Petrobras chief executive, directors resign

OREANDA-NEWS. Petrobras chief executive Maria das Gracas Foster and five unnamed directors have resigned amid a deepening corruption scandal.

The Brazilian state-controlled company's board of directors plans to meet on 6 February to name their replacements.

Foster was appointed by Brazilian President Dilma Rousseff in January 2012 to replace Jose Sergio Gabrielli, who has recently come under investigation for alleged corruption. Foster previously headed the companys gas and energy division. Although she has not been directly linked to the scandal, her ability to lead the company through the crisis has been questioned.

The challenges facing Foster culminated in last weeks controversial decision to postpone writedowns for the corruption in delayed unaudited third quarter results.

Petrobras said upon releasing the results on 28 January that initial studies showed around 31 projects with inflated book values stemming from the corruption, but it is considering other methodologies to pin a value on the financial impact.

The corruption case erupted last year in the tense run-up to Brazils presidential election, in which Rousseff secured another four-year term despite accusations that she was aware of systematic overcharging in Petrobras contracts. She has denied the accusations but acknowledged the likelihood of wrongdoing. Rousseff previously served as energy minister and chairman of the Petrobras board.

The excess funds from the contracts were allegedly funneled to the ruling Workers party (PT) and its political allies. Among the projects tied to the corruption are the 115,000 b/d Abreu de Lima 1 and 165,000 b/d Comperj 1 greenfield refineries.

But because some two dozen mostly local contractors implicated in the corruption have now been temporarily banned from future Petrobras contracts, and some are in deep financial straits, these and other projects are running into delays.

Petrobras stock price has surged on the news of Fosters resignation, although there is no official indication of who will take her place.

Petrobras currently has seven board directors, most of whom were appointed during a major 2012 overhaul spearheaded by Rousseff.