Petrobras and the abandonment of the downstream sector in Brazil

Abstract

This article examines Petrobras’ strategic reorientation from downstream to upstream activities. While upstream expansion has been extensively studied, less attention has been given to the consequences of downstream divestment. Drawing on a qualitative, historical-institutional approach based on documentary analysis, the paper analyzes the political, institutional, and economic drivers of this shift and its implications. The findings show that the sale of BR Distribuidora, the privatization of refineries, and the progressive reduction of refining investments have reconfigured Petrobras’ vertical integration, increasing the company’s exposure to international oil-price volatility and reducing Brazil’s capacity to generate value-added products domestically. Consequently, Petrobras finds itself in a delicate position, with potential risks to the flow of its primary derivative, fuel oil. This imbalance underscores the urgency of directing investments toward higher value-added products such as gasoline and diesel, in order to strengthen industrial capacity and reduce external vulnerabilities. These dynamics carry significant implications for energy security, trade balance, and the future of state-owned enterprises in the context of the global energy transition. By addressing this gap, the study contributes to debates on the political economy of national oil companies and the challenges of balancing profitability, industrial development, and public policy objectives in resource-dependent economies.