The antitrust watchdog allows Petrobras to negotiate new pipelines and sets new conditions for the state-owned enterprise
05/23/2024
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With the antitrust watchdog’s latest decision, Petrobras will retain ownership of some refineries it was initially required to divest, including Repar, in the state of Paraná — Foto: Divulgação
Petrobras has successfully renegotiated the terms of its 2019 agreements with the Administrative Council for Economic Defense (CADE), the antitrust regulator. The agreements were initially established to suspend investigations into Petrobras’s dominance in the refining and gas markets. With the new arrangement, approved by CADE’s tribunal on Wednesday, Petrobras is no longer obligated to divest five of its refineries and the Transportadora Brasileira Gasoduto Bolívia-Brasil (TBG).
Under the revised terms, Petrobras faces new responsibilities. Notably, CADE will oversee the methodology used to set oil prices at refineries for the next three years and renewable energy pricing for an additional three years. In the gas sector, although Petrobras will maintain its investment in TBG, it will relinquish operational control, as the pipeline operator is to appoint independent members to its board of directors.
Should Petrobras fail to comply with these stipulations, CADE retains the authority to reopen investigations. Any findings of misconduct could result in penalties for Petrobras, including fines and mandatory changes to its business practices. Existing inquiries into allegations of price discrimination will be on hold throughout this monitoring period.
This agreement, the result of months of negotiations with CADE, coincides with a leadership transition at the state-owned company. Magda Chambriard, recently endorsed by the company’s eligibility committee, is set to assume the presidency with a directive to augment Petrobras’s refining operations.
The initiative to revisit these agreements began under the leadership of Jean Paul Prates in 2023. The company communicated to its board that the mandated divestments conflicted with its strategic objectives, a plan originally put into place during the Bolsonaro administration.
Following the new agreement, Petrobras has proceeded with the sale of three refineries: Six (Pará), Reman (Maranhão), and Rlam (Bahia). However, with CADE’s latest decision, the company will retain ownership of the other refineries it was initially required to divest: Repar (Paraná), Refap (Rio Grande do Sul), Rnest (Pernambuco), Regap (Minas Gerais), and Lubnor (Ceará).
As part of the commitments negotiated with CADE, Petrobras will also make public its general commercial policies for oil deliveries to ensure non-discriminatory practices. It will offer a specific type of contract, known as a Frame agreement, to any independent refinery on Brazilian soil concerning oil supply. Additionally, Petrobras is required to provide easy access to confidential data to facilitate ongoing monitoring by the antitrust watchdog.
During the session, CADE’s president, Alexandre Cordeiro, emphasized that the proposed consent decree for refining will not only bolster the transparency of Petrobras’s operations but also enhance CADE’s ability to access complex information, thus improving oversight.
He also noted that the proposal includes a robust monitoring mechanism that enables CADE to promptly verify Petrobras’s compliance with competition rules and respond swiftly to any discriminatory practices. Other board members echoed the significance of this structure, which aligns with the technical opinion provided by CADE’s General Superintendence.
Board member Camila Cabral Pires Alves emphasized the critical nature of monitoring the commitments outlined in the consent decree to ensure the effectiveness of the negotiated remedies. Meanwhile, board member Gustavo Augusto clarified that the consent decree aimed to foster the entry of new economic players into the refining market, rather than privatizing the refineries. “We are focused on maintaining the goals and making a technical correction in how these goals will be achieved,” he noted, adding that repurchasing assets that had been divested would not be appropriate.
Board member Diogo Thomson reported that the gas consent decree had been largely fulfilled, and the adjustment made—removing political control over TBG—was enabled by subsequent legislation. This change allows the state-owned company to continue its investments in vital infrastructure and further opens up the market.
In a notice to the market, Petrobras noted that the appendix to the refining consent decree emerged from “extensive debate” with CADE. The company explained that it was unable to sell the remaining refineries, necessitating a revision of its strategic plan.
Petrobras detailed that the frame agreement model sets foundational terms for negotiating oil volumes on a cargo-by-cargo basis. It specifies that the obligation to buy and sell will only be established if both parties reach an agreement on pricing, ensuring alignment with the prevailing market conditions at the time each deal is finalized.
Regarding natural gas, the company noted that the New Gas Act, enacted after the 2019 agreement, provides an exemption from de-verticalization for companies that were already vertically integrated. This exemption is contingent upon these companies adhering to independence and autonomy requirements, which are to be regulated by the National Petroleum Agency (ANP). Consequently, specific obligations have been negotiated to ensure the operational independence of TBG.
However, lawyer Thiago Silva, a partner at Vieira Rezende Advogados, argues that under the New Gas Act, de-verticalization remains a legal imperative that must be addressed eventually. There is a two-year window for the ANP to publish the relevant resolution on this matter. “The exemption does not permit permanent vertical integration but rather provides a timeframe for compliance, which has not yet commenced,” he explained. Mr. Silva also pointed out that distributors currently face scrutiny over plans that appear similar to transportation projects and are under pressure to regularize their operations.
*Por Beatriz Olivon, Fábio Couto — Brasília and Rio de Janeiro
Source: Valor International
