June 7, 2017 / 2:28 PM / a year ago

UPDATE 1-Petrobras keeps cooking gas from pricing parity on Brazil rules

(Recasts to add details on new LPG pricing policy, comments, background from paragraph 3; changes dateline to RIO DE JANEIRO)

By Marta Nogueira

RIO DE JANEIRO/SAO PAULO, June 7 (Reuters) - S tate-controlled Petróleo Brasileiro SA has kept cooking gas out of a pricing system based on international parity, in order to comply with rules set by Brazil’s most powerful energy policy body to help contain fuel costs for households.

The decision, which was announced in a Wednesday securities filing, sets lower prices for smaller quantities of liquefied petroleum gas sold in domestic markets. For industrial LPG, Petrobras will follow Brazil’s National Energy Policy Council’s guidelines seeking higher prices.

Final prices for LPG stored in cylinders of less than 13 kilograms and sold to Brazilian households will correspond to the average of butane and propane prices in European markets plus a 5 percent markup. The move will spark a 6.7 percent average household increase starting on Thursday, with consumer prices rising an estimated 2.2 percent.

Chief Executive Pedro Parente sought to allay concern that the move would mark a comeback of state meddling in Petrobras’ pricing decisions, noting that the markup is enough to reverse years of government-mandated subsidies. Brazil’s federal government controls Petrobras, which for years was used as a policy tool to tame inflation and boost growth.

The move to adjust pricing in the LPG market helped Petrobras conclude a year-long effort to peg domestic fuel costs to global prices. During the tenure of the left-wing Workers Party, between 2003 and 2016, Petrobras booked hefty losses for heavily subsidizing fuel prices in Brazil.

“I don’t think this rule aims to stop us from reversing the losses that the company incurred in this market for years,” Parente told reporters in Rio de Janeiro.

Prices for so-called GLP-P13 natural gas will be revised at the fifth day of every month, the company said.

Preferred shares, the company’s most widely traded class of stock, gained 0.8 percent to 13.28 reais in early trading on Wednesday. (Additional reporting by Rodrigo Viga Gaier and Alexandra Alper in Rio de Janeiro, and Bruno Federowski and Luciano Costa de Paula in São Paulo; Editing by Guillermo Parra-Bernal, Chizu Nomiyama and Meredith Mazzilli)

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