Government evaluates mechanism to force Petrobras to sell assets, including refineries

The proposal would be linked to privatization, defended by the MME as a way to expand competition

The government is considering including in the Petrobras privatization bill a mechanism to oblige the company to dispose of a list of assets, including refineries, informed the Sheet government officials involved in the discussions.

In the view of defenders of the measure, the sector is today excessively concentrated in the hands of the company, which gives it enough market power to influence prices and maintain high profit margins — a point that has been highlighted by President Jair Bolsonaro (PL) in their criticism of the company.

The bet of this wing of the government is that greater competition in the oil and gas market can help reduce fuel prices in the medium and long term.

In 2019, Petrobras even signed an agreement with Cade (Administrative Council for Economic Defense) to sell 8 of its 13 refineries, but the company has so far disposed of just one facility — a pace considered undesirable and insufficient by government officials.

The proposal under discussion would give the CNPE (National Energy Policy Council) the power to define guidelines to promote free competition in the oil and natural gas industry, which would include the possibility of indicating the assets to be sold in full by Petrobras.

The collegiate has ten ministers of State as effective members, among them those of Mines and Energy, Economy, the Civil House and the GSI (Institutional Security Office), in addition to the special secretary for Strategic Affairs of the Presidency of the Republic and the president of the EPE (Energy Research Company).

The CNPE could also define the maximum period for the conclusion of the operations, as well as criteria to be fulfilled by the buyers so that there is an effective expansion of competition.

In case of non-compliance with the stipulated schedule, Petrobras would be subject to penalties. One of the possibilities is to impose a compulsory sale of the assets, in charge of the ANP (National Agency of Petroleum, Natural Gas and Biofuels), with the help of a federal financial institution.

The proceeds from the sale would revert to Petrobras, except for some cost to structure the operation.

The draft law is still under internal discussion at the MME and the Economy. The text, therefore, can still undergo changes until the moment of submission to the National Congress.

The MME has seen the wear and tear caused by the increases announced by Petrobras as an opportunity to create a favorable political environment for privatization in the Legislature and, therefore, wants speed in the internal negotiations for the conclusion of the proposal.

Sending the project could also feed the government’s discourse that it is acting to solve the fuel problem, considered by members of Bolsonaro’s campaign one of the main obstacles to the president’s reelection.

However, there are those who see difficulties in Congress being able to advance on such a controversial issue in an election year. The president himself has already publicly admitted that the privatization of the company could take up to four years.

In addition, the first place in the voting intention polls for the Planalto Palace, former president Luiz Inácio Lula da Silva (PT), is against any attempt to privatize Petrobras.

as showed the Sheetone of the models analyzed for the operation is the conversion of the company’s preferred shares (prioritized in the distribution of dividends, but without voting rights) into common shares (with voting rights at the shareholders’ meeting).

This transaction alone would be enough to dilute the Union’s stake in the company. With that, the control of the company would pass into the hands of the private initiative.

There is concern, however, in providing in the text a kind of antidote against the mere transformation of a public monopoly into a private one. It is in this context that the mechanism that forces the sale of refineries fits.

According to a member of the government, the idea is for the divestment proposal to be presented to the company’s minority shareholders in return for privatization – that is, the plan would be agreed in advance.

The text should also provide that the CNPE decision will only apply if it is ratified by the shareholders’ meeting.

After the agreement signed with Cade, Petrobras managed to sell only the Landulpho Alves Refinery, in Bahia, now under the command of Acelen — a company created by the Mubadala fund, in the United Arab Emirates.

The slow pace of divestments has been criticized within the government, as well as the option made by Petrobras to keep its refineries located in the Southeast region, harming competition in this area.

In the sector, the assessment is that the instability surrounding Petrobras’ command and the constant attacks on its pricing policy, even by Bolsonaro, contribute to reducing investors’ appetite for these assets.

This Monday (27), Petrobras announced in a statement that it has restarted the sale processes of the Abreu e Lima Refinery, in Pernambuco, of Repar (President Getúlio Vargas Refinery), in Paraná, and of Refap (Alberto Pasqualini Refinery), in Rio Grande do Sul.

“The main subsequent steps of the sale processes of these three refineries will be informed in a timely manner to the market”, said the company.

Source: Leaf