Petrobras managers head for the exit

Boardroom instability could threaten the planned refinery sell-off, as the chief executive moves to reassure investors, writes Nathan Walters

Brazil's state-controlled Petrobras is losing four senior executives as political interference by Brasilia continues to take its toll.

Chief financial officer Andrea Almeida, upstream director Carlos Alberto Pereira de Oliveira, production director Rudimar Lorenzatto and logistics director Andre Chiarini decided not to renew their contracts, and will follow technocratic chief executive Roberto Castello Branco out of the door. Several board members had already said they would step down, and were quickly replaced. The shake-up follows President Jair Bolsonaro's surprise appointment of Joaquim Silva e Luna as chief executive. Currently head of the Itaipu hydroelectric complex, Silva e Luna is a former army general and defence minister with no oil industry experience.

Despite the turmoil, Petrobras is keen to convey progress on refinery sales — a pillar of its strategy to cut debt and focus on pre-salt oil development. On 24 March, the board approved a $1.65bn (R9.1bn) offer from Abu Dhabi's state-owned Mubadala for the 333,000 b/d Mataripe refinery, one of eight refineries Petrobras plans to sell by the end of this year. A sales and purchase agreement for the refinery should be signed shortly, Petrobras says. Mubadala has not commented.

Shortly after announcing the approval, Petrobras said the four departing executives had informed the company that they will not seek an extension of their two-year contracts past their 20 March expiry, although Brazilian law automatically extends the term of executive directors until the next shareholder meeting, which is scheduled for 12 April. The departures mean that only a few senior executives will carry over from Castello Branco's technocratic two-year tenure, including recently appointed downstream director Rodrigo Costa Lima e Silva.

Bolsonaro's shock decision last month to replace Castello Branco harks back to Brazil's record of political meddling in fuel pricing. The company has been pricing gasoline diesel on a market basis since 2016. The bombshell appointment caused Petrobras shares to plummet. Since then, Silva e Luna has tried to reassure investors that he is not beholden to Brasilia. But with the government scrutinising the company's market-based fuel pricing policy amid perceptions of a managerial vacuum, the asset sales look less certain.

Accelerated election

Whether or not the developments augur a renewed pattern of political interference could hinge on the wider political scene. In recent weeks, two supreme court decisions have tentatively cleared former president Luiz Inacio Lula da Silva to challenge Bolsonaro for re-election in October 2022. Both are towering populist figures, Lula on the left and Bolsonaro on the right. Oil policies — including fuel pricing and refinery sales — would loom large in a standoff.

In a controversial 23 March ruling, the court determined that former judge Sergio Moro was not impartial in his pursuit of Lula on corruption charges, for which he was convicted in 2018. The case against Lula was part of the sweeping Lava Jato (Car Wash) investigation centred on Petrobras and a pool of contractors led by Odebrecht. The case reverberated across Latin America.

In a separate opinion earlier this month, one of the supreme court justices determined that the court that convicted Lula had no jurisdiction over the case. But the full court has yet to vote on the jurisdiction issue, presenting a possible roadblock in Lula's comeback. Although the elections are still far off, Lula is now expected to become more outspoken as he galvanises supporters. His political re-emergence has coincided with a sharp surge in Covid-19 infections across Brazil, where Bolsonaro regularly plays down the pandemic's gravity, despite the country having the world's second-highest death toll of over 300,000.