Bolsonaro criticizes Petrobras after reporting solid profits

Brazilian oil company Petrobras posted another robust quarterly profit that left its shareholders, with the exception of the government, celebrating.

On Thursday, the state company announced a net profit of 44.561 million reais (about US$9 billion) in Q1, which was mainly due to high oil prices.

Shortly after, President Jair Bolsonaro called the net result a “violation” and urged the company not to raise fuel prices further.

“If you are [Petrobras] continue to make profits this way, raising the price of fuel, they are going to break the country […] If they make one more increase in fuel, they can break Brazil. Petrobras people don’t understand or don’t want to understand, or they only have their eyes on profits,” he said.

Bolsonaro’s reaction must be put into context. Brazil will hold presidential elections on October 2, in which the president is running for a second term and the prices of gasoline, natural gas and diesel, in particular, are the main factors that explain the country’s high inflation.

Liquefied petroleum gas represents up to 10% of the minimum wage in Brazil.

Petrobras, which dominates the refining segment domestically, has been following an import parity pricing policy since 2016 and has indexed fuel prices to the exchange rate and international oil prices.

In this way, when the real depreciates against the dollar or oil rises, fuels become more expensive in Brazil, which depends on imports. This hits the popularity of the government.

Since January 2019, when he took office, Bolsonaro has fired two Petrobras CEOs appointed by himself, Roberto Castello Branco and Joaquim Silva e Luna, to show that he does not agree with the rise in fuel prices.

However, changing Petrobras’s top executive does not imply changing its fuel price policy, since its executive staff could face legal problems if it deviates from import parity.

webcast for investors on Friday.

Brazil is self-sufficient in crude oil, but it is an importer of derivatives such as gasoline, diesel, LPG and aviation kerosene.

While Petrobras has upset Bolsonaro, and possibly many Brazilians, it has also been “unfriendly” to fuel importers and distributors, who accuse the company of freezing prices.

By maintaining a price lag of up to 700 reais (US$140) per cubic meter, according to local distributors’ association Brasilcom, Petrobras harms the competitiveness of fuel importers, who pay higher prices for oil products.

While importers reduce their operations, Petrobras prioritizes large fuel consumption centers and leaves other regions of the country at risk of shortages.

To relieve pressure, Petrobras is carrying out a national communication campaign to highlight social initiatives such as the donation of residential liquefied gas, reporting the economic resources it allocates to combat the effects of the COVID-19 pandemic and also publicizing taxes, royalties and fees paid to the State.

“Only in 1Q22 some 70,000 million reais were collected. This promotes more investments, economic development, job creation and income for all Brazilians”, said Coelho.


In the last decade, Petrobras significantly reduced its investments, as it needed to bring its debt to comfortable levels and achieve a net debt to EBITDA ratio of less than 2.5.

“From now on, with a gross debt of only US$58 billion and US$40 billion of net debt, Petrobras can resume investments in natural gas to help the electricity sector and, in refining, to depend less on imports”, Flávio Conde, an analyst at Levante Ideias de Investimentos, told BNamericas.

The executive added: “In the case of energy, this should remain in the hands of Eletrobras once privatized. Renewable energy can be interesting, but the return on investment takes time and even more scale.” The government is in the process of selling the state power company.

Petrobras has been criticized for selling the few renewable energy and biofuel projects it had, as it could be overexposed to the volatility of crude oil and fall into a risky position in the global energy transition process.

However, the company says it must first focus on exploration and production of its huge offshore hydrocarbon reserves in Brazil to take advantage of the current window of opportunity.

“This is the right path, and I think the trend is to continue to focus on the businesses that are most profitable for the company. The same investors consider that business segments that do not report profits should be sold to the private sector,” Top Gain analyst Sidney Lima told BNamericas.

According to the director of institutional relations and sustainability at Petrobras, Rafael Chaves, the company is studying a second “value generation engine” aligned with the energy transition.

“We will evaluate the alternatives that the technical team presents to the administration and the board to decide if we try a different strategy than the one we have today,” he said during a webcast.

Meanwhile, Petrobras is advancing with a broad divestment program that includes hydrocarbon exploration blocks and fields (mainly in shallow waters and onshore), the holding company Gaspetro gas distribution, gas pipelines and refineries.

The company is currently awaiting the go-ahead from local antitrust authority CADE to complete the sale of the Reman and SIX refineries, due to take place this year, and is in negotiations with Regap and Lubnor.

“As for the other plants, we are evaluating the market and potential buyers and talking with CADE to resume the processes as soon as possible,” CFO Rodrigo Araujo Alves said in the conference call for investors.

He added that Petrobras is also evaluating the best time to resume the sale of its stake in petrochemical company Braskem.

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