Transition: Petrobras needs to expand its capacity to 'Brazilianize' prices, but the company has shrunk.

Brazil Current Network - Petrobras needs to “maximize” its installed capacity to reduce its dependence on imports of refined products, but the company has lost economic weight in recent years. These are some of the conclusions of the working group (GT) on mines and energy of the transition team, which gave a press conference in the early afternoon of this Thursday (8). “The company has shrunk in size in relation to the multiplier effect it has on the Brazilian economy. It reached 13% of GDP in 2014, this movement has fallen to less than 4%,” said Senator Jean Paul Prates (PT-RN), coordinator of the Oil, Natural Gas and Biofuels subgroup, speculated for the presidency of the state-owned company. He stated that, today, the future of the company is “nebulous”.

According to several participants in the interview, Petrobras needs to reconsider the direction it has taken in recent years and not focus solely on exploration. Prates and others stated that oil companies worldwide are moving towards becoming energy companies, which also needs to happen in Brazil. For Magda Chambriard, former president of the National Agency of Petroleum, Natural Gas and Biofuels (ANP), Petrobras has abandoned its leading position, moved in the opposite direction to the major oil companies, and taken steps backward. Professor Mauricio Tolmasquim, coordinator of the Mining and Energy technical group, stated that Petrobras needs to enter the 21st century by adapting its production process.

Vulnerable to external shocks

Brazil exports crude oil, but is dependent on imports of refined products. This makes the country vulnerable to international price shocks. Increasing capacity would reduce this vulnerability. The pursuit of clean energy is a clear guideline, said the coordinator of the transition groups, Aloizio Mercadante. "Petrobras cannot only focus on exploration," he stated. It is necessary to seek "the maximization of installed capacity, in the sense, as President Lula would say, of making fuel prices more Brazilian over time." This is to stop depending on the exchange rate and imported fuel. "The country is in fiscal collapse, Bolsonaro broke the Brazilian state, we now need to have a rational policy and use the advantages we have."

Tolmasquim further stated that the current government left a bill of approximately R$ 500 billion to be paid by energy consumers in the coming years. This includes, according to him, a "COVID account" for loans taken out during the pandemic, another "water scarcity account," and the emergency contracting of thermoelectric power plants, among other factors. Thermoelectric plants represent the largest portion of the bill.

Energy irrationality

He criticized (“Energy irrationality”) the obligation to contract thermal power plants where there is no natural gas supply. This was one of the conditions imposed by Congress to approve the privatization of Eletrobras. Another was the contracting of Small Hydroelectric Power Plants (PCHs) through market reservation in energy auctions.

“Today, the cost of generating electricity is very cheap because our sources are inexpensive; we have good natural resources. However, the tariff that the consumer pays is exorbitant, one of the most expensive in the world,” commented Tolmasquim.

During the press conference, representatives from the transition team pointed to the "penurious" situation of the sector's agencies, such as the ANP itself and the National Mining Association (ANM). They also criticized decrees and regulations that, according to them, paved the way for illegal mining.

“There has been deliberate, official encouragement of illegal mining. This is not good for the Amazon, for Brazil, or for mining,” stated the coordinator of the Mining subgroup, Giles Azevedo. “This instability compromises companies' investments,” he added, noting that some regulations will be revised.

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