UPDATE 1-Shares in Brazil's Petrobras fall as Bolsonaro suggests broad shakeup

(Adds information on transition process)

BRASILIA, May 27 (Reuters) - Shares in state-run oil company Petrobras fell on Friday after Brazilian President Jair Bolsonaro signaled a wide shake-up of the company’s board and executive team amid rising dissatisfaction with high fuel prices.

Speaking to journalists outside a church in Brasilia late on Thursday, Bolsonaro said officials who had been at the company for more than six months could be considered unfit for further service as they are wedded to the market-oriented policies that have squeezed Brazilians at the pump.

“I’m the majority shareholder. I have the right to propose, via the Mines and Energy Ministry, changes not only to the board of directors, but also to the executive board,” he said.

“If they’ve stayed more than six months, they could have a policy of continuity regarding what has been happening over there.”

Brazil-listed preferred shares in Petroleo Brasileiro SA , as the company is formally known, were off 3.6% in afternoon trade, underperforming the nation’s benchmark Bovespa equities index, which was roughly flat.

It was Bolsonaro’s latest move regarding Petrobras top management and high fuel prices as he faces a tough battle for re-election in October. A survey by pollster Datafolha released on Thursday showed that former Brazilian President Luiz Inacio Lula da Silva has increased his polling lead over Bolsonaro.

Bolsonaro earlier this month had replaced his energy minister and had assailed Petrobras’ bumper profits amid rising fuel prices.

Earlier this week, Bolsonaro announced he was ousting current Chief Executive Jose Mauro Coelho after only weeks on the job.

Since then, domestic media reports have indicated the shake-up at Petrobras could go beyond the CEO.

In practice, it will be difficult for any management shakeup to occur within the next few weeks, according to a company statement on Wednesday. The company’s internal governance committees will examine the qualifications of Bolsonaro’s pick for the next CEO, Caio Paes de Andrade, as well as the other nominees to the board, the statement said.

Once those steps have taken place, the company will hold an extraordinary shareholders’ meeting and is required to give shareholders 30 days notice to attend.

The appointment of the new CEO will also likely be examined by prosecutors’ offices housed within Brazil’s Finance Secretariat and the Mines and Energy Ministry, said four sources with knowledge of the process.

Bolsonaro has consistently decried high domestic fuel prices. Petrobras, however, has maintained its current policy of pegging domestic rates to international prices.

As Petrobras does not have enough refining capacity to fulfill all of Brazil’s needs, company leaders warn that significant and prolonged discounts could lead to shortages as private refiners and importers exit the market. (Reporting by Lisandra Paraguassu in Brasilia and Sabrina Valle in Houston; Writing by Gram Slattery Editing by Mark Potter and Leslie Adler)