Petrobras CEO Says Tenure Guaranteed Until Year-End

Petroleo Brasileiro SA Chief Executive Officer Jose Sergio Gabrielli said he’s only guaranteed to remain at his post until Dec. 31, when Brazilian President Luiz Inacio Lula da Silva leaves office.

“The only confirmation I have is from President Lula,” Gabrielli said today in an interview with Brazilian radio stations, when asked about his tenure under Brazil’s President-elect Dilma Rousseff.

O Estado de S. Paulo newspaper reported Nov. 7 that Rousseff may name Maria das Gracas Foster, the head of Petrobras’s natural gas and energy divisions, to replace Gabrielli or as cabinet chief. Naming Foster as head of the state-run oil company may raise concern that the government will have more control over the company’s decisions, said Christopher Garman, director for Latin America at Washington-based researcher Eurasia Group.

Foster “has a close working relationship with the president-elect, which could lead to some uncertainty over how strong she defends Petrobras’s interests if it goes against the government’s stated objectives,” Garman said by telephone from Washington D.C.

Petrobras will need to convince the government to develop offshore fields at a “slower pace” so the company can manage all its projects efficiently, he said. The government’s goal of having Petrobras run all new deep-water oil projects may slow production growth, he said.

Oil Laws

Brazil’s Congress is in the “final phase” of approving legislation to make Petrobras the lead operator of all new projects in the so-called pre-salt region in deep waters off the coast of Brazil, Gabrielli said. The legislation also includes changes to the distribution of oil royalties to give more revenue to states that don’t produce oil.

“The main debate is not about the regulatory framework, but about the distribution of royalties,” Gabrielli said.

If Lula vetoes the royalties section of the bill, Congress will probably resume debating the topic in 2011, he said. Approval of the oil legislation will probably get delayed until 2011 because Congress doesn’t have enough time to debate all the bills in its agenda, Garman said.

“I think it’s going to be kicked down the can,” said Garman. “The issue is when they will approve it next year.”

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