Brazil Has New President, Energy Policy and Petrobras CEO

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Leftist politician Luiz Inacio Lula da Silva was sworn in as Brazil's new president on Sunday, shifting the nation's energy policy and changing its top energy executives.

Lula began his third term as president, ushering in hopes for a renewable energy transition while maintaining a robust Petrobras. The new president will have to balance his nationalistic policies while also trying to address the market's concerns.

Prior to his current term, Lula was president for two terms between 2003 and 2011.

After assuming power on Sunday, Lula extended Brazil's fuel tax exemption for another 60 days, with the objective of keeping fuel prices in check to reduce public discontent and setting fuel pricing high on the government's agenda.

The initial decision to decree a fuel tax exemption was announced by Jair Bolsonaro, Lula's predecessor, though the incumbent has decided to extend the mandate once more. Fuel prices are critical for the South American nation as steep costs could trigger unrest across Brazil. In 2018, a strike by truck drivers over steep fuel prices brought the country to a halt for more than a week, prompting decisions to contain fuel prices.

Meanwhile, Lula said on Twitter last week that Senator Jean Paul Prates would be Petrobras' incoming chief executive officer. The lawyer and economist also has placed fuel pricing high on his agenda. According to the local Brazilian news site Poder360, Prates highlighted that he would work to establish a new fuel price framework through dialogue with different sectors in order to not hurt the market.

Since 2016, Brazil has maintained parity with international fuel prices, though the fuel tax exemption was introduced in order to lower costs and curb unrest.

Additionally, Lula also has been critical of Bolsonaro's policy to divest Petrobras' downstream sector, and as a result, he will seek to strengthen the national oil company. Alexandre Silveira, Brazil's new energy and mining minister, said Monday that Brazil's dependency on fuel imports has made the country vulnerable and that he supported the expansion of Petrobras refining sector. This could translate into a halt of the refining divestment efforts launched by the previous government, which aimed to sell half of Petrobras' downstream capacity.

Moreover, Lula and Prates have hinted towards a new focus on the renewable energy industry. With this, Petrobras is expected to be geared more toward the renewable sector in the next few years.

In November 2022, Petrobras produced some 2 million barrels of oil per day (BBL/d) and 95.5 million cubic meters per day of natural gas in Brazil, yielding a total of 2.6 million BBL/d of oil equivalent and making it one of the largest oil producers in South America.

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