Prates wants to take Petrobras beyond the pre-salt reserves.

RIO DE JANEIRO/BRASILIA, Dec 30 (Reuters) - The choice of Senator Jean Paul Prates (PT-RN) to preside over Petrobras confirms the elected government's intention to promote a major change in the oil company's strategy, which in recent years has placed a large part of its investments in the exploration and production of oil in the pre-salt layer.

Prates has already indicated that he wants the oil company to have a more diversified operation focused on the energy transition.

"Petrobras is a long-term company. A long-term company can't just keep extracting (oil from) the pre-salt layer from the seabed and distributing dividends; it needs to think about things that all other oil companies are thinking about," Prates argued in a recent interview.

The senator's name, chosen by president-elect Luiz Inácio Lula da Silva to head Petrobras, was even announced last week by the general coordinator of the Unified Federation of Oil Workers (FUP) and member of the transition government, Deyvid Bacelar.

However, it was only this Friday that there was an official confirmation of the nomination.

Prates will be the first politician to assume a strategic position in the company in years.

Although his name has encountered less resistance in the market due to his long experience in the energy sector, some still have doubts about the company's future.

"It was the best choice given the current scenario," said a source from the company's current leadership, adding that it remains to be seen how Prates' name will be evaluated within the context of the company's governance rules and the State-Owned Enterprises Law.

"I hope he will be moderate and do a good job managing the company. He knows the area well," said a second source from the state-owned company's top management.

In the wake of Operation Lava Jato, which began in 2014 and investigated billions of dollars in corruption involving Petrobras contracts, efforts were made to remove political figures from the company's strategic structure in order to avoid potential conflicts of interest. Rules to this effect were included in the State-Owned Enterprises Law in 2016 and replicated in the company's bylaws.

This month, however, the Chamber of Deputies approved a change to the State-Owned Enterprises Law that reduces the mandatory quarantine period for individuals linked to the decision-making structure of political parties or election campaigns to assume positions in state-owned companies from 36 months to just 30 days. The text still requires analysis by the Senate and presidential approval.

A change to Petrobras' bylaws --which contain similar rules-- would require a request from the Board of Directors and a vote at a Shareholders' Meeting, a process that could take months.

A source close to the senator argued, however, that there would be no impediments regarding this point, since Prates did not assume a command or coordination position in Lula's campaign and provided information about the sector during the campaign in a consulting capacity.

When questioned about the matter, the future Minister of Mines and Energy, Alexandre Silveira, stated that, according to legal analyses published in the press, there would be no legal impediment to the politician assuming the position.

CHANGES IN FOCUS

With over 25 years of experience in the energy sector, Prates has argued that Petrobras should increase its investments in renewables, in line with other global oil companies, and also in refining, in pursuit of energy security.

The senator has also questioned Petrobras' current pricing policy, which is currently aligned with international market practices and seeks to follow the Import Price Parity (PPI).

"I'm not in a position to make a value judgment. He knows the subject. He was a strong critic of the PPI in Congress. I imagine he will try to suspend the CADE's decisions on divestments (sale of refineries). But everything will depend on the team he assembles," former Petrobras president Joaquim Silva e Luna told Reuters.

The senator and the transition team have questioned Petrobras' sale of refineries and have even asked the oil company to halt ongoing divestments so that the new management can assess whether to continue them next year.

About a month ago, however, Prates stated that Lula's government will not be "interventionist" in Petrobras, and that changes in the company will be made gradually, since it is up to the State, as the majority shareholder, to define the policies.

Former Minister of Mines and Energy in Jair Bolsonaro's government, Bento Albuquerque, stated that Prates is "a good choice." "He's not a radical, he understands the oil and gas sector and has substance. Given the current context, it's fair to say he's an excellent candidate," he said.

Prates studied Law at UERJ and Economics at PUC/RJ. In the United States, he earned a Master's degree in Energy Planning and Environmental Management from the University of Pennsylvania. In France, he completed a Master's degree in Petroleum and Engine Economics at the French Petroleum Institute. Throughout his life, he has worked in the private sector and in politics on energy-related issues.

GOOD NEGOTIATOR

Elected to the Senate in 2014 by the Workers' Party (PT) of Rio Grande do Norte, Prates had an active role in the National Congress. As Minority Leader in the Senate, he was combative but also considered a good negotiator.

In fact, he took on the role of rapporteur for complex issues, not only because of the areas covered by the projects, but also because of his ability to communicate effectively. He was, for example, the one who led all the coordination surrounding the legal framework for railways, a proposal he reported on.

At the time, and in subsequent situations --such as discussions about the so-called BR do Mar (Sea Highway)-- Prates maintained a good relationship with the then Minister of Infrastructure and now governor-elect of São Paulo, Tarcísio de Freitas.

During the fuel price crisis at the beginning of the year, Prates also took on the task of reporting in the Senate on a bill that created a price stabilization account for fuels, expanded the scope of the gas subsidy program, and provided for the creation of a gasoline subsidy program.

The Fuel Price Stabilization Account (CEP-Combustíveis) proposed by Prates would be regulated, detailed, and operationalized by the Executive branch and would serve as an instrument for the State to use, in the format it deems most appropriate, to prevent companies from failing to receive the market price when the government takes measures to control prices at the pump.

For this very reason, he was chosen by the president of the Senate, Rodrigo Pacheco (PSD-MG), to coordinate the articulation between senators and state finance secretaries to discuss another bill brought to light to cool down fuel prices, establishing a ceiling of around 17% for the ICMS tax charged on the fuel, electricity, natural gas, communications and public transport sectors.

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