Understanding the crisis that hit Petrobras

Former CEO Maria das Graças Foster and new CEO Aldemir Bendine

Former CEO Maria das Graças Foster and new CEO Aldemir Bendine

Brazilian state-owned oil company Petrobras has been in the center of a corruption scandal that started in March 2014, when Brazil’s Federal Police launched the so-called Car Wash Operation.

Investigators say Paulo Roberto Costa, former director of supply at Petrobras, and Alberto Youssef, a Brazilian black market money dealer, built a system of corruption and cartelization within the oil company. Both defendants have signed plea bargaining agreements with the Federal Police. Costa named 10 companies that were drawn into the corruption scheme that included payment of bribes in order to obtain multimillionaire contracts.

Other executives have also sought leniency and are contributing to the investigations, whereas at least 39 individuals have become defendants. Until January, the police had issued 62 warrants for search and seizure and preventive, temporary or coercive arrest. More than 20 executives have been arrested so far.

As investigations move forward, at least 25 Brazilian engineering and construction, and supply companies have allegedly paid bribes to win contracts. There are also allegations that bribes were later distributed to the campaign of political parties, including Rousseff’s Workers’ Party (PT) and other allied parties.

Earlier in 2014, Petrobras confirmed that Netherland-based SBM Offshore, a contractor in oil platform lease services, admitted to have bribed Petrobras employees in order to win contracts. SBM Offshore was barred from entering into contracts with the Brazilian oil company.

In the end of December, Petrobras applied a provisional ban of companies comprising the business groups cited as cartel participants in the testimonies of the Car Wash operation. These 23 companies are temporarily blocked from being contracted and participating in biddings offered by Petrobras. The companies are: Alusa, Andrade Gutierrez, Camargo Côrrea, Carioca Engenharia, Construcap, Egesa, Engevix, Fidens, Galvão Engenharia, GDK, IESA, Jaraguá Equipamentos, Mendes Junior, MPE, OAS, Odebrecht, Promon, Queiroz Galvão, Setal, Skanska, TECHINT, Tomé Engenharia and UTC.

The suspension does not affect contracts that have already been signed or are in progress. More individuals must still be interrogated and the outcome of the operation is not clear. In January, Rousseff said her government is willing to punish individuals proved to be involved in the corruption scheme rather than to seek to destroy companies.

Despite its compromise with the local industry, especially shipbuilding, Petrobras has recognized it may need to pursue alternatives overseas. Foster has urged Rousseff’s administration to study flexible measures to compensate the ban of the 23 companies mentioned above.

Before resigning as Petrobras CEO, Graça Foster said that while local content policies were extremely important for Brazil, the scandal had drastically changed the situation. “We cannot pursue local content at any cost, because at the same time that we try to achieve our production goal, we have to look out the interest of our shareholders,” said Foster.

Aldemir Bendine, former president of state-owned Banco do Brasil, was pointed as Foster’s successor on Friday, 6 February. Bendine has no background in the oil industry. The decision was received with surprise by analysts and the market.

Links with more information in English, Norwegian and Portuguese follow below.

ENGLISH

http://www1.folha.uol.com.br/internacional/en/brazil/2014/12/1569114-petrobras-may-hire-foreign-companies-to-replace-suppliers-banned-after-probe.shtml

http://www1.folha.uol.com.br/internacional/en/brazil/2015/02/1586066-workers-party-received-us200-million-in-bribes-according-to-informer.shtml

http://www.huffingtonpost.com/2015/02/06/petrobras-scandal-brazil_n_6615994.html

http://www.huffingtonpost.com/huff-wires/20150205/lt–brazil-petrobras/?utm_hp_ref=world&ir=world

http://www.huffingtonpost.com/huff-wires/20150204/lt–brazil-petrobras/?utm_hp_ref=world&ir=world

http://www.huffingtonpost.com/huff-wires/20150206/lt–brazil-petrobras/

http://www.bloomberg.com/news/articles/2015-02-09/petrobras-leads-declines-in-brazil-after-credit-suisse-says-sell

http://www.bloomberg.com/news/articles/2015-02-06/petrobras-slumps-as-banco-do-brasil-s-bendine-said-to-be-new-ceo

http://www.nytimes.com/2015/02/07/business/international/new-management-at-petrobras-fails-to-appease-investors.html?_r=0

http://www.nytimes.com/2014/12/08/world/americas/brazil-to-indict-key-figures-in-oil-company-graft-scandal.html

http://www.bbc.com/news/world-latin-america-31150585

http://www.reuters.com/article/2015/02/10/us-brazil-petrobras-idUSKBN0LE15B20150210

NORWEGIAN

http://www.dn.no/nyheter/naringsliv/2015/02/10/1218/Aker/-flger-brasilsituasjonen-fra-dag-til-dag

http://www.dn.no/nyheter/utenriks/2015/02/04/2205/Olje/petrobrassjef-gr-av-etter-korrupsjon

http://www.nrk.no/verden/massearrestasjon-i-brasiliansk-korrupsjonsskandale-1.12045506

http://www.heiabrasil.no/petrobras-trobbel/

http://brasileira.no/2014/brasil-den-aller-storste-korrupsjonsskandalen/

http://www.aftenbladet.no/energi/Korrupsjonsskandale-for-Statoil-partner-i-Brasil-3585048.html

PORTUGUESE

http://www1.folha.uol.com.br/poder/2014/11/1548049-entenda-a-operacao-lava-jato-da-policia-federal.shtml

http://oglobo.globo.com/brasil/apos-denuncias-de-corrupcao-petrobras-revisa-manual-de-contratacao-15283560

http://oglobo.globo.com/brasil/petrobras-confirma-bendine-para-petrobras-15265920

http://economia.estadao.com.br/noticias/geral,salvamento-da-sete-brasil-e-suspenso-apos-empresa-aparecer-na-lava-jato,1630243

http://economia.estadao.com.br/noticias/geral,crise-na-petrobras-reduz-previsao-de-pib-imp-,1631259

http://economia.estadao.com.br/noticias/geral,doze-desafios-de-aldemir-bendine-no-comando-da-petrobras,1630479

Innovation Norway is responsible for promoting the Norwegian industry abroad. Our office in Rio de Janeiro manages Innovation House Rio, our business incubator office, and helps Norwegian companies in their efforts towards the Brazilian market.

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Posted in Oil & Gas

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