Petrobras CEO steps down suddenly: Update 2

Includes naming interim CEO, more reaction.

Pedro Parente has resigned as chief executive of Brazil's state-controlled oil company Petrobras, a high-profile exit that could portend a coming upheaval in Brazil's recovering oil and gas sector.

The seasoned executive took the position in May 2016 on a guarantee from then-interim President Michel Temer that the government would stay out of the company's decision-making. In his tenure, which was expected to continue into 2019, Parente has pulled Petrobras back from the brink of collapse and helped reshape the firm as a leaner, more independent oil company.

But a crippling truck driver strike that started on 21 May and is only now ending forced Parente to make successive concessions to the government, resulting in a diesel price subsidy policy that threatens to eliminate the market-based pricing policy he implemented. The trucker strike and an abbreviated oil workers strike this week were held, in part, to protest Parente's plans to sell billions of dollars in Petrobras assets.

"[I]t is clear that my stay in the presidency of Petrobras is no longer positive and contributes to the construction of the alternatives that the government is facing," Parente said in a letter to Temer that was released publicly.

In an emergency session this afternoon, Petrobras' board of directors selected the company's chief financial officer Ivan Monteiro as interim chief executive. A former executive with Brazil's state-owned Banco do Brasil, Monteiro took over as chief financial officer in 2015. He joined the company along with former chief executive Aldemir Bendine, who was replaced by Parente and is currently jailed after being convicted of corruption involving disgrace Brazilian conglomerate Odebrecht.

Monteiro has been key in Petrobras' push to rein in its debt and is highly regarded by the market. He is expected to continue to defend the company's market-based pricing policy and should help ensure continuity in the company's investment and divestment programs.

Brazilian government officials tried to downplay the impact of Parente's resignation.

Marcio Felix, executive secretary of Brazil's mines and energy, told reporters the government did not pressure Parente about the pricing policy during the truck driver strike, saying it is working on proposals to ease consumer prices without abandoning Petrobras' pricing policy. This could include flexible fuel taxes which could be implemented by year-end.

"It's important we reaffirm the commitment of the government and the mines and energy ministry to not interfere with Petrobras' pricing policy," Felix said.

Oil regulator ANP said there was no change to plans for next week's pre-salt bid round, where Petrobras has already exercised preferential rights for three of the four blocks on offer.

A senior ministry and mines official tells Argus Parente's exit will have no impact on ongoing inter-ministerial negotiations for the pre-salt cluster known as the transfer of rights region nor on next week's pre-salt bid round.

Parente's departure — considered a strong indication of the government's plans to further intervene in the fuel industry — could hamper Petrobras' plans to unload 60pc stakes in four domestic refineries.

The news of Parente's exit was greeted with mixed signals across Brazil's political spectrum. While most parties left of center and even some on the right celebrated Parente's departure, more pro-market politicians lamented the decision and what it means for Brazil's fragile economic recovery.

Brazil's minority opposition Workers' Party (PT), whose labor union base claims credit for the resignation, said Parente's exit was not enough and that the government needs to make radical revisions to the company's pro-market policies.