Brazilian government could subsidize LPG with fines from Petrobras, sources say

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By Rodrigo Viga Gaier

RIO DE JANEIRO, Aug.6 (Reuters) – The Brazilian government plans to use environmental fines paid by state-owned oil company Petrobras to fund a program that would be used to help low-income families buy liquefied petroleum gas, two people with knowledge of the case said Friday.

Brazilian President Jair Bolsonaro said last week that he had been informed by Petrobras chief executive Joaquim Silva e Luna that the company had set aside 3 billion reais ($ 572 million) to help Brazilians buy LPG, widely used for cooking.

Petroleo Brasileiro SA, as the company is officially known, distanced itself from Bolsonaro’s statement over the next few days, saying it was simply discussing with authorities ways to reduce the LPG load for consumers.

The issue is sensitive for Petrobras, as the company has suffered tens of billions of dollars in losses over the years when the government forced it to sell gasoline below market rates. Shares fell sharply in February when Bolsonaro announced he was toppling then-CEO Roberto Castello Branco amid a dispute over fuel prices.

Environmental fines are not uncommon in the Brazilian oil industry, which means that the revenues from these funds could be significant.

Representatives of Petrobras, as well as the ministries of Citizenship, Economy and Mines and Energy, did not immediately respond to requests for comment on Friday afternoon.

Petrobras executives are sensitive to the political and social repercussions of LPG pricing, but also wish to avoid violating internal corporate governance rules or upsetting market shareholders, the sources said, who requested the anonymity to detail private chats.

Another alternative being considered by the government is to use Petrobras dividends to cover the expenses of the LPG fund, the sources said.

On Thursday, Petrobras announced R $ 31.6 billion in extraordinary dividends. The government, the company’s largest shareholder, will receive R $ 15.4 billion from these dividends. ($ 1 = 5.24 reais)

(Reporting by Rodrigo Viga Gaier in Rio de Janeiro Writing by Gram Slattery Editing by Matthew Lewis)


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