Petrobras Expects Production to Pick up in 2014
Investors in Petroleo Brasileiro SA, the Brazilian oil company, may have to wait until 2014 to see its production pick up pace even as the company works on adding facilities and improving its efficiency.
After its disappointing third-quarter results, Almir Barbassa, the company's chief financial officer, explained various plans to boost output.
"In 2012, our production [fell] quarter after quarter" on the lack of new platforms, maintenance issues and natural decline of existing reservoirs, Mr. Barbassa said at an investor forum in New York organized by Brazilian bank Banco Bradesco (BBD).
He highlighted the company's plans to build its capacity, adding: "This is the main target of the current administration of Petrobras."
In September, the state-run producer was able to add one platform, Baleia Azul, which started with an output of 29,700 barrels per day and is expected to hits its peak of 72,000 barrels per day in February next year.
In addition, Petrobras has found 15 billion barrels of proven oil supply in the so-called sub-salt layers beneath the ocean, he said, adding there were billion barrels more of oil in unproven fields in the region.
But to implement these projects, the company needs to improve its operational cash flow especially by bringing prices that consumers pay at the pumps up to reflect market prices of crude oil.
Current pump prices are at a 20% subsidy, Mr. Barbassa said, adding that his company has asked its board to approve price increases. It is unclear if these consumer price increases will be incorporated in one shot or as gradual increases. The company already increased prices in June and July of this year. Petrobras estimates international crude prices to trade around $100 a barrel for the next couple of years, and wants retail prices to reflect that.
The company says it will use the extra cash flow to fund its more than $237 billion through 2016 to develop its oil fields and improve production.
"To implement this program, we need to have parity with imported oil products prices," he said.
Another roiling issue for Petrobras is the question of royalties from exploratory fields that could be auctioned out by the company, but it faces opposition from oil-producing states such as Rio de Janeiro and Espirito Santo.
"Petrobras will be running out of exploratory opportunities in the future," Mr. Barbassa said, if it can't bid out the exploration of these oil fields.
Jeff Fick contributed to this article
Copyright (c) 2012 Dow Jones & Company, Inc.
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