Brazil President Lula fires Petrobras CEO after dividend dispute

RIO DE JANEIRO - Brazil’s President Luiz Inacio Lula da Silva fired Mr Jean Paul Prates, the chief executive officer of the country’s state-owned oil company, Petroleo Brasileiro (Petrobras), following a dispute over dividend payments.

The firing was confirmed by people familiar with the matter. Petrobras, as the company is known, said late on May 14 that Mr Prates is expected to officially resign at an upcoming board meeting.

Mr Lula plans to nominate Ms Magda Chambriard, the former head of Brazil’s oil and gas regulator, to replace Mr Prates, according to a person familiar with the matter. Petrobras’ American depositary receipts dropped more than 6 per cent after the close of regular trading in New York on May 14.

The announcement brings to an end months of speculation that Mr Prates’ days at the helm of Petrobras were numbered as he tried to balance competing expectations from investors and Mr Lula.

Tensions escalated earlier in 2024 when Mr Prates refused to align himself with government-appointed board members who voted to withhold the payout of extraordinary dividends to shareholders who had grown used to steady returns.

The firing may add to concern among investors that Petrobras is coming under increasing pressure from the ruling Workers’ Party to help revive Brazilian industry and create jobs at the expense of shareholders. The dividend drama shocked some investors, who viewed it as a sign of growing political interference in Latin America’s biggest oil producing country.

After weeks of debate, Petrobras ultimately approved returning half its available cash to investors through a special dividend, as Mr Prates’ executive board had initially proposed. The government is the biggest shareholder, and the dividends have helped shore up a fiscal deficit at a time spending is on the rise.

A former senator for Mr Lula’s left-wing party with a history of working in the oil industry, Mr Prates became CEO in January 2023, shortly after Mr Lula assumed the presidency. Prior to his appointment, Petrobras had gone through six CEOs, including interim ones, since 2019.

Under Mr Prates’ leadership, Petrobras changed direction, halting asset sales, shielding consumers from sharp fluctuations in international oil prices and earmarking billions of dollars for energy transition investments. The company recently boosted the budget for its five-year business plan to US$102 billion (S$137.9 billion), its biggest spending plan since 2015. BLOOMBERG