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Petrobras to Stop Selling Refineries

Brazil’s state oil major Petrobras has agreed with the country’s antitrust regulator to stop selling refineries in order to boost its processing capacity.

Five years ago, Bloomberg recalls, Petrobras had announced plans, coordinated with the watchdog, to sell a total of eight refineries. Now, after three sales, the company has ended the divestment, again in coordination with the regulatory organ.

The change in plans comes as the Brazilian government exerts growing pressure on Petrobras to expand its operations and create more jobs, boosting the Brazilian economy in the process. The pressure recently led to the ousting of the company’s chief executive Jean Paul Prates and his replacement with the former head of Brazil’s oil and gas industry regulator, Magda Chambriard.

The change at the top came last week, a day after Petrobras reported a 38% decline in net profits for the first quarter of the year on 15% lower revenues. It also adds to bad news about shareholders after late last year outgoing CEO Prates informed them dividend payments would be kept lower for a while as Petrobras tried to expand into low-carbon directions.

"In our view, the exit of Prates is a deterioration of Petrobras governance and a downside risk for the investment thesis," Citi analysts said in a note quoted in a Reuters report at the time.

"The new CEO arrives with the pressure to fulfill the investment plan and accelerate the capex expansion, which may negatively impact the company's dividend payment."

The Bloomberg report noted that investors were concerned about the reshuffle at the top after Prates had prioritized cost reductions and a focus on only the most profitable business of the company. In contrast, the government wants Petrobras to invest more in things like wind and solar, refining, and fertilizer production.

In fairness, Prates was the one who announced plans to have 50% of Petrobras’ future revenues come from wind and solar. He also cut the company’s dividend payout in order to invest more money into this shift into transition energy tech—which understandably did not sit particularly well with shareholders.

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By Charles Kennedy for Oilprice.com

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