José Dutra
1957–



President and chief executive officer, Petrobrás

Nationality: Brazilian.

Born: April 11, 1957, in Rio de Janeiro, Brazil.

Education: Universidade Federal Rural do Rio de Janeiro, BA, 1979.

Career: Geologia Sondangens, 1980–1981, geologist; Petrobrás Mineradora, 1983–1990, geologist; Companhia Vale do Rio Doce, 1990–1994, geologist; Brazilian Government, 1995–2003, senator; Petrobrás, 2003–, president and CEO.

Awards: Geologist of the Year, Geologist Association of Sergipe, 1988.

Address: Petrobrás, Avenida Chile 65-20031-912, Rio de Janeiro, RJ, Brazil; http://www2.petrobras.com.br/ingles/index.asp.

■ In 2003 Brazilian President Luiz Inacio da Silva appointed José Dutra as president and CEO of Petrobrás, the country's partially government-owned oil company. At the time, Petrobrás was Brazil's largest corporation, with some 48,000 employees, 10,000 miles of pipeline, nearly eight thousand service stations, and close to two million barrels of oil production per day. A geologist by training, Dutra had previously worked in geological planning for several firms in Brazil during the 1980s and 1990s. He also became heavily involved in politics as a member of the Workers Party, serving as a senator from the state of Sergipe starting in 1995.

EARLY CAREER

Dutra was born in Rio de Janeiro, Brazil. After graduating with a degree in geology from the Universidade Federal Rural do Rio de Janeiro in 1979, he worked for the next 15 years as a geologist. He spent two years doing geological mapping in the state of Rio de Janeiro and mining research in the state of Bahia for the Geologia Sondagens company. He then went to work for Petrobrás Mineradora (Petromisa) from 1983 until 1990, where his main duties were related to geological planning in the Taguari-Vassouras potassium mine in the city of Rosário do Catete in the state of Sergipe. Dutra was rewarded for his work with Petromisa when the Geologist Association of Sergipe selected him as Geologist of the Year in 1988. Dutra worked as a geologist for four more years, from 1990 to 1994, with the Companhia Vale do Rio Doce, the world's largest iron-ore exporter.

While living and working in the state of Sergipe, Dutra became involved in the labor movement and in politics. From 1988 to 1990 he was the national director of the Centro Unico de Trabalhadores, and between 1989 and 1994 he served as president of the Miners Union of the State of Sergipe. Dutra also became a member of the Workers Party, running for office in Sergipe in 1990 and serving as president of the state's Workers Party Regional Board. In 1994 the people of Sergipe elected him to the Brazilian legislature for the 1995–2003 period. In 1997 and 2001 Dutra served as the leader of the opposition block in the Brazilian Congress. He was a member of many congressional committees, including the Justice and Citizenship, Constitution, Economic Affairs, Infrastructure, and Education committees.

AT THE HELM OF PETROBRÁS

During the Brazilian presidential campaign in late 2002 many Petrobrás investors worried about the possible election of the left-wing Workers Party candidate Luiz Inacio da Silva, known simply as "Lula." Petrobrás had won much autonomy in the 1990s, but the Brazilian government retained 56 percent of the company's voting shares and the rights to appoint top management. In his campaign speeches Lula's rhetoric regarding Petrobrás was very nationalistic and interventionist. He asserted that large contracts to build oil platforms should be awarded not to foreign companies but only to Brazilian firms. Some investors worried that giving contracts would become a political tool to reward domestic supporters even if their bids were higher or they were less qualified to carry out the required work. Panic among investors over the rise of the Workers Party and a possible Lula victory forced Petrobrás to cancel a planned $200 million bond issue, even though the company offered political-risk insurance.

After he won the election, Lula toned down much of his radical rhetoric. Among his first actions as president of Brazil was to appoint Dutra as the new president of Petrobrás. Some investors expressed lingering concern about the future direction of the company, believing Dutra to be a political appointee with no experience in the petroleum industry. Many investors would have preferred someone with more technocratic rather than political experience. Dutra also faced the unenviable prospect of replacing the former CEO Francisco Gros, a well-respected and market-friendly executive.

In spite of these initial doubts in the corporate community, Dutra seemed to convince investors of his ability to run Petrobrás, offering toned-down, financially sound talk. He promised to respect the company's existing strategies, insisting that Petrobrás would continue a four-year, $32 billion investment plan set in motion under the previous leadership and that he would seek private participation in the company. In contrast to Lula's campaign comments, Dutra insisted that all contracts should be based on technical value, and that if the government forced Petrobrás to contract with Brazilian firms, the company should be reimbursed. He reported to the Gazeta Mercantil that "Petrobrás is not a government agency. It is the biggest Brazilian company, which must yield results and will be administered as such" (February 17, 2003).

Following Dutra's initial actions, Petrobrás was seen to be one of the world's best-run state oil companies, and by 2003 investors who avoided Petrobrás during the 2002 presidential campaign scrambled to purchase bonds. Dutra told Petrobrás Magazine , "The reopening of international markets and the positive evaluation of Petrobrás are both due to the results of good political-economic management by the government, and naturally Petrobrás's credibility with investors" (2003). Almir Barbossa, a long-time executive at Petrobrás, told Latin Finance , "The management has changed but we do not expect that there will be different goals for the company. Petrobrás will keep investing in the growth of production and that is it" (April–May 2003).

THE FOUR PILLARS OF PETROBRÁS

Dutra's main challenge as head of Petrobrás was to balance the company's need to remain profitable and efficient while at the same time staying true to its vision of social responsibility. He told Petrobrás Magazine that "the focus of Petrobrás will be the development of the country, without wavering from its commitment to shareholders" (2003). To achieve this dualistic goal, the company's overall strategy was to center on four basic pillars.

First, Petrobrás would continually seek to expand the exploration and production of oil. Dutra succeeded in this area early in his term as CEO, with the company breaking records for both daily and monthly production levels. He set a goal of establishing Brazilian oil self-sufficiency by 2006. Dutra also wanted Petrobrás to continue to be a world leader in deep-water oil exploration and production technology. The company already held the world record for deepwater extraction at 1,800 meters; it once explored as deep as 2,700 meters and had a program in place to probe beyond three thousand meters. Petrobrás intended to invest $800 million in research and development in oil exploration and production between 2003 and 2005.

Second, Dutra wanted Petrobrás to continue its leadership in the Brazilian downstream market, including the refining, marketing, and distribution of petroleum products. He hoped to maintain a competitive advantage by investing in the quality of Petrobrás's products and also updating the company's refining units to increase output.

Third, the company would consolidate its position in the natural-gas and energy market, emphasizing the provision of fuel for collective transport in cities and generating thermo-electric power for the industrial and commercial sectors. Brazil had traditionally depended on hydroelectric power; however, in the years before Dutra's arrival at Petrobrás the country suffered through severe electrical shortages, increasing the attractiveness of alternative forms of electricity production.

Finally, the Brazilian oil company would selectively expand into international operations. Such plans came on the heels of the 2002 purchase of the Argentine company Pérez Companc, which was renamed Petrobrás Energia. Dutra reported to Petrobrás Magazine , "Priority is to consolidate this acquisition, exploiting the synergies in our businesses both inside and outside Brazil" (2003). The company was active throughout South America, investing in oil and gas projects in Argentina, Bolivia, Colombia, Cuba, Mexico, and Venezuela. Dutra also wanted Petrobrás to implement its deepwater expertise globally, in such locations as the Gulf of Mexico and West Africa.

STRESS ON CORPORATE GOVERNANCE

Another of Dutra's goals as the leader of Petrobrás was to raise the company's corporate-governance standards. While the Brazilian government was Petrobrás's controlling shareholder, the company needed to answer to many minority shareholders as well. Petrobrás was traded on both the Sāo Paolo Stock Exchange (Bovespa) and the New York Stock Exchange, such that stressing corporate governance would be a key part of its investor-relations strategy.

In Brazil the company was considering entering the stringent second level of Bovespa's standards for corporate governance. On the international front Petrobrás complied with the Sarbanes-Oxley Act of 2002, a U.S. bill enacted to protect investors by improving the accuracy and reliability of corporate disclosures. Adhering to the U.S. requirements would be worth the costs, according to Dutra, as it sent a clear message about Petrobrás's commitment to investors. In Institutional Investor , Dutra insisted that Petrobrás would follow a path that included "perfecting the transparency process within the company, adhering to Bovespa Level 2, and increasingly respecting the interests and rights of minority shareholders" (September 2003).

ENVIRONMENTAL CONCERNS

Another key issue facing Dutra was that of the environment. The Petrobrás CEO stated that the company placed an emphasis on upholding a culture giving the utmost attention to health, safety, and the environment. This had been the case at Petrobrás since a large oil spill in Guanabara Bay off the shore of Rio de Janeiro in 2000. Between 2000 and 2003 Petrobrás invested $1.3 billion in accident prevention, bringing its pipeline system up-to-date, installing Environmental Defense Centers, and acquiring environmental certification for all units of the company.

In an interview for Petrobrás Magazine , Dutra said that such investment allowed the company "to concentrate on improving the reliability of our systems, seeking new technologies and perfecting management methods, with emphasis on training and deviations correction" (2003). He stressed that his aim was to disseminate the culture stressing health, safety, and the environment throughout the company, with the goal of reducing accidents and leakages.

sources for further information

Collitt, Raymond, "State Tones Down Its Rhetoric on Petrobrás," Financial Times , January 13, 2003.

Conceicāo, Claudio R. Gomes, "Petrobrás Must Make a Profit," Gazeta Mercantil , February 17, 2003.

"Efficiency and Social Responsibility," Petrobrás Magazine , 2003, pp. 6–11.

Myers, Randy, "The Global Stance on Sarbanes-Oxley," NYSE Magazine , September 4, 2003, pp. 30–33.

O'Brien, Maria, "Oil on Troubled Waters," Latin Finance , April–May 2003, pp. 12–16.

Yarm, Mark, "The Deepwater Front," NYSE Magazine , January 2, 2004, pp. 34–35.

Yolen, Steve, and Tom Murphy, "Profiles of CG Programs in Brazil," Institutional Investor , September 2003, pp. 20–26.

—Ronald Young



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