Petrobras Increases Production and Exploration as Part of $87 Billion Plan

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Researched by Industrial Info Resources (Sugar Land, Texas). Setting long-term production targets for the first time in its corporate business plan, Brazil’s Petrobras (NYSE:PBR)(Rio de Janeiro, Brazil) has forecast that the company will be producing 4,556,000 barrels of oil and gas (oil equivalent) per day by 2015. Approving the company’s 2007-2011 plan, the board of directors also gave the go ahead for total investments of $87 billion over the four-year planning period.

Always pursuing the goal of sustained, self-sufficient national energy, investments will cover a substantial increase in exploration, production, and supply as well as develop the gas sector for which there is a growing demand as an energy source in Brazil. Distribution systems will also be given focus to maintain the company’s leadership and expansion into the gas sector. Parallel with developing the natural gas business, Petrobras is increasing its petrochemical, biorefinery and biofuel interests. Over $17 billion will be invested in different areas of the natural gas chain in Brazil and partners in the sector will invest an additional $4.5 billion over the planned period.

The investments show an increase of 66% over the previous plan for the 2006-2010 period. Nearly $75 billion of the total will be invested in Brazil and the balance of $12 billion abroad. Approximately 70% of the international investments will be dedicated to exploration and production with a focus on West Africa and the Gulf of Mexico. The total annual average investments for the period will be $17.4 billion.

The business plan is maintaining the company’s aggressive growth targets with oil, LNG and natural gas production in Brazil and abroad, estimated to reach 3.5 million barrels per day in 2011. Out of this total production, 2.9 barrels per day will come from production in Brazil. With new refinery capacity through expansion and acquisitions, concerns will be addressed about maintaining a balance between production and processing capacity. By 2011, the company’s oil processing capacity at home and abroad should reach 2.4 million barrels per day and by 2015, the total output is estimated at 3.2 million barrels per day. In May, the combined Brazilian and overseas output totaled 2.3 million barrels of oil equivalent (BOE) per day. In 2005, the company averaged 1.8 million barrels per day at home and abroad.

The company’s project portfolio covers $17.4 billion investments in new projects and $7.8 billion towards increased costs, which have been driven up by increases in the equipment and services market activity in the sector. Over $4 billion will cover currency valuation and the remainder will cope with other factors such as changes in project scopes and business models.

Petrobras is using a price of $55 per barrel of Brent crude as a basis for capital expenditure in 2007, and $35 per barrel in 2009 onward. Higher oil prices and improved earnings have allowed for expansion plans. In 2005, the company reported a record profit of over $10.4 billion. In the new planning period the company will start releasing greenhouse gas emission targets that are in line with its sustainable growth strategy.

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