OREANDA-NEWS. An indefinite labor strike by oil workers kicked off yesterday afternoon in Brazil, interrupting the upstream and downstream operations of state-controlled Petrobras.

The strike involves 14 regional unions represented by Brazilian federation of oil workers FUP.

The workers are seeking wage hikes and a stop to Petrobras? comprehensive plan to shed assets.

The FUP represents some of Brazil?s most critical unions, including those operating offshore production platforms and some of Petrobras' 12 domestic refineries.

Operations at 21 offshore platforms in the Campos basin, which accounts for more than 70pc of Petrobras' oil production, have been either totally or partially interrupted, the FUP said.

The labor organization said the estimated total loss from the interruption of these units could reach 400,000 b/d, or around 20pc of the 2.06mn b/d of oil Petrobras produced in Brazil in September.

Brazilian labor law requires that a minimum number of workers maintain activity in high risk operations, including refineries, during strikes.

Petrobras says the strike is not affecting supply to the market, but it is monitoring the situation. The company says it remains open to negotiations with the union.

The work action follows prolonged labor negotiations that failed to yield an agreement.

Last week, smaller regional unions represented by the national federation of oil workers FNP launched an indefinite strike after negotiations with Petrobras for a salary increase reached an impasse.

Oil workers are seeking a wage hike to offset rising inflation, which is now running at an annual rate of around 9.5pc.

The heavily indebted Petrobras is looking to raise almost $58bn in asset sales and corporate reorganizations through 2018, a plan the unions equate to a privatization of the state-managed firm. At the same time, the company has trimmed more than $100bn of planned capital expenditures through 2019, a reduction the company hopes to achieve by reducing supplier costs.

Last month, Petrobras approved a R1.2bn ($311mm) sale transaction with Japan's trading house Mitsui for a 49pc stake in natural gas transport subsidiary Gaspetro.

The FUP is now trying to block that deal in a local federal court before the transaction closes next month, and vows to fight Petrobras' plan to bring on a minority partner in its fuel distribution subsidiary BR Distribuidora.

Union leaders say Petrobras' plans to sell assets and cut back investments in non-core operations will lead to massive layoffs.

The heavily indebted company is in the process of cutting around half of its more than 1,000 communications employees and has created voluntary reduction programs for non-managerial staff.

Petrobras has yet to announce material layoffs in upstream or downstream operations, though most analysts say deep cuts are inevitable.

In 1995, oil workers unions carried out a 32-day strike in opposition to former center-right president Fernando Henrique Cardoso's plans to spin off some of Petrobras' segments.

The FUP is strongly connected to Brazil's governing Workers Party (PT), which has ruled Brazil for the past 12 years.

The strike is the latest challenge to face president Dilma Rousseff who was re-elected by a slim margin late last year.

Rousseff chaired Petrobras between 2003 and 2010, overlapping a period of massive systemic corruption that is the target of investigations at home and abroad. Rousseff denies any knowledge of the scheme, which has yielded several high-level arrests so far.

The scheme has compounded the impact of lower oil prices on Petrobras, and has already cost the firm nearly $20bn in direct and indirect impairments and write-offs of corruption-tainted assets.