Petrobras Seeks New Rigs, Marches on with Expansion Plan

SINGAPORE (Dow Jones Newswires), Apr. 16, 2009

Petroleo Brasileiro SA (PBR), or Petrobras, will start seeking bids for new rigs in the next couple of months as it marches on with its ambitious five-year investment plan.

The Brazilian state energy giant in January announced it planned to invest $174.4 billion in 2009-13, including $28.6 billion this year -- an increase from $23 billion in 2008, which is unusual as global oil majors including U.S. firms Chevron Corp. and ConocoPhillips are cutting back on investment.

Petrobras is banking on the ultradeep pre-salt area off Brazil's coast to elevate its status to one of the world's largest oil and gas producers.

The area, also known as Santos Basin, could add 8 billion-12 billion barrels to Brazil's reserves -- at 14 billion barrels of oil equivalent, or BOE, in 2008.

The company, which awarded contracts for 12 rigs last year, still needs 28 more over the next five years as part of its expansion.

"We will divide them (28 rigs) into lots of 5-7," Chief Financial Officer Almir Barbassa told a news conference Thursday, adding the company will seek bids for the first lot in 2-3 months.

Each drillship, a rig that can drill up to 3,000 meters in water, is estimated to cost over US$600 million, said Barbassa.

Petrobras is aiming to produce a total of 2.76 million BOE a day this year, and ramp up output to 3.66 million BOE in 2013.

The company expects the first oil production from Tupi, part of its pre-salt Santos basin, on May 1.

Pre-salt field output will be competitive at under $40 a barrel, Barbassa said.

In November 2007, Petrobras estimated Tupi had recoverable reserves of 5 billion-8 billion BOE.

Financing For Capital Expenditure

The company has secured most of the financing for its capital expenditure plans for the next two years, Barbassa said.

"If the average crude oil price is $40 (a barrel), we are going to need $19 billion" for 2010, he told Dow Jones Newswires.

He referred to Brent crude grade, which traded Thursday in London around $53 a barrel.

Petrobras's capital expenditure for 2009 and 2010 will be funded primarily by Development Bank of Brazil, apart from global capital markets and internal resources, he added.

Barbassa was leading a delegation in Singapore seeking business partners for Brazil's oil and gas sector and will be in South Korea later this week to attract investment and gain financing support from export-credit agencies.

"We need more than 200 vessels of different kinds," Barbassa said, adding Petrobras was also looking at adding over 1 million barrels a day of refining capacity.

Petrobras is also still in negotiations with China for a US$10 billion credit line, which will focus on the "strategic supply of oil" to the country, Barbassa said.

He added Petrobras was open to joint ventures with Chinese companies in the exploration and production and refining sectors.

When asked about recent reports Petrobras could join Total SA (TOT) and Chevron Corp. (CVX) in competing for a contract to develop Iraq's Nahr Bin Umar oil field, Barbassa said: "There were visits by the Iraqi government...nothing has been decided."

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