Brazil’s Lula government ousts Petrobras chief after dispute over dividends

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The head of Petrobras has been ousted following tensions with the leftwing Luiz Inácio Lula da Silva administration, which has sought to exert greater influence over Brazil’s state-controlled oil major.

Chief executive Jean Paul Prates planned to offer his resignation to the board, Petrobras said on Tuesday evening, ending weeks of uncertainty over his future at the $108bn group.

The decision to remove the top manager of Latin America’s biggest crude producer was taken by the government in Brasília, according to two people with direct knowledge of the matter.

Friction had been mounting since Prates disagreed with government-appointed board members this year over whether Petrobras should pay an extraordinary dividend to shareholders.

Since returning to the presidency last year, Lula has pushed Petrobras to reduce investor payouts and instead invest more in areas such as renewable energy and refineries, aiming to stimulate economic activity.

The government has been accused of political interference by critics who fear a repeat of the mismanagement and scandal at Petrobras that occurred under past leftwing rule.

The company’s American depositary receipts were down 6 per cent in after-hours trading in New York following the news of Prates’ impending departure.

Petrobras said the energy and mines ministry had picked Magda Chambriard, a former head of the Brazilian oil and gas regulator, to replace Prates. Her nomination must be approved by the board.

Formerly a senator from Lula’s party, 55 year-old Prates had prior energy sector experience and began the role in January 2023 after being handpicked by the leftist leader. His exit is the fifth departure of a Petrobras chief in three years.

The Rio de Janeiro-based company is the world’s seventh-largest oil producer by output, according to consultancy Rystad Energy.

As he struggled to square the demands of external investors with the Brazilian state, Prates also clashed with energy minister Alexandre Silveira, who criticised Petrobras for not reducing fuel prices enough.

Leftwing politicians accused the chief executive of being too closely aligned with private sector shareholders.

Under previous rightwing president Jair Bolsonaro, the company sought to focus on offshore oil and gas production, selling off assets considered non-core. Lula criticised the approach and has urged Petrobras to be a diversified energy group.

The company this week reported net profit of R$23.7bn ($4.8bn) for the first quarter of 2024, down 38 per cent on the same period a year ago.

The Brazilian government owns a 36.8 per cent equity stake in Petrobras but holds more than half of the voting rights.

Additional reporting by Beatriz Langella in São Paulo



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