Petrobras to Revamp US$6.9bn/y Investment Plan

Brazil's federal energy company Petrobras is revising its strategic plan to invest US$6.9bn a year through 2007 to take into account new oil and gas discoveries and recent changes in government industrial policy, Petrobras president Jose Eduardo Dutra said Friday.

The company does not plan to reduce the amount to be invested, but reallocate the money. "A lot of things happened this year so we have to take them into account," Dutra told reporters.

He did not say when he would announce the revised plan.

The two main factors that will lead to the changes are the discoveries of 400 million barrels of light crude reserves and 419 billion cubic meters of natural gas in the Santos Basin this year. Dutra emphasized that the reserves are not yet proven and that the company is unlikely to control 100% of them.

Earlier this year, Petrobras announced that it would invest US$34.3bn between 2003 and 2007 to boost oil production to 2.2 million barrels a day (mb/d) from the current 1.6mb/d, while keeping production costs at US$2.80/b. Some 65% of the capex would go to exploration and production both in Brazil and abroad, while 23% would be invested in downstream operations.

At the time, Petrobras said it also plans to invest 5% of the total in gas and electric power and 4% in distribution. Another 3% would be invested in corporative areas. But Dutra said the company's future operations will follow government policy of making the state a promoter of development, which is one of the main reasons why Petrobras requires 65% of goods and equipment suppliers to be Brazilian.

"It's the government's job to carry out industrial policy, since Petrobras is a state-controlled company and won't abdicate from its role of helping the development of national industry. This is not incompatible with quality," he said.

Dutra said part of the investment would also go to determining quality and technical standards for its suppliers and to participate in a government-sponsored program to boost quality of capital goods and heavy machinery supplies.

Petrobras also plans to raise more money abroad through the continued expansion of international production and commercial operations in all regions. The company has interests in Latin America, Europe, Africa and the Middle East. It plans to invest abroad about US$4.4bn of the US$22.4bn earmarked for exploration and production, the company's president said.

Dutra, who accompanied Brazil's President Luiz Inacio Lula da Silva on a recent trip to the Middle East, said Petrobras has been invited to participate in oil production bids in Egypt, the United Arab Emirates and Libya.

In Libya, Petrobras was invited to participate in the recuperation of old oil wells, while the UAE has shown interest in investing in Brazilian gas pipelines.

Petrobras also continues to weigh up gas exploration opportunities in Saudi Arabia and petroleum in Iran. In addition, the Egyptian government has shown interest in buying diesel, naphtha and fuel oil from the Brazilian company. "International operations are very important not only because they raise hard currency, which is good for the company and the country, but because they also allow access to international capital markets," said Dutra.

He also pointed out that the company has been investing heavily in environmental protection programs, and will continue to do so. Between 2001 and the end of 2003 Petrobras will have invested a total of 6.5bn reais (US$2.2bn), which has reduced leaks to 190 cubic meters a year from 5,000 cu. m. in 2001.

Overall the strategic plan aims to keep the company's oil production growing at about 8% annually, in line with 10% yearly growth registered between 1998 and 2002.

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