(Bloomberg) -- Brazil’s state-controlled oil firm Petroleo Brasileiro SA is under increasing pressure to change its pricing and investment strategy as dissatisfaction with the company’s chief executive officer grows within President Luiz Inacio Lula da Silva’s government, according to people familiar with the situation.
Lula and some members of his administration have pushed Petrobras CEO Jean Paul Prates to more closely align the company with government efforts to fight inflation and boost Brazil’s economy, according to the people, who requested anonymity to discuss internal matters.
The president rescheduled for Tuesday afternoon a meeting with the CEO and several administration officials that was set for Monday evening, including the finance minister, mines and energy minister and chief of staff, according to two people with knowledge of the situation.
The sources told Bloomberg that replacing Prates is not under discussion at the moment, refuting an earlier report from Reuters.
The burgeoning feud is shining a light on the challenges Prates faces as he seeks to balance the company’s interests with those of a government battling increasing economic headwinds. Fuel prices play a major role in Brazil’s inflation rate, which is under the microscope as the central bank weighs the pace of future interest rate cuts as part of its ongoing monetary easing cycle.
Mines and Energy Minister Alexandre Silveira last week publicly called on Petrobras to reduce fuel costs in response to declining oil prices, while Lula has urged the company to focus its next five-year business plan more heavily on domestic job creation.
Prates on Saturday rejected Silveira’s pleas to lower prices, saying Petrobras would make adjustments only when technical guidelines suggest the need for them. The producer earlier this year unveiled a new pricing policy that combines domestic and foreign factors, abandoning a previous mandate to follow the cost of imported fuel supplies.
“We don’t want uncertainty created by geopolitical factors entering consumer’s homes,” Prates said in a social media post.
Global oil prices have fallen to about $80 a barrel in recent weeks as supplies have exceeded expectations. A spokesperson for Silveira said Monday that he will continue demanding lower prices in line with the international scenario, which he sees as a key part of his role as the country’s top energy policy official.
The Rio de Janeiro-based Petrobras has already presented a draft of its 2024-2028 investment plan to the government, Reuters reported Friday, citing unidentified sources.
In response, Lula asked Prates to focus on hiring Brazilian companies over foreign suppliers and complained about the company’s lack of investment into Brazil’s shipbuilding industry, according to the report.
Petrobras declined to comment. The company is expected to reveal its investment plan in the next few weeks, according to a spokesman. Shares rose as much as 1.4% in Sao Paulo on Monday.
The company’s board, which is controlled by the government, has proposed a $100 billion investment plan, above the previous one of $78 billion, Brazilian newspaper Estado reported, without saying where it obtained the information. The company has said it will increase investments for low-carbon and renewable-energy projects to as much as 15% of the total.
“I can’t repeat it enough: Petrobras doesn’t create its market prices, but has a commercial policy which follows technical, logistical and operational parameters,” Prates wrote in his social media post. The company’s current commercial policy focuses on sheltering domestic prices from international volatility, he added.
Read more on Petrobras’s strategy:
- Petrobras Poised for More Output Growth After Quarterly Jump
- Petrobras Management Under Political Attack, CEO Prates Says
- Petrobras’ Dividend Constraint May Offset Fuel Pricing Risk
--With assistance from Maria Eloisa Capurro and Vanessa Dezem.
(Update with new day for meeting with CEO, ministers in the third paragraph.)
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