led by a former official and critic of the Brazilian oil company

President-elect Luiz Inácio Lula da Silva has appointed a senator and former Petrobras official to lead Brazil’s State oil company with a view to turning it into a renewable energy powerhouse.

Jean Paul Prates, a senator from Lula da Silva’s Workers’ Party (PT), confirmed the invitation in a note sent from his press office. Prates will take over a company that has been criticized for offering investors record dividends while underinvesting in oil refining, wind power and solar power.

Even Prates himself has said that the current leadership of Petrobras is leading the company “over a cliff” by focusing exclusively on oil and gas and neglecting the energy transition.

WHAT WILL PRATES LOOK FOR?

Prates is considered a moderate member of the leftist Workers’ Party, and his run in the Senate will help him run an oil company that is regularly under political pressure to contain fuel prices and create jobs.

In recent years, Petrobras has earned praise from investors for focusing on its most profitable oil projects in the deep waters of the South Atlantic, while selling lower-margin assets such as pipelines, refineries and mature onshore oil fields.

This strategy has allowed it to drastically reduce its debt and increase its dividend payout. Financial markets worry that profits will plummet under Lula da Silva, who is leading the company to invest in other areas more in line with his broader industrial policies.

“All the oil companies are turning into energy companies, and it’s not just hot air,” Prates said at a news conference earlier this month. “None of this is happening on the right scale at Petrobras.”

WHO IS THE NEW BOSS OF PETROBRAS?

Prates was one of the key people on Lula da Silva’s energy team during the campaign, taking it upon himself to talk to investors about oil and energy. He worked in the international division of Petrobras in the 1980s, then became an oil consultant and helped draft legislation in 1997 that eliminated Petrobras’ monopoly on exploration.

In an interview in August, Prates said that under Lula da Silva, Petrobras would reverse years of cost cutting and invest heavily in refinery and renewable energy, as well as rebuild international operations that had been scaled back in recent years. Within 30 years, he envisions the company investing in both clean energy and fossil fuels.

Lula da Silva is also expected to review local content rules, that is, the percentage of goods and services for oil projects that must come from Brazil in order to boost domestic employment. Any increase to that percentage would worry the oil industry, as similar policies have led to cost inflation in the past.

“We have to go back to being the great Petrobras that we were,” Prates said in August. “It has to become a global player in the energy transition.”

With information from Bloomberg