Brazil Court Ruling Casts Doubt Over Petrobras Asset Sales
A Brazilian Supreme Court justice on Wednesday suspended a presidential decree establishing rules for Petroleo Brasileiro SA to sell upstream assets, casting a pall over the state-controlled oil company's ambitious divestiture program.
Justice Marco Aurélio Mello granted an injunction in a lawsuit brought by the leftist Workers Party to the Supreme Court, suspending a decree signed by President Michel Temer in April, the justice told Reuters. Part of the asset divestment program of Petrobras, as the company is known, had already been suspended by another Supreme Court justice, Ricardo Lewandowski.
The April presidential decree had reinforced an earlier agreement made between Petrobras and Brazil's federal audit court, known as the TCU. That previous agreement was seen as a major step in allowing asset sales to go forward, after a number of lawsuits by labor unions significantly slowed and in some cases stymied divestitures.
While it was not clear what immediate effects Wednesday's decision would have, it casts doubt over the ongoing sale of Petrobras' production and exploration assets, said Ali Hage, a partner in the oil and gas area of law firm Veirano Advogados.
Petrobras said in its five-year strategy plans released early this month that it foresees around $26.9 billion in asset sales over the next five years to reduce its significant debt load.
According to Hage, the Wednesday decision could also present difficulties for oil companies in consortia with Petrobras, by undoing parts of the presidential decree that streamlined procurement in some situations.
Among the companies that operate in Petrobras consortia are Royal Dutch Shell Plc, Exxon Mobil Corp and Norway's Equinor ASA.
Petrobras did not respond to a request for comment.
Brazil-listed preferred shares of Petrobras fell after the decision, but were still up 2.6 percent in afternoon trade, as traders bought back in after two days of losses.