Brazil picks technocrat to lead Petrobras after succession plan mess

By Gram Slattery and Gabriel Araujo

RIO DE JANEIRO (Reuters) – After two messy, drama-filled weeks struggling to fill the top job at state-run oil company Petrobras Brazil’s government turned this week to low-profile technocrat José Mauro Coelho, and investors welcomed the move.

Coelho’s record indicates he is not keen on sacrificing Petrobras profits to keep fuel prices low for Brazilian drivers, or to accomplish other policy aims. He was picked on Wednesday, and Brazil-listed preferred shares in Petrobras, formally Petroleo Brasileiro SA, shot up 3% on Thursday morning.

Last week, energy consultant Adriano Pires backed out of the government’s nomination to take the helm at Petrobras, shortly after soccer magnate Rodolfo Landim declined a nomination as chairman. Coelho, whose appointment as CEO needs to be confirmed at a shareholders’ meeting next week, is a relative unknown compared to those two.

But Coelho’s stance on fuel prices should allay concerns for investors as President Jair Bolsonaro is under pressure to rein in pump prices ahead of a heated October election contest.

Those views line up broadly with high-profile oil and gas consultant Pires, who withdrew his name from consideration after charges arose of conflicts of interest with longtime clients.

Late last month, Bolsonaro ousted current Chief Executive Joaquim Silva e Luna amid tensions over rising fuel prices. The government approached Landim and Decio Oddone, CEO of oil independent Enauta Participacoes SA, two sources with knowledge of the matter said, though both declined.

Coelho, a long-time researcher at Brazil’s state energy think tank, now serves as chairman of Pre-Salt Petroleum (PPSA), a government agency that receives and sells oil handed over by offshore producers as a condition of their operating concessions. For a year and a half ending in 2021, he also served as the secretary of oil, gas and biofuels at Brazil’s Mines and Energy Ministry.

Coelho and PPSA did not immediately respond to requests for an interview. In an October interview on state television, he defended the current, market-friendly policy of Petrobras pricing its fuel in line with global oil markets, saying this was necessary to avoid fuel shortages.

“We have to have domestic market prices related to import prices,” Coelho said at the time.

In another interview Coelho granted upon receiving an award in mid-2021, he made the case for Petrobras to keep a narrow focus on deepwater oil production, by far the firm’s most profitable division.

Analysts and investors were heartened to see the government settle on a no-thrills technocrat. Still, they warned that the risk of political interference remains significant, particularly if crude prices remain high and Brazilian voters feel pain at the pump.

“Although we anticipate a positive market reaction tomorrow,” analysts at Itau BBA wrote to clients in a late Wednesday memo, “we note that the company could continue to face recurring challenges in ensuring the convergence of prices toward international parity.”

(Reporting by Gram Slattery in Rio de Janeiro and Gabriel Araujo in Sao Paulo; Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro and Sabrina Valle in Houston; Editing by Brad Haynes and David Gregorio)

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