Petrobras Unveils $174.4 Billion Spending Plan, Counts on Loans

Petrobras Unveils $174.4 Billion Spending Plan, Counts on Loans


Jan. 24 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s government-controlled oil company, said state loans will help finance a $28.6 billion spending plan this year aimed at developing the Americas’ largest discovery in three decades.

The investment is part of a $174.4 billion strategy for 2009 through 2013 that the Rio de Janeiro-based company unveiled yesterday. The proposal, a 56 percent increase from the previous five-year plan, counts on an $11.9 billion loan from Brazil’s state development bank, $5 billion from other lenders and another $1.2 billion in unspecified borrowing.

“This is not a rescue,” Petrobras Chief Executive Officer Jose Sergio Gabrielli told reporters yesterday in Rio de Janeiro. “This is very different than what is happening in other countries. This is not a bailout.”

Latin America’s biggest publicly-traded company is increasing investment while rivals such as ConocoPhillips, the third-largest U.S. oil company, are cutting jobs and reducing spending plans after oil fell 68 percent from a record $147.27 a barrel on July 11. Petrobras, whose offshore Tupi field discovery is bigger than Mexico’s Cantarell find in 1976, aims to boost oil and gas production to about 4.63 million barrels a day by 2015.

“The volumes of investments will have an important macroeconomic impact in Brazil,” Gabrielli said.

Of the planned spending through 2013, Petrobras expects to generate $120 billion in cash from operations with crude at an average of $47 a barrel, Gabrielli said. The rest will be financed by debt and efforts to cut costs, he said.

Lula’s Efforts

Petrobras’ plan to invest more each year in capital projects is part of Brazilian President Luiz Inacio Lula da Silva’s effort to maintain the nation’s economic growth. Brazil’s economy, the region’s largest, is forecast to expand 2.9 percent this year from 5.2 percent in 2008, according to the median estimate of 16 economists surveyed by Bloomberg.

The company expects to increase oil and natural-gas output to 5.73 million barrels a day by 2020 and daily refining capacity in Brazil to 2.27 million barrels by 2013. Petrobras produced about 2.4 million barrels a day last year.

About $28 billion of the total investment will go to developing the so-called pre-salt offshore oil fields, which include the 5 billion-to-8 billion barrel Tupi discovery.

Pilot Program

Petrobras may be able to produce oil from its pre-salt fields in a pilot program for less than $40 a barrel, the company’s investor relations manager, Theodore M. Helms, said Dec. 9. The company aims to produce 219,000 barrels of oil a day from the pre-salt fields by 2013 and as much as 1.82 million barrels a day by 2020.

Rivals including Royal Dutch Shell Plc, StatoilHydro ASA, EnCana Corp. and Petro-Canada have announced planned spending cuts or postponement of projects after oil prices plunged from record in July.

BLOOMBERG