Petrobras, with Lula, retreats in strategy and political and union influence

Little by little, Petrobras’ institutional advances are melting away and the company consolidates steps towards the past. The accumulated signs of the first year of the PT mandate include a reorientation of investments with a resumption of refineries, a loosening of the pricing policy and, in particular, an intensification of political and union influence in the company’s management bodies.

“The reorientation follows the path we already know, of leveraging growth via the State, which is what the government believes”, says Adriano Pires, energy specialist and founder of the Brazilian Infrastructure Center (CBIE).

In November, the company’s strategic plan reaffirmed its direction, but the red lights flashed more intensely at the end of the month, when majority shareholders approved changes to the company’s bylaws, with the deletion of the article dealing with the quarantine of political appointees for the top management.

The change was based on the injunction issued by Minister Ricardo Lewandowski, of the Federal Supreme Court (STF), which suspended the restrictions imposed by the State Law. There were 55% of votes in favor of the changes and 32% against. “The news is very bad, it creates gaps for the return of a management team in the company or on the board of people who are more active in politics than in the oil and gas industry”, says the founder of CBIE.

The Federal Court of Auditors (TCU) determined, as a precautionary measure, that the state-owned company not register changes to the statute until the STF decides on the merits. “Fortunately, the TCU had common sense. The change is a risk to governance. The private, minority shareholders voted against it”, highlights Pires.

New PT administration began with a change of direction and a power struggle

The company’s new direction was observed since the appointment of former PT senator Jean Paul Prates to the presidency, which was also only possible due to the suspension of part of the State Law. His first action was to decree the end of the automatic readjustment of fuel prices in the domestic market based on the international price of oil, meeting President Lula’s campaign promise to “Brazilianize” tariffs.

The PPI, import parity price, was made more flexible, with gradual transfers of corrections, in a rule with less transparency that the market never quite understood. As oil prices have been volatile downwards this year, the government has been favored, with no sudden increases occurring.

With the renewal of management and consultant positions, filled with political appointees to please allies, a division of forces was established between the board, with names linked to the PT and trade unionism, represented by Prates, and the board of directors, with nominations serving the interests of the so-called Centrão, under the influence of the Minister of Mines and Energy, Alexandre Silveira.

Unions regained power in the state-owned company’s board of directors

Prates has been a faithful supporter of union demands, represented by the Single Federation of Oil Workers (FUP). They range from regulatory issues to demands in the Judiciary involving agreements and labor rights. The general coordinator of the FUP, Deyvid Bacelar, in turn, defended Prates several times against “friendly fire” from palace ministers, within the power struggle at the state-owned company.

Bacelar, at the forefront of the category’s demands, contrary to any privatization initiative and changes in public oil and gas policies, positions himself as a leader “in the resistance against fascism and attacks on the Democratic Rule of Law”, as documents from the FUP. The general complaint is that union leaders were denied access to company units during the Jair Bolsonaro government.

In November, the union leader increased his criticism and called for the dismissal of advisors allegedly aligned with the former president’s administration. Behind the scenes, the group is called “Bolsonaro managers”. “It is unacceptable for people who contributed to the Petrobras privatization program in the previous government to continue in management roles at the company, especially in high-level roles,” Bacelar said at the time, to “Estadão”.

Strategic Plan rescues model adopted in previous governments

Even with internal conflicts between directors and advisors, the strategic plan announced by the company converges to meet the interests of Planalto. Following the example of PT’s previous administrations, the state-owned company is resuming its leading role as an agent inducing public policy, prioritizing investments with the potential to generate jobs and offer visibility to the government, with an eye on the next presidential election.

For the next five years (2024-28), the company announced the figure of US$ 102 billion for investments, an amount 30.7% higher in relation to the current business plan, of US$ 78 billion for the period 2023-2027 . The promise is to create 1.4 million direct and indirect jobs, including the company in the Growth Acceleration Program (PAC).

To this end, Petrobras established a capital reserve, which, in practice, means reducing dividend payments to shareholders so that the company can invest more. The guidance goes against the market consensus that Petrobras, as a mixed capital company and listed on the Stock Exchange, must remunerate shareholders.

“There is no sense in using a state-owned oil company to make public policy,” says Samuel Pessôa, economist at the Brazilian Institute of Economics at Fundação Getulio Vargas (FGV).

During the government of Dilma Rousseff (PT), the state-owned company invested R$565 billion and distributed R$335 million in dividends.

Under the government of Michel Temer (MDB), this logic began to be reversed and under the management of Jair Bolsonaro (PL), the state-owned company invested R$133 billion and distributed R$299 billion in dividends, around six times more than the average of the four previous governments.

It was within this same logic that is now being resumed, of inducing growth, that during the PT administrations, Petrobras was ravaged by political interests and went into debt to make investments in the government’s interest.

Between 2014 and 2017, it suffered a record loss of R$71 billion, culminating in a debt of around R$350 billion. “Under the disastrous management of [Sérgio] Gabrielli, Petrobras became the most indebted company in the world”, recalls Pessôa.

The economist also cites the frustrated investments in refining, especially the Abreu e Lima Refinery (RNEST), in Pernambuco, and the Rio de Janeiro Petrochemical Complex (Comperj), which caused the state-owned company a loss of US$12.5 billion, according to TCU calculation in 2017.

The corruption scandals that followed involving some of these projects, denounced by Operation Lava Jato, led the company, in subsequent governments, to intensify oil extraction, with emphasis on pre-salt areas, and to disinvest in some areas of activities, such as refining and fertilizers.

With Prates and the new strategic plan, these areas are being resumed. The company will put money back into a fertilizer factory in Três Lagoas (MS), interrupted in 2014, and into refining at Comperj. “The investment policy indicated is more dispersed, of diversification”, states Adriano Pires.

Suspension of privatizations and resumption of spending on refineries and fertilizers

Reaffirming the interruption of the asset privatization policy, Petrobras gave up, in November, selling the Lubnor refinery, the main asphalt producer in the Northeast and one of the largest in the country, to the Ceará group Grepar. The sale had been agreed last year for US$34 million, approximately R$167 million.

Petrobras argued, in a note, that the contract was terminated “due to the lack of compliance with the precedent conditions established therein by the final deadline.”

Businessman Clovis Fernando Greca, controller of the Grepar group, promises to go to court for compensation and said that the oil company gave up selling Lubnor due to “ideological bias”. “[O governo] is against any sale of any asset. We are in a moment where the State is much more active in the economy”, he said to” Estadão “.

In the same month, the state-owned company also asked Cade to renegotiate an agreement that obliges it to sell eight refineries, and the company’s president announced negotiations to repurchase the RLAM refinery, in Bahia, sold under the last government.

Prates reaffirmed, in a press release, that the majority of investments – 73% or US$73 billion – remain focused on the exploration and production of oil and gas, mainly in activities related to the pre-salt, on the southeast coast. “This percentage was already higher, reaching 84%”, says Pires.

To increase the level of use and efficiency of refineries, the investment planned for Petrobras’ refining and natural gas park until 2028 is US$17 billion. The idea is to increase production and sales of derivatives, and offset the cash effects of the new pricing policy, without the PPI.

“I hope that, at least, they don’t think about building new refineries. They have already proven that they do not have the capacity to extract at minimally competitive levels”, says Pessôa.

A study by Adriano Pires with Pessôa and economist Luana Furtado revealed that the cost per unit of barrel of refined oil at the Abreu e Lima Refinery, in 2021, was five to six times the industry standard.