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What’s Next For Big Oil Now Brazilian President Rousseff Is Suspended?

Dilma Rousseff

Brazilian President Dilma Rousseff has been suspended from office following a senate vote to initiate her impeachment trial on corruption allegations that lead back to state-run Petrobras, leaving vice-president Michel Temer to take over in the interim, while foreign oil companies wait anxiously to see what this will mean for the industry.

Rousseff has denied any wrongdoing and refers to the impeachment process as a ‘’coup’’.

Temer is an academic who has also been accused of corruption. He is expected to take office today. He may remain in office until the end of Rousseff’s term in 2018 if the senate votes this through. For now, however, the senate has voted only to suspend Rousseff for 180 days.

Related: Kuwait Plans To Ramp Up Oil Production By 44% Before 2020

Temer is expected to pursue privatization of state assets if he is left in office, and Brazil’s strong labor unions will fight this. An immediate strike has already been threatened by the labor union behind Transpetro—Petrobras’s transportation subsidiary—over Rousseff’s suspension. Other industry-related labor unions are also talking about strikes.

For the oil industry, nothing is clear. While the industry is seeking reforms on a number of levels, including changes to rules that require state-run Petrobras to have a 30-percent operating stake in all sub-salt projects and changes to tough local content rules, nothing is likely to be decided until Rousseff’s status is definitive.

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At the same time, there were already indications that the oil industry was gaining ground with the current government. The day before Rousseff’s suspension announcement, Brazil said it was planning to push through new regulations any day that would allow companies other than state-run Petrobras to operate some sub-salt projects, according to anonymous sources cited by Reuters. These projects are part of the Subsalt Polygon—where the major discoveries have been—and presently only Petrobras can operate them.

There has been no independent confirmation of this report, and it remains unclear what the status of this potential relaxation may be in light of Rousseff’s suspension.

By Charles Kennedy of Oilprice.com

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