Minister announces changes in Petrobras pricing policy after board election

The Brazilian Minister of Mines and Energy, Alexandre Silveira, has stated in an interview that changes will be made to the price policy of Petrobras after the election of the new board of directors. The statements were poorly received by Petrobras’ top management as they viewed them as an attack from the ministry.

Silveira announced that the new model will be the Internal Competitiveness Price (in Portuguese, PCI), which may reduce the cost of diesel by up to R$ 0.25 per liter. He also stated that Petrobras has a social function and must absorb sharp fluctuations in crude oil prices abroad.

Last Friday, OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) announced additional cuts in oil production. The decision could raise the barrel price to $100, tightening the market and reducing refinery profits.

“The import parity price is a real absurdity. We have to have what I have called the PCI, which is the internal competitiveness price,” the Minister stated.

He acknowledged that he respects the leadership of Petrobras and its legal nature, but he noted that the company is controlled by the Union and “must work by fulfilling its social function.”

“The critical discussion has to be done quickly. Petrobras has already been directed in this direction,” he added.

Intervention

The change in Petrobras’ price policy is one of the priorities of the President of Brazil, Luiz Inácio Lula da Silva (PT), but the Minister’s unforeseen declarations surprised Petrobras’ management and board of directors.

After the interview, sources claim that executives pointed out the Government’s intervention in the company. On the same day, Petrobras released a statement stating that it “had not received any proposal from the Ministry of Mines and Energy” and that any changes to its price policy would be communicated to the market and conducted through its usual mechanisms of internal governance.

Any change in the current model adopted by Petrobras needs to be evaluated by the board of directors and approved by the board. The company’s regulations also require the disclosure of any significant events to the market, ensuring equal access to information.

The Minister believes that the process will not be a problem. “I’m absolutely sure that President Jean Paul will meet the demands of the majority shareholder, which is the Union – therefore, the Brazilian people in the fundamental issues that are Brazil’s social issues,” he concluded.