Petrobras warns new management may ditch price policy

Political meddling in Petrobras' fuel pricing policy is one of the many risks that could adversely affect the Brazilian state-controlled company's performance, according to a recent company filing with US Securities and Exchange Commission.

"A new management team or board of directors may propose changes to our pricing policies, including a decision that such policies may not seek for alignment with international price parity," Petrobras said in the filing. In flagging the risk, the company referred to repeated statements from President Jair Bolsonaro urging a modification of the company's market-based pricing.

The warning comes just days after Bolsonaro decided to replace outgoing chief executive Joaquim Silva e Luna with seasoned technocrat Adriano Pires — the second chief executive change in a little over a year — and just weeks before a shareholder meeting will put Rodolfo Landim, a controversial Rio businessman and oil industry veteran, in the chairman's seat.

The changes, just months before presidential elections in October, have raised concerns that Bolsonaro could meddle in the firm's decision making to tame spiraling inflation, which is weighing on his re-election bid.

Since 2016, Petrobras' market-based fuel pricing policy has been guided by the import price parity principle that seeks to align domestic commodity prices with the value of the same imported commodities. Petrobras' adherence to the policy, which attempts to avoid the transfer of global price volatility and exchange rate fluctuations caused by exceptional external issues, has often been criticized, but a clear change in strategy could disrupt fuel imports and sink the company's plans to sell seven refineries.

"In the future, there may be periods during which our product prices will not be at parity with international product prices. Actions and legislation imposed by the Brazilian government, as our controlling shareholder, could affect these pricing decisions," the company said in the SEC filing.

Analysts do not expect Pires to make significant changes to the company's pricing policy, but the pro-market consultant has yet to provide insight into the strategy he will pursue as head of the firm. The future chief executive's nomination is subject to the approval of Petrobras' personnel committee and shareholder approval at the next meeting scheduled for 13 April.

By Nathan Walters