Petrobras May No Longer Have Refining Monopoly and Will End Diesel Subsidies

The New President of Petrobras Criticized the Government’s History of Interference and Promised to Pursue Policies That Increase Profit, Echoing a Broader Promise from President Jair Bolsonaro to Reduce the Role of the State in the Largest Economy in Latin America.

Roberto Castello Branco, who assumed the presidency of Petrobras on Thursday, said he is “outraged” by the company’s moral and financial crisis in recent years and promised to increase oil production and reduce the largest debt burden of any publicly traded oil company. The deep-water oil state will also continue with a divestment program that has helped raise funds and optimize its operations, he said.

“Fuel prices should be aligned with international ones, with a ‘no’ to subsidies or attempts to have a monopoly,” Castello Branco said in his inauguration speech. “We are pro-market economists. We like competition,” he told reporters afterward.

The Minister of Energy, Bento Albuquerque, who attended the ceremony in Rio de Janeiro, said that the government will end diesel subsidies that were implemented last year to appease truck drivers on strike. Castello Branco said that Petrobras should not enjoy any monopoly and called for more competition in the Brazilian refining industry.

Investors have been encouraged by Castello Branco’s business statements since he was appointed to the position in mid-December. Petrobras closed up 2.45 percent at 24.65 reais, the highest since December 7.

Bolsonaro received praise from analysts and investors for selecting qualified candidates for his economic team. The Minister of Economy, Paulo Guedes, Castello Branco, and Joaquim Levy, head of the National Bank for Economic and Social Development (BNDES), all studied at the University of Chicago and share liberal views on the economy.

Castello Branco was previously a board member of Petrobras in 2015 and 2016. He said that the company has improved since a broad pay-to-play scandal became public in 2014 and prompted changes in corporate governance. He was also the director of investor relations at Vale SA, the largest iron ore mining company in the world.

The new president advocated that Petrobras should focus on its core business and accelerate oil production, putting aside other sectors. Fuel unit BR Distribuidora and midstream assets are among those that will be considered for possible sale, he said.