Petrobas Board Member Complains of Inept Management

Maritime Activity Reports, Inc.

May 8, 2014

The uproar in Brazil over state-run oil company Petroleo Brasileiro SA's purchase of a refinery in Pasadena, Texas, is just "a drop in the ocean" of problems afflicting the company, a board member said on Tuesday.

Concerns it paid too much for the refinery pale in comparison to the problems with the way the company has been managed since a 2010 capital increase, said Mauro Cunha, who represents minority shareholders on the board of the Rio de Janeiro-based company.

Petrobras, as the company is known, has been struggling with management mistakes since 2010, when the government pressured it to raise as much as 120 billion reais ($58.3 billion) from the sale of new stock to investors, analysts say. Preferred shares of the company, which on Tuesday rose 3.8 percent to 18.24 reais, have plunged 22 percent since then.

The stock sale, then the world's biggest, raised nearly $80 billion. Petrobras, already one of the world's largest companies, saw its market value jump to $226 billion. Since then, its value has shrunk to $100 billion as the company failed to deliver on ambitious offshore expansion plans. It has the highest debt levels and lowest profitability of any major oil company.

"We are just wasting so much time with the Pasadena issue. You have the political issues and all, but Pasadena is just a drop in the ocean about what's going on with the management of the company," Cunha told reporters at an event in São Paulo. He declined to elaborate on what other problems Petrobras might be facing.

The $1.2 billion purchase of Pasadena Refining Systems Inc in Pasadena, Texas, and allegations that bribes may have been paid to secure the sale have grown into a campaign issue ahead of October general elections. The cost, though, pales in comparison with Petrobras refinery projects in Brazil.

Opponents of President Dilma Rousseff, who was chairwoman of Petrobras' board when the company bought its first stake in the 100,000-barrel-per-day refinery, have used the issue to attack her reputation as a manager. Congress has authorized an investigation into the company's purchase of the Pasadena refinery.

On Feb. 25, Cunha voted against the approval of Petrobras' 2013 financial statements, an unprecedented move for a board member. At the time he said Petrobras did not give sufficient information about the company's accounts or time to study them.

(By Aluísio Alves)

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