Petrobras reaffirms fuel pricing, CEO dodges debut

Brazil's state-controlled Petrobras reaffirmed its market-based fuel pricing policy in an ]earnings call marked by the conspicuous absence of new chief executive Joaquim Silva e Luna.

The company's recently appointed marketing and logistics director Claudio Mastella said the current pricing policy is "intermediate" in terms of price adjustments but still adheres to import price parity measured annually.

Petrobras has no fixed duration for price adjustments, and that refinery gate prices may be higher or lower than international prices at different times, Mastella said. The company has already experimented with weekly and daily price changes since adopting the current policy in 2016.

Silva e Luna took over at Petrobras in mid-April after the controversial ouster of former chief executive Roberto Castello Branco.

Castello Branco's removal in the hours following a 15pc wholesale diesel price increase was widely perceived as government meddling to keep pump prices from spiking.

Silva e Luna's only appearance on today's call was a pre-recorded message focused on resiliency, disappointing investors looking for signals of the one-time defense minister's plans for the company. On 19 April, the military veteran with no oil experience pledged to follow import price parity, but also said he would seek to reduce price volatility.

Market-based fuel pricing is essential to Petrobras' $25bn-$35bn divestment plan, mostly focused on the sale of eight refineries by the end of 2021. The company's new chief financial officer Rodrigo Araujo said the divestment process remains on track.

Funds raised from the sales will be used primarily to trim Petrobras' massive debt load, but also to help finance the company's $55bn 2021-25 investment plan.

Frontier drilling

Of the $46.5bn earmarked for upstream spending under the plan, around $6bn will be directed to exploration. Of that amount, $1bn will spent on exploration in the frontier basins in the north of Brazil, believed to be connected to trends in Suriname and Guiana.

Upstream director Fernando Borges expects to receive a drilling license from environmental watchdog Ibama at the start of 2022.

Total handed over its operating stake in the five blocks to Petrobras after repeated failures in obtaining drilling permits for areas near a reef system. BP followed suit in April, giving Petrobras a 100pc stake in the assets—subject to regulatory approval.

Borges says the company will have a robust safety plan in place when it drills an exploration well in Foz do Amazonas next year. Wells are also planned for the Barreirinhas and Para-Maranhao basins, also part of the equatorial margin.

By Nathan Walters