Incumbent Luiz Inacio Lula da Silva's surprising win in Brazil's presidential election is likely to mean a steady course for the country's hydrocarbons agenda and the strategy of state-controlled Petrobras. But with a recently elected right-wing majority in congress likely to push back against most of his policies, the president may rely more heavily on Petrobras and its profits to support his wider agenda.
Lula beat senator Flavio Bolsonaro in the presidential election run-off after trailing the challenger in the first round. His fourth term in office — he also served two in 2003-11 — is expected to be one of continuity for the oil and natural gas sector. The government is likely to focus on increasing crude production for export and pursuing lower domestic gas prices by increasing competition and production.
Brazil's crude output has been rising steadily through Lula's third term, reaching consecutive records. August production reached almost 4.6mn b/d, up from 3.8mn b/d in the same month in 2025, hydrocarbons regulator ANP says. The country expects to increase oil production to 4.9mn b/d by 2030, according to energy research firm EPE's latest projections.
It is still driving output from its prolific pre-salt fields, but it will also keep looking at other exploration frontiers such as the southern Pelotas basin and the equatorial margin. Lula has been a strong advocate of increasing production in the pre-salt and the new frontiers.
Production was also likely to keep growing under Bolsonaro or any other candidate. Crude surpassed soy as Brazil's largest export product for the first time in 2024. But Bolsonaro's and Lula's plan for the energy sector diverged mostly in their approach to state-controlled Petrobras.
During his election campaign, Lula spoke of Petrobras re-entering the fuel distribution market, which it exited after it sold its stake in BR Distribuidora in 2021, during the presidency of Flavio's father Jair Bolsonaro. Lula's last administration also halted Petrobras' divestment programme, but stopped short of repurchasing sold-off refineries or returning to fuel distribution.
The Lula government has framed state involvement in fuel distribution as a price-control mechanism in the face of rising consumer prices. But Petrobras' business plan is focused on upstream investment, and fiscal pressures may leave the government little room to manoeuvre on downstream pricing. "I don't see much scope for very heterodox policies in the oil and gas sector," said Edmar Almeida, a professor at the PUC-Rio university's Institute of Energy.
Vote of confidence
Foreign oil companies gathered at a conference in Rio de Janeiro before the elections pointed to Brazil as an increasingly attractive investment in deepwater pre-salt fields and new offshore exploration frontiers. Lula's shock re-election does not change this, particularly given ongoing risks and challenges to business in Russia, the Middle East and Venezuela, Almeida said.
Petrobras is also likely to continue expanding its biofuels business under chief executive Magda Chambriard, including a planned return to ethanol after exiting the sector in 2017. While Chambriard has stressed the importance of fossil fuels, her management has embraced Lula's view that oil and gas revenues can finance Petrobras' energy transition and investment in lower-carbon businesses.
Keeping Chambriard at the helm would maintain a degree of management stability for Petrobras that it lacked in 2018-24, which is likely to be welcomed by investors. A clearer indication of whether the firm's priorities will change in Lula's new term is likely to come with Petrobras' next five-year business plan, due to be unveiled in November.
