Lula picks political ally as next Petrobras chief

Brazil’s next president Luiz Inácio Lula da Silva has nominated for chief executive of Petrobras a close political ally, who promised an overhaul of how the state-controlled oil and gas company charges for fuel.

Senator Jean Paul Prates, who advised Lula on energy matters and is a member of his Workers’ party, was named as the incoming leftwing administration’s preferred candidate to run the $66bn-valued group.

He said the Petrobras practice of moving domestic fuel prices in line with international dollarised rates — denounced by Lula on the campaign trail — was to be altered. This was not “to traumatise investors or investment returns”, Prates told local reporters in the capital Brasília on Friday. “It will be changed because the country’s policy will be changed.”

New price guidelines would be formulated by a “government consortium”, including ministries and Petrobras, he added.

The market-based system that Latin America’s largest hydrocarbon producer follows for petrol, diesel and cooking gas prices has been controversial in recent times. Opponents say it passes volatility on to consumers and feeds inflation.

It was criticised by outgoing rightwing president Jair Bolsonaro, who fired three Petrobras chief executives within the space of two years over fuel price hikes.

But private sector investors, who hold just under two-thirds of the company’s equity, fear that any divergence from the current policy could prove financially harmful to Petrobras.

Under the last government led by the Workers’ party, or PT, the Rio de Janeiro-headquartered group incurred billions of dollars of losses after being forced to offer subsidies.

“To remove the dollarisation of fuel prices in my view is very difficult. It is an international commodity and the [Brazilian] real component of the price is very small,” said Marcelo de Assis, at the consultancy Wood Mackenzie.

“Considering that we import more or less 30 per cent of our refined oil products in Brazil, which have a very strong dollar component, you cannot switch this overnight.”

Lula, who previously ruled Brazil between 2003 and 2010 and will be inaugurated again on Sunday, has also called for Petrobras to invest more in refining capacity and play a greater role in the clean energy transition.

The company has in recent years doubled down on its main activity of pumping deepwater crude, selling off non-core assets such as fertiliser plants and petrol stations to reduce debt.

“We need to think about the future and invest in the energy transition to meet the needs of the country, the planet and society, as well as the long-term interests of its shareholders,” Prates wrote on Twitter on Friday.

The 54-year-old politician is also an economist and lawyer, whose resume lists almost four decades of experience advising public-private ventures in oil, gas, biofuels and renewable energy.

Petrobras said it had not yet received formal notice of the nomination, adding that the final appointment depended on board approval.

São Paulo-listed preferred stock in Petrobras fell 1.2 per cent on Friday. It has slumped about a quarter since Lula’s narrow election victory over Bolsonaro in October.