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Ousted by Bolsonaro, outgoing Petrobras CEO defends fuel price rises

CommoditiesFeb 25, 2021 03:40PM ET
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© Reuters. Outgoing Petrobras CEO Castello Branco wears a T-shirt with the London subway slogan "Mind the Gap" as he attends a virtual news conference in Rio de Janeiro

By Gram Slattery and Marta Nogueira

RIO DE JANEIRO (Reuters) - Outgoing Petrobras CEO Roberto Castello Branco said on Thursday he will ensure a smooth transition to his successor, a retired general hand-picked by Brazil's president, but reiterated his stance that the state-owned company should match international fuel price increases rather than keep them artificially low.

"Prices below the international market generate negative consequences," said Castello Branco, who is 76 and normally dresses conservatively but who on Thursday wore a visibly worn T-shirt with the London subway slogan "Mind the Gap".

"Mind the Gap" was also a slogan Petrobras adopted in 2019 to refer to its ambition to close the performance gap with the world's top oil and gas firms.

Analysts have said the gap is only likely to widen amid interference by populist President Jair Bolsonaro, who forced Castello Branco out last week in a disagreement over pricing.

Further retreating from a one-time "hands-off" policy toward state-run companies, Bolsonaro said on Thursday that they must perform a "social function," adding in an apparent swipe at Castello Branco that it was a mistake to have CEOs who did not share that "vision." Fitch said the CEO shake-up was "not a good sign" for Brazil.

Castello Branco, a University of Chicago-trained economist, said he had received no details about the transition to Joaquim Silva e Luna, a reserve army general with no oil or gas experience who was named by Bolsonaro to replace him.

"We're willing to carry out (a transition) in the most smooth and efficient manner," Castello Branco told analysts on a video conference call, following the release of the company's 2020 financial results.

"We're continuing to work normally until at least March 20. What we're doing won't change," he added, referring to the day his mandate is set to expire.

He added that companies bidding on the company's refineries had expressed "worry" about recent developments at Petroleo Brasileiro SA, as the firm is formally known, though none had dropped out of the process.

Petrobras had been expected to raise billions of dollars selling off its refineries this year but Bolsonaro's reluctance to sell fuel at international cost has spooked some bidders.


On Wednesday night, Petrobras posted fourth-quarter net income of 59.9 billion reais ($10.9 billion), saying it had reversed some 31 billions of impairments due to an improved outlook for crude prices.

Petrobras expects Brent to average $45 per barrel in 2021 and 2022 before rising to an average of $50 per barrel indefinitely, it said in a presentation released on Thursday. Previously, the company expected Brent to average $30 per barrel in 2021, before rising $5 per year until reaching $50 per barrel in 2025.

Brazil-listed preferred shares in Petrobras were down 3.2% in afternoon trading after opening 3% higher, underperforming Brazil's benchmark Bovespa equities index, which was off 2.2%.

In a separate call with journalists on Thursday afternoon, Rudimar Andreis Lorenzatto, an executive in Petrobras' upstream unit, said the company had disqualified a consortium led by Samsung (KS:005930) Heavy Industries Co Ltd from the bidding for a multi-billion dollar contract to build two floating platforms known as FPSOs.

It was unclear why Samsung was disqualified. A Samsung representative did not immediately respond to Reuters outside of business hours.

On Tuesday, federal prosecutors in Brazil said they had reached an 812 million-real leniency deal with the Korean multinational related to allegations it had paid bribes to win Petrobras contracts.

(This story refiles to substitute 'vision' for 'Avision' in paragraph 5)

Ousted by Bolsonaro, outgoing Petrobras CEO defends fuel price rises

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Alan Rice
Alan Rice Feb 25, 2021 5:42PM ET
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It is a point of Honour to be fired by a profiteering "government servant". Ask Vice President Pence.
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