Petrobras, Brazil oil sector could get lift from impeachment

Thomson ReutersA worker paints a tank of Brazil’s state-run Petrobras oil company in Brasilia

By Jeb Blount

RIO DE JANEIRO (Reuters) – Brazil’s corruption-battered state oil company Petrobras could be a big beneficiary if the country’s opposition parties impeach President Dilma Rousseff, investors and analysts said on Monday.

Vice President Michel Temer, who would take power if Rousseff were impeached, is considered open to industry calls for changes to oil rules brought in by her Workers’ Party over the past decade.

Rousseff’s critics have said the policies, aimed at boosting state control of huge offshore discoveries, drove up costs, limited output and built up Petrobras’ crippling $126 billion debt, the largest of any oil company.

“First off, Petrobras will no longer be used as a tool for monetary policy,” said Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management in London, pointing to a longtime policy of keeping gasoline prices artificially low to keep a lid on inflation.

Many have said Rousseff’s policies left Brazil’s oil industry and Petroleo Brasileiro SA, as Petrobras is formally known, with few options but layoffs, cutbacks and asset sales when oil prices plunged and a giant corruption scandal was uncovered over the last year and a half.

With Brazil’s offshore oil among some of the world’s most expensive to extract, any new government would have to make changes to attract a shrinking pool of investment capital away from other oil producers, he added.

Brazilian oil unions, some of the biggest opponents of Rousseff’s impeachment, are also convinced changes are afoot if Temer takes over, said Deyvid Bacelar, an oilworkers’ union leader and employee representative on Petrobras’ board of directors.

Likely changes would include an end to strict local purchasing laws for ships and oil platforms, new layoffs to add to the tens of thousands already imposed nationwide, an end to minimum Petrobras involvement in key offshore oil developments and a wholesale selloff of Brazilian oil assets to foreigners.

Temer’s PMDB party and the opposition PSDB, that would likely partner with him if he became president, agree that Petrobras’ role in new offshore development should be reduced and foreign investment encouraged, said Adriano Pires, a long-time PSDB advisor.

Still, Petrobras is likely to remain a symbol of nationalist pride, limiting the potential for real change, said John Baur, global income portfolio manager who handles some of the $306 billion of assets held by Eaton Vance Investment Managers in Boston.

“One of the reasons Rousseff was so unpopular was because she was slowly starting to make some of the changes that needed to be made,” he said. “With many of the same people still around, big change in Brazil seems far-fetched.”

Even a hands-off policy, avoiding the political interference that led to corruption, massive writedowns and a plunging share price, could be a big improvement, some experts said.

“I imagine that whomever takes over the government will look at Petrobras in a more careful way than they did only a short time ago” said Nelson Narciso, a former director of Brazil oil agency ANP.

(Reporting by Jeb Blount and Marta Nogueira; Editing by Christian Plumb and Andrew Hay)

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