There was an important strategic redirection of Petrobras during the Michel Temer government, which is detrimental to the company, the Brazilian population and an attempt against national sovereignty. This strategy is detrimental to Petrobras because it makes it become a company that only produces in the area of the Pre-Salt (as a partner of foreign oil companies) and only exports petroleum, it is detrimental to the company by transferring 25% of the market of refining to other private and / or foreign companies, is detrimental to the company due to the fact that it reduces its role in other segments of the production chain such as petrochemicals, renewable energy, fertilizers etc., is detrimental to Petrobras' national shareholders because it contributes to have smaller gains, is detrimental to the Brazilian population because it contributes to an excessive increase in the prices of gasoline, diesel and LPG by adopting a price policy of petroleum derivatives of parity with international oil prices and is detrimental to national sovereignty because it opens space for the penetration of competitors in the area of refining and exploration of the Pre-Salt, contributing to the weakening of Petrobras, which is one of the levers of development in Brazil.

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NO TO PETROBRAS PRIVATIZATION
Fernando Alcoforado*
Petrobras is the eighth largest company in the world in the oil and gas sector, according
to Economatica whose market value is estimated at 100 billion dollars. Petrobras rose
two places in the ranking of the 15 largest in the oil and gas sector, going from 10th
place in 2017 to 8th place in 2018. The good performance of the company is related to
the increase in the price of oil in the foreign market. Petrobras has been established for
decades as one of the main instruments of the Brazilian government in the execution of
its industrial policy of growth and innovation. Petrobras, one of the largest in the world
in the field of exploration and extraction of oil, registered in 2014 more than 90,000
direct and 300,000 indirect jobs, accounting for more than 10% of the total investments
made in the country. Petrobras' suppliers is made up of 20,000 companies. In addition to
producing oil, Petrobras is located at the heart of the Brazilian petrochemical complex.
Since the discovery of the Pre-Salt reserves in 2006, Petrobras has been developing
research that positions it as a world leader in deepwater oil extraction technology. The
exploration of the Pre-Salt contributed to the Brazilian government to develop the
system of sharing (Law 12.351 / 2010), which establishes which establishes that the
Brazilian government is the main owner of the oil extracted and no longer the company
that performs the extraction. From a technological point of view, Petrobras is
historically the main investor in research among Brazilian companies and until 2014
had a policy of prioritization of national suppliers, who received their support to adapt
to their technological and productive excellence requirements.
Petrobras had a monopoly on exploration until the end of the 1990s. In 1997, a
concession model was established, in which the Brazilian government gives private
companies the right to explore certain areas for a specific period. The country began to
have a mixed regime from 2009, when the model of sharing was applied to the fields of
the Pre-Salt. In Brazil, the state continues to be the "owner" of oil and the contracted
companies are responsible for the exploration and extraction, giving part of the
production to the Brazilian government. As a consequence of the crisis that affected
Petrobras from 2014, the National Congress approved a new rule that exempts Petrobras
from participating in all the consortiums tendered under the production sharing regime.
Petrobras will be able to choose which areas it is interested in exploring, and it will be
up to the company's CEO to decide what the strategic areas are in fact. Petrobras will
maintain a minimum holding of 30% in these fields that it is interested in exploring. The
rest will be auctioned, explored and operated by the winning company.
Petrobras recorded its fourth consecutive year of loss in 2017, with a loss of R$ 446
million. The main impact was the US$ 2.9 billion closed agreement with investors in
the United States, which represented R$ 11.198 billion in the company's balance sheet,
but there was also an influence of adherence to programs to regulate federal debts,
which added R$ 10.433 billion. Petrobras said that without the agreement with the
American investors, the result would have been a profit of R$ 7.089 billion. The
information presented by Petrobras in 2017 evidences the focus on short-term financial
management in detriment of its strategic role focused on the development of Brazil and
social response to the demands of the Brazilian population, which was quite significant
in previous years. These aspects, coupled with the extensive regulatory changes in the

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Brazilian oil sector and the recently announced partnership policy for Petrobras'
refining, confirm that there is a new long-term Petrobras strategy underway.
Despite the reduction in Petrobras' indebtedness resulting from the company's
mismanagement and corruption and the recovery of the company's profitability, the
available data indicate that there was a significant strategic redirection of Petrobras
during the Michel Temer government. This strategic redirection is detrimental to the
company, to the Brazilian population and to the national sovereignty. This strategy is
detrimental to the company because Petrobras adopts a deliberate policy of reducing its
participation in the oil refining market by adopting a price policy for petroleum
derivatives of parity with international prices and with the model of partnerships it has
to transfer 25% of the refining market to other private and / or foreign companies. This
strategy is detrimental to the Brazilian population because it contributes to an excessive
increase in the prices of gasoline, diesel and LPG and is detrimental to national
sovereignty because it opens space for the penetration of competitors in the refining
area and contributes to the weakening of Petrobras, which is one of the levers of
development in Brazil.
Petrobras 'deliberate policy of reducing its market share in refining contributes to an
expansion of imports of oil products to meet growing demand, opening up space for
other foreign companies to take Petrobras' place in the refining segment, implying a
significant drop in from 82% in 2016 to 78% in 2017, some of which are operating at a
capacity close to 50% such as Rlam in Bahia. There is a clear reduction of Petrobras'
participation in the supply of petroleum products, either by the lesser use of its own
refineries or by the increase in the import and resale of fuels by third parties. Petrobras'
strategy is detrimental to the company by abandoning its position as a price maker
enabling it to maintain higher profit margins in order to adopt a price taker position in a
clearly oligopolistic market for production and distribution of derivatives, deliberately
reducing its ability to generate revenue for the benefit of its competitors. The
abandonment of the mature fields, mainly from the Campos Basin that still account for
about 40% of the national production, have undermined Petrobras' gains made possible
by Pre-Salt in terms of production. This is a strategy that leads to the weakening of
Petrobras in relation to its competitors in the domestic market.
This strategy of Petrobras is detrimental to the company because, in the medium term, it
becomes a company that only produces in the area of the Pre-Salt (as a partner of
foreign oil companies) and only exports oil, giving up other segments, moving in the
opposite direction to what is being adopted by large companies in the sector in other
countries. As a result, Petrobras' production was more dependent on the dynamics of
international demand, increasing its external vulnerability. This strategy is detrimental
to Petrobras due also to the company's decision to reduce its role in other segments of
the production chain such as renewable energy, fertilizers, etc. This undermines
Petrobras' role as an integrated company - where eventual negative results from one
segment could be offset by others - and also as an important player in the process of
energy transition from fossil fuels to clean energy. In addition, the difficulties to
leverage short-term operational cash generation from Petrobras pose serious doubts
about the company's long-term role. This is a strategy that leads to the weakening of
Petrobras paving the way for its privatization in the future.
This strategy of Petrobras is detrimental to its national shareholders and the Brazilian

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population that are not obtaining positive results with the current strategy of the
company. Petrobras' national shareholders are undermined because this company's
strategy contributes to its lower earnings and the Brazilian population is undermined
because it has to pay more for the purchase of gasoline, diesel and LPG, among other
oil products. This strategy is also detrimental to Brazil because those who have made
gains from it all are the financial segments, especially the international segment, the
international importers / refiners, the large integrated oil companies that, in addition to
expanding their presence in Pre-Salt, now can enter the national refining industry. This
is a strategy that seems, in short, to weaken Petrobras and to enable its future
privatization.
Oil, as well as its derivatives, are natural resources of extreme importance for any
nation. Besides being important in the energy aspect, they are also important in the
strategic aspect. The strategic importance was responsible for the nationalist stance
adopted by the Brazilian people and the Getúlio Vargas government with the
consequent creation of Petrobras in 1954. This company for many years had a
significant growth, becoming one of the largest companies in the oil sector in the world.
However, poor management decisions and corruption have contributed to the slowdown
in the company's recent growth. In order to avoid the privatization of Petrobras and to
guarantee the benefits resulting from the exploitation of the Pre-Salt, there should be a
reversal of the anti-national strategy and contrary to the interests of the company and of
the population adopted by Petrobras during the Michel Temer government, following
Russia's example. From the first Putin government, this country has taken a path of
resumption of public control over the strategic oil and gas sector as part of the
resumption of a national development project.
The Russian government has changed the taxation regime to increase revenues from the
oil sector, the Russian Central Bank has adopted mechanisms for a large part of the
revenues of oil companies to remain in Russia and state oil company Rosneft and state
oil company , Gazprom, began to acquire shareholdings and assets of companies seen as
strategic or disconnected from national interests. In a few years, oil production has
grown again vigorously. Russia's sovereign control of the oil and gas economy has
taken away the ability of the country's traditional Western oil majors to dominate one of
the world's largest oil reserves. We need to prevent Brazil from losing the Pre-Salt
reserves.
With regard to oil production, Brazil should strengthen its relationship with China,
which is an oil-dependent country. While China is heavily dependent on imported oil,
Brazil could become a major oil producer in the future by exploiting the Pre-Salt. It is
not by chance that China has been adopting a determined policy of building its energy
security and being assured that its development process will not be blocked by oil
shortages. The Asian country is already the largest energy consumer in the world,
accounting for 19% of world demand and studies have indicated that it will become the
largest importer of oil in the coming years.
Aware that it cannot become dependent on the oil-producing countries of the Middle
East, due to the instability of these countries and their alignment with US policy, China
makes large investments in various parts of the world. Turkmenistan, Kazakhstan,
Uzbekistan, Egypt, Ecuador, Venezuela, Canada, Kenya and Uganda that are countries
which have Chinese participation in oil exploration in some way, whether via Chinese

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state-owned companies, joint ventures or stakes in local or foreign companies. Among
all these investments, the most notable are those in Africa. China has made investments
in various sectors in that continent as in logistics infrastructure, hospital construction
and schools. It has established exchange partnerships between Chinese and African
universities, provided military equipment and carried out debt forgiveness from
governments. Since 2009, China has been Africa's main trading partner.
It was concluded, therefore, that there was an important strategic redirection of
Petrobras during the Michel Temer government, which is detrimental to the company,
the Brazilian population and an attempt against national sovereignty. This strategy is
detrimental to Petrobras because it makes it become a company that only produces in
the area of the Pre-Salt (as a partner of foreign oil companies) and only exports
petroleum, it is detrimental to the company by transferring 25% of the market of
refining to other private and / or foreign companies, is detrimental to the company due
to the fact that it reduces its role in other segments of the production chain such as
petrochemicals, renewable energy, fertilizers etc., is detrimental to Petrobras' national
shareholders because it contributes to have smaller gains, is detrimental to the Brazilian
population because it contributes to an excessive increase in the prices of gasoline,
diesel and LPG by adopting a price policy of petroleum derivatives of parity with
international oil prices and is detrimental to national sovereignty because it opens space
for the penetration of competitors in the area of refining and exploration of the Pre-Salt,
contributing to the weakening of Petrobras, which is one of the levers of development in
Brazil. No to Petrobras privatization.
* Fernando Alcoforado, 78, holder of the CONFEA / CREA System Medal of Merit, member of the Bahia
Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the
University of Barcelona, university professor and consultant in the areas of strategic planning, business
planning, regional planning and planning of energy systems, is the author of 14 books addressing issues
such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The
Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific,
Economic, and Social Revolutions that Changed the World.