STRIKES SWEEP BRAZILIAN PETROLEUM INDUSTRY

A strike in Brazil's upstream and downstream oil and gas operations has hit state owned Petroleos Brasileiro SA.

The strike, which began June 14, was expected to continue spreading at presstime last week, with labor forces targeting Brazil's refineries and oil and gas production facilities.

Petrobras last week denied reports that strikes had slashed as much as 100,000 b/d of Brazil's oil production or paralyzed some of the nation's biggest refineries. Brazil produces about 650,000 b/d of oil.

Five of Brazil's 10 refineries, representing 60% of the nation's 1.2 million b/d capacity, were reported by labor officials as paralyzed by strike actions.

However, Petrobras said that in the event of nationwide strike shutting down refineries, it has enough products stocks for periods from a little less than 1 week to more than 2 months, depending on the product.

In the meantime, Petrobras has gone to Brazil's Superior Workers'Tribunal to have the strike declared illegal. That body was expected to rule by this week. It remains to be seen, however, whether the strikers will acknowledge any declaration of illegality. Although it won't negotiate with strikers directly, Petrobras says it is willing to negotiate wage hikes within the tribunal's scope.

The oil workers' strikes occur against a backdrop of widespread labor unrest in Brazil caused by impending massive layoffs of government workers as a result of stringent economic reforms by the new government.

STRIKE RATIONALE

The 18 labor unions representing 35,000 of Brazil's 60,000 oil workers and operating under the Sindipetro umbrella organization called the strike mainly in response to what it claims is the new government's layoff of 2,000 workers.

The government of President Fernando Collor de Mello, which took office in February, has undertaken sweeping economic reforms that include privatization in some sectors.

Certain subsidiaries of Petrobras are likely to be included in that privatization push (OGJ, Mar. 12, Newsletter).

The Collor government earlier planned to lay off as many as 360,000 of Brazil's 1.8 million public sector workers by June 16 as part of its plan to privatize and reform the beleaguered Brazilian economy. Those plans include laying off as many as 16,000 oil workers, says Sindipetro.

The Collor administration also opposes further wage hikes until Brazil's economy is on track again.

As a result, strikes are popping up across the country in a number of businesses and industries, with an estimated 1 million workers on strike nationwide at present. However, at presstime, the Collor administration reportedly had slowed the rate of layoffs in response to widespread labor actions.

Sindipetro also claims the Collor government reneged on wage contracts that were signed by the previous government.

It demands fulfillment of contracts Sindipetro and the previous government signed in September 1989 for the following 12 months. The contracts, Sindipetro says, call for a 166.9% wage increase, based on average inflation rates in March-May 1989.

Sindipetro also wants government officials to suspend further dismissals and to rehire laid off workers.

CONFLICTING REPORTS

There were conflicting reports as to the effectiveness of the strikes.

Sindipetro claimed production at oil fields in Rio Grande do Norte remained shut in at presstime last week. Petrobras confirmed that Rio Grande do Norte production of 75,000 b/d remained shut in last week at a cost of $1 million/day.

Private industry sources, in addition to labor officials, claimed the strike has spread to the Campos basin. The Carapeba 2 platform in the Campos basin reportedly was shut down, slicing 25,000 b/d of the basin's 405,000 b/d produced off Rio de Janiero. Petrobras would not confirm this.

Sindipetro targeted the nation's biggest refinery, the 300,000 b/d Paulinia plant at Sao Paulo, for shutdown last week.

In a June 19 radio interview, new Petrobras Pres. Luis Octavio da Motta Veiga said the unions have failed to increase participation in the strike, although he cited strike related activity at refineries at Paulinia, Cubatao, Rio Grande do Sul, and Amazonas.

He claimed only 10% of Petrobras oil workers have joined the walkout.

Motta Veiga also said as of June 19 oil production operations generally were normal throughout the country, including those hit by strikes.

In addition, he said there were no negotiations with Sindipetro and there would be more dismissals in the event of damage to facilities or other violence. Motta Veiga said layoffs in operational and administrative sectors of the company were continuing but declined to give numbers.

In the event of a nationwide strike paralyzing the refining sector in Brazil, Petrobras stocks on hand as of June 19 were 4.1 million bbl of gasoline for 24 days of current use, 1.2 million bbl of jet fuel for 25 days, 5.9 million bbl of fuel oil for 41 days, 5.8 million bbl of LPG (mainly for cooking) for 6 days, 4.7 million bbl of diesel fuel for 11 days, 1.7 million bbl of fuel alcohol for 68 days, and 1.5 million bbl of petrochemical grade naphtha for 9 days.

LEGAL SETBACK

Compounding the situation is the first major setback in Brazil's Congress for Collor under his drive to cure inflation and salvage the economy with reform and privatization measures.

Congress rejected one of Collor's provisional measures designed to stop wage increases granted by regional worker tribunals.

Collor immediately sent Congress another, similar measure.

However, Brazil's Solicitor Gen. Aristides Junkueira challenged the constitutionality of the measure in the federal supreme court, pointing out its similarity to one already rejected.

The federal supreme court accepted his injunction to block the measure and will rule on constitutionality in 30 days.

The impasse has led the Collor administration and congressional foes to try to hammer out compromise agreements.

When Collor's government came to power in February, Brazil's inflation rate was 73%. It dropped to 10.6% in April and about 7% in May. Government officials are projecting an inflation rate of 8% in June.

In October, however, Brazil will have congressional and gubernatorial elections, and ratifying layoffs and wage freezes are widely seen as politically deadly.