With Lula plan, Petrobras cash cow yields less for the government – 03/09/2023 – Vinicius Torres Freire

Lula 3’s plans for Petrobras will make the company less profitable for the government. That is, to pay less taxes and dividends (part of the profit). Last year, the oil company generated the equivalent of almost 10% of the federal government’s gross revenue. It is enormous.

The government intends to contain fuel prices and reduce profit sharing in order to increase company investment in expansion and new businesses (such as cleaner energy). You’ll have to think it over carefully. It’s already in the deep red. Without Petrobras’ milk, the hole widens.

Only the general lines of Lula’s plan for the oil company are known. Fuels would no longer be sold according to international prices. For this measure to make any political sense, prices would remain below the (international) market value for a long time and rarely above. Everything more constant, the company becomes less profitable.

There must be a change in the distribution of profits (dividends), in favor of investments. It may be reasonable to some extent. Petrobras is a cash cow, but without grass and other amenities, without investments in adequate volume, it could end up very thin and yield less and less.

It is difficult to decide how much more to invest and in what. That is, determine whether the capital expenditure will pay off. It is easy to remember cases in which governments decided to carry out investments ranging from bad to disastrous, as in petrochemicals and refining in the PT years. It is also necessary to know whether it is possible to make these pricing and investment decisions without trampling Petrobras’ laws and governance rules.

In the short and medium term, at least, these changes will make the company less profitable for the National Treasury, in recurring (usual) terms. The company’s income to the government also depends, of course, on the price of oil, for example.

In addition to taxes and dividends, Petrobras pays “government shares”. They are royalties, special participations (amount owed for the exploration of oil fields with exceptional yield) or signature bonuses (payment for the concession, for the right to explore oil in an area).

Last year, the company paid BRL 232.1 billion in taxes and contributions (to federal, state and municipal governments, excluding taxes collected on behalf of third parties), according to Petrobras’ Fiscal Report, released this Thursday.

For the federal government, it was almost R$ 230 billion (including taxes, participations and dividends). In 2022, the gross revenue of the federal government was BRL 2.313 trillion (all values ​​are nominal: without discounting inflation).

Considering the total amount of dividends included in Petrobras’ annual balance sheet, the federal government must have received (or will receive) approximately R$ 56 billion for 2022. If the profit distribution criterion were the minimum payment of dividends, the government would have taken just R$13.5 billion last year.

It is a difference of almost BRL 43 billion. There is certainly a reasonable middle way between partying and excessive profit retention. Furthermore, 2022 was a year of exceptional gains for the oil company, with expensive oil and fuel, among other bonanzas. Even so, the account gives food for thought: R$ 43 billion is almost the value of all federal investment in works, equipment and the like in 2022.

The government wants to make industrial policy through Petrobras (investments it deems strategic). Want to intervene in prices. To do so, it will have to sacrifice the Budget (having more deficit or directly investing less, for example). Even without screwing up, it’s a tough decision.

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