Oil giant disagrees with increasing biodiesel share in diesel blend as defended by the Lula administration

03/20/2024

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Jean Paul Prates — Foto: Lula Marques/ Agência Brasil

After the crisis generated by Petrobras’s decision to put the payment of extraordinary dividends on hold, a bill aimed at encouraging the production of more environmentally friendly fuels is putting the oil giant’s management board and the Lula administration again at odds.

Approved by a large majority in the Chamber of Deputies (Lower House) thanks to an agreement with the government last week, the so-called Fuel of the Future bill reaches the Senate facing pressure by Petrobras for changes to the text, especially in the chapter regarding biodiesel.

Defended by the agribusiness caucus, the definition of targets for the percentage of biodiesel to be blended with diesel was not in the government’s first draft. It was included by the lawmakers after an agreement with the Chief of Staff Office and the Ministry of Mines and Energy. Under the agreement, the minimum percentage would increase to 15% in 2025, from the current 6%, with a gradual increase of 1 percentage point per year until 2030, when it would reach 20%.

According to the text, the goals’ feasibility will be assessed by the National Energy Policy Council (CNPE). The body will set the mandatory percentage of biodiesel addition, which could range from 13% to 25%, depending on market conditions. Although the program is seen by the government as the most concrete step taken so far toward energy transition, the effort faces strong resistance from Petrobras.

During the proceedings in the Lower House, the oil company highlighted the increase in costs—and prices—expected to come along with the increase in the blend. The company also argued that it would lose market share in diesel soon after announcing relevant refining investments. One of the main projects is the second train of Abreu e Lima, the refinery located in the state of Pernambuco, expected to process up to 130,000 barrels of oil per day and cost up to R$8 billion.

Petrobras has also tried, unsuccessfully, to include co-processed diesel in the bill. This less-polluting fuel category is processed in the refinery together with plant-based oils and fossil diesel. The company’s management board wanted to keep the green percentage of the co-processed product, at around 5%, to be used as a reference to meet the biodiesel targets, but the lawmakers did not accept it.

The Lower House also rejected Petrobras’s position against the targets for incorporating biomethane in the sale of natural gas and for the acceptance of an alternative model of sustainable aviation kerosene. These topics will have a second chance in the Senate.

Until the end of last week, Senator Vanderlan Cardoso, head of the Economic Affairs Committee, was expected to be chosen as rapporteur of the “Fuel of the Future” bill in the Senate. Valor learned that he had previously agreed to maintain the text’s main points that came from the Lower House, especially the issue involving biodiesel and biomethane.

However, after negotiations led by Petrobras CEO Jean Paul Prates with the support of the Ministry of Finance, Senate President Rodrigo Pacheco was convinced to appoint another rapporteur: Veneziano Vital do Rêgo, who replaced Mr. Prates as head of the Parliamentary Front for Renewable Energy—Mr. Prates was a senator before assuming Petrobras.

Petrobras executives’ reading is that Mr. Veneziano, who is also the Senate’s vice-president, will be more willing to listen to all parties’ arguments and to “stretch the dialogue.” The company understands that the government had to give in to the interests of the Lower House to gain political momentum to approve top-priority bills.

On Tuesday (19), at an oil sector event in the United States, Mr. Prates confirmed that Petrobras would defend a mandate for co-processed diesel in the Senate and praised Mr. Veneziano. “That’s why bicameralism is good, we need calibration,” he said. Petrobras did not immediately reply to Valor’s request for comment.

Last week, the company saw its market capitalization shrink by more than R$50 billion on the B3 stock exchange following the announcement that extraordinary dividends for the fourth quarter of 2023 would not be distributed. The decision by the majority of the board of directors was supported by a technical opinion—and by President Lula.

(Caetano Tonet contributed reporting.)

*Por Murillo Camarotto — Brasília

Source: Valor International

https://valorinternational.globo.com/