Petrobras chief and other senior executives resign

Out - Petrobras chief executive Maria das Gracas Foster

The head of Brazil's state-run oil giant Petrobras and five senior executives have resigned in the wake of a huge corruption scandal.

Maria das Gracas Foster's departure follows the arrest and testimony of some three dozen executives at Petrobras and many of its suppliers.

The board of Petrobras is due to meet on Friday to elect new executives.

The scandal involves alleged price-fixing, bribes and kickbacks, which implicates Brazil's ruling party.

Prosecutors have uncovered around $800m in bribes and other illegal funds. More than 200 businesses are being investigated and more than 80 people, including three former executives from Petrobras, are facing possible charges.

Petrobras shares soared 16% on Tuesday on rumours that Brazil's President Dilma Rousseff would sack the chief executive. On confirmation of the resignations, the shares initially jumped another 8% on Wednesday, but fell back to end the day just 1.1% higher.

Corruption

Petrobras is one of the largest oil businesses in the world with interests in Asia, Africa and the Middle East.

Analysis: Daniel Gallas, South America business reporter

Not very long ago, Petrobras was living one of the most exciting moments in its 61-year history.

In 2007, the company discovered massive oil fields about 5km beneath the seabed off the coast of Brazil.

The then President Luiz Inacio Lula da Silva even joked that this was proof that "God was Brazilian".

But much of that lustre has come off since last year, when a major corruption scandal was unveiled, including allegations that some executives were channelling 3% of the proceeds of major contracts straight to politicians' campaign funds or pockets.

Petrobras is also facing financial challenges too. Low global oil prices have hurt the company's long-term investment plan.

Also, as part of the Brazilian government's efforts to hold down inflation, the company has been subsidising petrol. That has helped consumers' budgets, but it has damaged Petrobras financially.

Rebuilding Petrobras' finances and reputation is the main challenge faced by whoever is appointed by President Dilma Rousseff.

The illegal activity, the authorities allege, diverted anything from $3.7bn to over $28bn from Petrobras assets.

Ms Foster has said publicly that she offered to resign when the corruption scandal broke, but maintains she did nothing wrong.

The scandal has also damaged President Rousseff, a former chairwoman of the company's board of directors. She has denied any knowledge of corruption.