(Bloomberg) — Latin America’s greatest oil firm shall be extra cautious about issuing blockbuster dividends because it strikes to turn out to be a renewable power powerhouse, Petrobras Chief Govt Officer Jean Paul Prates stated in an interview.
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In 10 years about half of Petrobras’s income will come from wind, photo voltaic and renewable motor fuels — and the corporate is gearing as much as make acquisitions as early as this 12 months to propel the shift, Prates stated in a wide-ranging interview. The Brazilian producer additionally must spend closely on oil exploration at house and overseas to ensure that it’ll proceed pumping crude for many years.
“We have to be cautious. Shareholders will perceive,” Prates stated from Bloomberg’s workplace in Sao Paulo, when requested about a rare dividend cost. “I’d be extra conservative than aggressive. We’re in the course of this nice determination of turning into an oil firm in transition.”
Petrobras shares fell as a lot as 2.9% in Brazil, essentially the most throughout common buying and selling since December.
Analysts see room for Petroleo Brasileiro SA, as the corporate is formally recognized, to reward traders with billions of {dollars} in extraordinary dividends, that are anticipated to be introduced when it stories earnings March 7. Citigroup Inc. sees area for as much as $7 billion, whereas Goldman Sachs Group Inc. forecasts as a lot as $8 billion. Petrobras was the second-biggest payer of dividends within the oil trade in 2022 behind Saudi Aramco.
Petrobras’s willpower to plow forward into clear power contrasts with a few of its worldwide friends. European heavyweights Shell Plc and BP Plc have pivoted away from renewables to focus extra on fossil fuels. US oil majors Chevron Corp. and Exxon Mobil Corp. by no means made wind and photo voltaic a precedence and have targeted their enterprise plans on oil and gasoline.
Learn Extra: BP Activist Sees Signal of Technique Shift However Desires Bolder Motion
The 55-year-old government, who took the helm at Petrobras in January 2023, dominated out making “drastic turns” in technique. However he stated the corporate must be ready for acquisition alternatives in each renewables and oil, in addition to petrochemicals and fertilizer manufacturing. Petrobras is investing in wind and photo voltaic tasks on land in Brazil earlier than shifting into offshore wind. It’s additionally scaling up plant-based gasoline for aviation and delivery, two of essentially the most tough industries to decarbonize.
Prates stated Brazil has higher circumstances for offshore wind tasks than the US or the North Sea, and that creating the trade in Brazil will present a brand new line of enterprise for a similar sorts of service suppliers it makes use of for oil tasks. Considered one of his foremost issues is that Brazil gained’t have sufficient suppliers for its oil tasks because the world begins to transition away from hydrocarbons.
“Probably the most horrifying factor I see in 10 years is a disaster with contractors,” Prates stated.
Consequently, Petrobras is holding conversations with the federal government on an industrial coverage to help tools suppliers and shipyards in Brazil. It’s additionally figuring out methods to supply key items and companies from close by nations and geopolitical allies.
A foremost pillar of President Luiz Inacio Lula da Silva’s financial coverage is a sweeping reindustrialization plan that can present credit score and funding to sectors like well being, protection and agribusiness, together with initiatives to foster a inexperienced transition in Brazil.
Learn Extra: Lula Unveils $60 Billion Plan to Revitalize Brazilian Business
Prates stated that Petrobras, as a state-controlled firm, must take part in power coverage choices with the federal government. However this coordination doesn’t imply that Lula is interfering within the firm’s enterprise technique, he stated.
“I think about this extra as a prize than a burden,” stated Prates. “Who’s the opposite CEO in Brazil that may be with the president of Brazil each 15 days? That resolves lots of issues.”
Petrobras can be in talks with Mubadala Capital, the funding arm of Abu Dhabi’s sovereign wealth fund, to turn out to be a accomplice in a refinery that the Brazilian firm bought beneath earlier administration. Each side might attain an settlement by the tip of the 12 months, Prates stated. He added that Petrobras’s refineries weren’t designed to compete with one another and that the plant has been struggling because it was bought off.
Mubadala Capital is increasing the Mataripe refinery within the northeastern state of Bahia to provide renewable fuels, a venture that pursuits Petrobras. Prates stated Petrobras wouldn’t essentially function the refinery, and that it might be break up into a couple of separate corporations.
“We wish to get into that. They invited us,” Prates stated. “We can reincorporate the refinery into the system.”
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