The new boss of Brazilian state-owned oil giant Petrobras said Thursday that he wanted to draw a line under the company’s graft-mired past and offer ‘a new dawn.’
‘Monopolies restrict liberty,’ Roberto Castello Branco told a crowd of officials and Petrobras executives on the day he took up his functions.
Petrobras a couple of years ago ‘was looted by a criminal organization made up of corrupt politicians, enemies of capitalism, and a small group of employees,’ he said.
‘Privileged people and monopolies are intolerable in a free society.’
The harsh words referred to a sprawling, multi-billion-dollar corruption scandal implicating Petrobras and political parties, including those from the Workers Party that ruled Brazil from 2003-2016.
Investigations into the scandal, dubbed Car Wash, brought down politicians, including former leftist leader Luiz Inacio Lula da Silva, and resulted in Petrobras paying a $2.95-billion settlement to US shareholders.
Castello Branco also referred to Petrobras piling up a vast debt load, which currently stands at around $73 billion.
Brought in under new Brazilian Economy Minister Paulo Guedes – like him, part of the ‘Chicago Boys” club of US-trained free-marketers who have graduated from the University of Chicago – he is intent on turning Petrobras around by reducing its statist dependency.
His strategy, he said, was simple: better management, cut capital costs, seek efficiencies, impose a meritocracy, worker safety, and protection of the environment.
‘It’s a new dawn for Brazil and for Petrobras. The time has come to promote transformational change, for shareholders who are under control of Brazilian society,’ he said.
Before being named to the top Petrobras job, Castello Branco, a former board member in the company, had vocally backed an idea of privatizing all of the oil giant.
But Brazil’s new far-right president, Jair Bolsonaro, has said he – like many Brazilians – is not in favor of the country’s crown jewels being sold off, so that ambition has been scaled back.
Petrobras is already in a cycle of divestments to cut it massive debt. It is expected Castello Branco will accelerate that process.
But when asked by reporters how far he would apply privatization zeal to the company, the new chief executive said only that ‘we are analyzing assets’ for later decisions.
Big reserves
Petrobras was founded 65 years ago as a government monopoly to tap tiny reserves that existed at the time. Its oil bonanza happened in late 2006 when it discovered what turned out to be huge amounts of crude lying under the oceanic crust far offshore – so-called pre-salt deposits.
That pre-salt oil is costly to get at, but its extraction soon made the country a net exporter, propelled into the same league as members of OPEC, of which it is not part.
Today, Brazil has proven reserves of 13 billion barrels and produces 2.5 million barrels of oil a day, according to the US Energy Information Administration. Half the production comes from the pre-salt fields, with that proportion forecast to grow.
The company’s market value, of $94 billion, is around half of what it was at its peak. The company’s focus has turned to chipping away at its huge debt.