Pedro Parente kicked off his first day as chief executive of Brazilian state oil company Petrobras on Thursday by vowing change as he attacked the way the company has been run, noting corruption, heavy debt and government control of fuel prices.
He said Petroleo Brasileiro SA, as the company is formally known, must cut its nearly $130 billion of debt on its own.
“Some say to get out of this grave situation the federal government must capitalize the company. I don’t like this because it tosses the problem on the back of the taxpayer,” Parente said
A bailout would also dilute existing shareholders and weaken the credit of the government, he said.
In a forceful and wide-ranging address to employees, Parente promised independence from political interference, calling the company’s recent history of soaring debt and rampant corruption “absurd.”
Parente, 63, a former Petrobras chairman and CEO of the Brazil unit of commodities trading giant Bunge Ltd, was appointed CEO of Petrobras last month by Brazil’s interim president, Michel Temer.
Temer, who is serving in the place of impeached President Dilma Rousseff, has been replacing her appointments with more market-friendly candidates in an effort to kick-start an economy in recession.
During the speech, Parente shed tears as he mentioned the sacrifices that fixing Petrobras’ serious problems will impose on his family.
Responding to an old investor grievance, Parente said Petrobras’ domestic fuel-price policy will be set by the company based on commercial needs.
Only minutes later, though, Brazil’s energy minister, Fernando Coelho Filho, told reporters at the event that the policy will be reviewed by the energy, planning and finance ministries.
Petrobras accumulated billions of dollars in refining unit losses in recent years, causing debt to balloon, because the government, in an effort to control inflation, refused to let it raise gasoline, diesel and propane prices when world prices were high.
Parente urged Congress to pass bills ending Petrobras’ legal obligation to operate all oil exploration and production in the Subsalt Polygon, an offshore district near Rio de Janeiro where giant oil discoveries have been made in the last decade.
The law, he said, hurts the government and Petrobras by either forcing the company to finance investment it cannot pay for or prompting the government to forgo oil development because Petrobras cannot afford it.
Paying down debt and ramping up output will be the top priorities, Parente said, adding that the sale on non-core assets will be key to debt cuts. He said he has not been in the company long enough to say what assets will be on the block.
He said the company will prepare a strategic plan to meet his goals within 120 days.