Tuesday, September 27, 2022

Brazil’s upcoming election and what it means for Petrobras

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Millions of Brazilians are set to choose their next President on October 2 and all bets are on the incumbent Jair Bolsonaro and his fiercest opponent – former president, Luiz Ignacio Lula da Silva.

Both have gone head-to-head this campaign season, but Lula has managed to maintain a commanding lead in the polls. And this sends a strong message – that Brazil voters are willing to give Lula and his Workers’ Party (PT) another go at the Palácio do Planalto, the workplace of the Presidency.

New leadership can have a big impact on Brazil’s energy sector.

Rystad Energy’s Senior Vice President, Schreiner Parker said its future is still somewhat “amorphous”. Lula’s policies on energy differ vastly from President Bolsonaro. And Bolsonaro’s stint with the state-controlled Petrobras has been a bumpy rollercoaster, to put it mildly.

He fired three Chief Executive Officers (CEO) since early 2021, the latest being José Mauro Ferreira Coelho who served for less than two months.

Parker wrote in the August edition of Rystad’s Latin America Insights that “Petrobras under Bolsonaro has become mired in political machinations, with a revolving door being installed at the CEO level and floating the idea of full privatisation of the company like what was done recently with Eletrobras [Brazil’s electric utilities company].”

In his view, a Lula government would likely take a different course. In fact, Parker believes that there would be a “complete turnaround” in the thinking on Petrobras, specifically in the downstream space with a Lula-led administration.

Reports from his campaign already suggest the bolstering of Petrobras’ refining capacity, including through the reversal of refinery privatisations, and stopping the sale of refinery assets that have not yet been struck off the books.

Petrobras has 14 refineries under its bracket; almost half have been put up for sale. And it is still in the middle of a large divestment program concerning mid to late-life assets that are, at least today, considered ‘non-core’ to their overall development plan which is focused on bringing Santos basin pre-salt barrels to market.

And according to Parker, those types of actions by Bolsonaro’s government portend others, and raises questions about the future of the upstream sector.

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