Brazil’s President Luiz Inacio Lula da Silva has fired Jean Paul Prates, the chief executive of state-owned oil company Petroleo Brasileiro SA, following a dispute over dividend payments.
The decision was confirmed by people familiar with the matter, who asked not to be identified discussing private matters.
Petrobras, as the company is commonly known, said in a statement late on Tuesday that Prates is expected to officially resign at an upcoming board meeting.
Lula, as the president is known, plans to nominate Magda Chambriard, the former head of Brazil’s oil and gas regulator, to replace Prates, according to another person familiar with the matter. Petrobras confirmed that the Energy Ministry had proposed her for CEO.
The company’s American depositary receipts dropped more than 6% after the close of regular trading in New York following the announcements.
Prates’s departure brings to an end months of speculation that his days at the helm of Petrobras were numbered. Tensions escalated earlier this year when he refused to align himself with government-appointed board members who voted to withhold the payout of extraordinary dividends to shareholders who’d grown use to steady returns.
The firing may add to concern that Rio de Janeiro-based Petrobras is coming under increasing pressure from the ruling Workers’ Party to help revive Brazilian industry and create jobs, at the expense of shareholders. The dividend drama shocked some investors who viewed it as a sign of growing political interference in Latin America’s top oil-producing nation.
After weeks of debate, Petrobras ultimately approved returning half its available cash to investors through a special dividend, as Prates’s executive board had initially proposed. The government is the biggest shareholder, and the dividends have helped shore up a fiscal deficit at a time spending is on the rise.
Prates told the executive board before the official announcement that Lula had asked for his position back. In a message seen by Bloomberg, he said that his mission was “prematurely cut short,” blaming Alexandre Silveira, the energy and mines minister, and Rui Costa, Lula’s chief of staff, with whom he had clashed.
A former senator for Lula’s left-wing party with a history of working in the oil industry, Prates became chief executive in January 2023, shortly after Lula reassumed the presidency. Petrobras had burned through six CEOs, including interim ones, from 2019 until Prates’s appointment.
Under his leadership, Petrobras changed direction, halting asset sales, shielding consumers from sharp fluctuations in global oil prices and earmarking billions of dollars for energy transition investments. The company recently boosted the budget for its five-year business plan to $102 billion, its biggest spending plan since 2015.
Petrobras said it received a notice from the Energy Ministry late on Tuesday confirming that it would propose Chambriard to replace Prates.
The engineer started her career at Petrobras in 1980, working at the company for 22 years, before moving to Brazilian oil regulator Agência Nacional de Petróleo, Gás natural e Biocombustíveis, known as ANP. She was appointed head of the agency by former Brazilian president Dilma Rousseff in 2012 and held the position until 2016.
Like Prates, Chambriard was part of Lula’s transition team for energy in 2022. At that time, she had already been identified as a possible candidate for Petrobras’s top job. The former ANP head has defended the need for Brazil to explore for oil in new areas, including the Equatorial Margin and the Pelotas Basin.
“The pre-salt boom is over. It’s time to look for new frontiers, so Brazil can keep producing oil,” she told Bloomberg in an interview in December.
Chambriard also backs more investment in domestic oil refining, and wants to see more commodities processed in Brazil rather than exported as raw materials.
The ousting of Prates marks a deterioration in Petrobras’s governance, and Chambriard’s mission won’t be easy, Citigroup Inc. said in a note. She “arrives with the pressure to fulfill the investment plan and accelerate Petrobras’s capex expansion” and this may result in lower dividend payments, it said.
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