Petrobras wants oil royalties to promote industry – 06/26/2023 – Market

The president of Petrobras, Jean Paul Prates, proposes the use of oil royalties to encourage orders from the sector with Brazilian suppliers, one of the campaign promises of President Luiz Inácio Lula da Silva (PT).

In an interview with SheetPrates also said that the oil companies have to get closer to their suppliers to avoid the risk of migrating to other segments more linked to the energy transition, which will have greater development in the coming years.

The resumption of orders for goods and services in Brazil was one of the themes of Lula’s presidential campaign, which in his first terms fostered a second cycle of growth in the Brazilian shipbuilding industry, interrupted after the discovery of the corruption scheme investigated by Operation Lava Jato.

Prates says that the company is studying how to resume purchases in Brazil. But he defends “a form of inducement” for companies to justify more expensive orders in the country. “How do I justify this to my shareholder and TCU [Tribunal de Contas da União]?” he asks.

The royalty law allows the reduction of the maximum rate from 10% to up to 5% in specific cases. The government has already been using this prerogative to encourage investments in less profitable projects, such as fields at the end of their useful life.

Prates recognizes that his proposal will not be well received by states and municipalities, the main beneficiaries of royalties, but argues that the incentive helps to encourage other economic activities that can generate jobs and income.

“I’m going to start creating something that generates an industry that can then serve other industries,” he argues.

The president of Petrobras affirms that the resumption of orders in the national naval industry will be done “with great parsimony, with great tranquility, without recklessness, without heroic acts”. “Everything on schedule, within what is possible.”

He says that one concern is to keep manufacturers of goods and equipment in the oil sector in a scenario of greater restrictions on the production of hydrocarbons and greater investments in energy transition.

“We’re going to need to have a closer, planned, more perennial, more lasting relationship with our main suppliers. Because, otherwise, each one of them will start to migrate in their energy transition and soon we won’t find anyone else to do it maintenance at a refinery”, he says.

He recalls that in a recent tender by Petrobras, only two suppliers appeared. When the contract was signed, only one representative appeared, because the two competitors had gone through a merger process.

“In the past I was the king of the black coconut, I used to do it like this [imita um estalo] ten guys came to maintain me at the refinery. Now everyone has gone looking for their business, because things are changing and I have to take these two guys who serve me well and put them under my arm.”