Restructuring will align company with oil and gas sector’s new reality and increase oversight of executives’ decisions.
At a meeting held last week in Rio de Janeiro (January 27), Petrobras’ Board of Directors approved the company’s new organizational structure and management and governance model. This reform is taking place as part of the company’s response to the oil and gas sector’s new circumstances, leading Petrobras to prioritize its most profitable activities and become more competitive.
The restructuring involves redistributing activities, merging departments and revising its decision-making model. One of the core objectives is to expand oversight and compliance mechanisms. It is estimated that these changes will reduce costs by up to R$1.8 billion per year. There are also plans to cut the number of managerial posts in non-operational departments by at least 30%.
The company has around 7,500 approved managerial posts, of which 5,300 are in non-operational departments. The overhaul will adjust Petrobras’ structure and management in line with the vision established by the 2015-2019 Business Plan, whose fundamental goals include value creation and deleveraging. In addition, the company is expanding its efforts to strengthen its oversight, compliance and transparency mechanisms.
The first restructuring phase will involve eliminating 14 senior management functions. The number of departments will fall from seven to six through the merger of the Downstream and Gas & Electricity departments. The total number of management posts reporting directly to the Board of Directors, CEO and directors will be reduced from 54 to 41. The second phase, planned for February, will cover the remaining management functions. Appointments and team allocations will begin in March.
Accountability and compliance
Six Statutory Technical Committees will be established, composed of executive managers tasked with previously analyzing and issuing recommendations about topics to be decided on by directors, and to be jointly responsible in decision-making processes. Due to their statutory nature, the committees’ acts will be subject to oversight by the Brazilian Securities and Exchange Commission (CVM). To appoint executive managers, there will be new criteria for analyzing their integrity and technical and managerial capacity. In addition, the Board of Directors will be responsible for approving appointments and terminations for these functions. By reinforcing Petrobras’ commitment to compliance, the restructuring provides for changes in internal procurement and investment control. Activities involved in buying goods and services will be concentrated in the new Human Resources, HSE and Services Department.
The execution of investment projects will be centralized in the new Production Development & Technology Department (DP&T). This new structure will concentrate management and technical competencies for implementing projects.
As a rule, procurement for investment projects will involve three departments: the requesting department, which will produce the basic technical design; DP&T, which will develop the detailed design; and the HR, HSE and Services Department, which will conduct tenders to acquire goods and services. The redesign of the procurement process for projects and services will prevent excessive concentrations in decision-making processes.
In order to increase the profitability of businesses, the new model will involve merging departments to harness synergies. Accordingly, the Downstream and Gas & Electricity departments will be merged to form the Refining and Natural Gas Department.
The Exploration and Production Department will be organized by asset class, with structures created for Deep Water, Ultra-Deep Water, Onshore and Shallow Water. This will enable better management of value added by assets and optimization of oil and gas production. Changes that involve alterations to Petrobras’ bylaws will be submitted for approval to a General Shareholders Meeting, to be convened in due course. The new upper part of Petrobras’ organizational structure is shown in photo.