Petrobras choice signals sales drive: Update

The firm's new downstream head has divestment experience to drive the sell-off of $27bn in assets over the next five years

Newly appointed officials in the government of far-right president Jair Bolsonaro have started to outline key policy directives, with a financially strengthened state-controlled Petrobras high on the list.

Existing production-sharing legislation will be modified so that state-controlled Petrobras has the freedom to invest at a level that is compatible with its "technical and financial capacities", energy minister Bento Albuquerque says. The new government plans to publish a long-term schedule of auctions and wants to expand national energy policy council CNPE's role in determining the rules governing pre-salt tenders. And Bolsonaro's team has a proposal that would allow Petrobras to sell 70pc of its 5bn bl of oil equivalent (boe) output rights in the TOR region and allow the government to offer the excess — up to 10bn boe — this year.

Brasilia estimates signature bonuses could top 100bn reals ($27bn), some of which could go to cash-strapped states in exchange for their support.

Petrobras' new management plans to continue asset disposals, with the proceeds to be used to boost deepwater production and pay off some of its $85bn debts, new chief executive Roberto Castello Branco says. His appointment of a new downstream director signals an accelerated sell-off. In her previous position as executive manager of acquisitions and divestments, Anelise Quintao Lara oversaw multiple multi-billion dollar sales of prime upstream assets. The company fell short of its $35bn 2015-18 divestment goal, but sales of over $20bn of assets helped the company pare its debts.

Petrobras is looking to shed around $27bn in assets over the next five years. Unloading stakes in brownfield refineries and attracting partners to greenfield projects are top priorities for the company and the federal government. The firm's fuel distribution unit Petrobras Distribuidora (BR) is selling its 49pc stake in Rio de Janeiro-based fuel logistics company CDGN. Potential investors have until 6 February to express their interest. In 2017, Petrobras listed a minority stake in BR in an initial public offering that garnered around R5bn ($1.5bn at the time of the transaction).

Discussions concerning BR's privatisation continue. Bolsonaro's government has dismissed suggestions of privatising Petrobras, but favours selling off refining and midstream assets. Petrobras unveiled a plan in April 2018 to sell 60pc stakes in four refineries. The proposal is on hold after July's federal supreme court injunction, but once resolved, the divestment campaign could be expanded to include larger offerings or additional refineries, according to executives.

Management shake-up

In a wider management shake-up, Castello Branco has dismissed upstream director Solange Guedes, with Petrobras veteran Carlos Alberto Pereira de Oliveira nominated to replace him. Appointed in 2015, Guedes oversaw a tightening of the company's deepwater focus. Oliveira was recently involved in upstream portfolio management, partnerships and performance, another signal that Castello Branco is assembling an executive team with an emphasis on divestment.

He has also appointed Lauro Cotta as director of strategy, organisation and management systems, and Rudimar Andreis Lorenzatto as director of production and technology. Castello Branco, a University of Chicago-trained economist, is expected to further the company's focus on cost reduction and the development of deepwater reserves.

The new government also intends to push ahead with efforts to privatise utility Eletrobras, potentially reducing the state's shareholding in the firm to below 50pc and raising an estimated R12bn in the process.