Global Insight Perspective | |
Significance | Petrobras's board of directors has approved a US$112.4-billion business plan for 2008-12, up by 29% from the US$87.1-billion total investment projected under the business plan for 2007-11. |
Implications | The revised business plan and the slightly lower profits reported by the company in the second quarter both reflect higher costs. |
Outlook | Plans for higher investment show that Petrobras wants to maintain the upwards trend in oil production seen in recent years despite rising costs. |
Petrobras Unveils Business Plan 2008-12
Petrobras has released a statement announcing that its board of directors has approved the state oil company's Strategic Plan 2020 and its 2008-12 business plan. Under the latter, Petrobras intends to invest US$112.4 billion over a five-year period, representing an average yearly investment of US$22.5 billion.
Of the total projected investment, 87% (or US$97.4 billion) will be directed towards projects in Brazil and 13% (US$15.0 billion) abroad. Petrobras said that investments in the exploration and production business area will see an increase of 32% to US$65.1 billion; while spending on its downstream operations will rise by 35% to US$29.6 billion, and by 30% for petrochemicals. Petrobras also said that it plans to invest US$1.5 billion on biofuels under its new business plan, representing a small increase on the US$1.2-billion projected investment under its previous plan. Petrobras said that US$18.2 billion of the total investments would be applied to different areas of the natural gas supply chain, with Petrobras's partners expected to invest an additional US$1 billion in this area over the period.
Petrobras 2008-12 Business Plan |
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Petrobras Reports Q2 Results
In a separate statement, Petrobras announced it had recorded net profits of 6.8 billion reais (US$3.4 billion) for the second quarter of 2007, down by 2% compared with the second quarter of 2006. Petrobras raised its average domestic oil and liquids production by 2% between April and June 2007 to 1.789 million b/d, compared with the same period of 2006, following the start of production at the P-34 and P-50 platforms at fields in the Campos Basin, at the FPSO Capixaba platform at the Golfinho field, and at the FPSO-Cidade do Rio de Janeiro platform at the Espadarte field. The company also said that international oil and and liquids production fell by 19% year-on-year (y/y) in the first half of 2007 to 114,000 b/d, from 140,000 b/d—mainly because of a reduction in its share of production from its Venezuelan operations.
Outlook and Investment
Concerns about tight gas supplies in Brazil the coming years along with Petrobras's decision not to make new investments in the Bolivian gas sector have increased pressure on the state oil company to fast track investments in this area. These concerns were already reflected in the previous business plan, which anticipated US$17.6 billion investment from the state oil company in the natural gas supply chain over a five-year period and a further US$4.5 billion in anticipated investments from third parties.
The production targets in the new business plan are also either similar to those in the old plan or, in the case of its combined domestic and international 2015 production target, lower. Instead, the main reason for the higher investment is the rising costs of equipment and services. The impact of rising costs have been particularly evident in the case of a joint refinery venture between Petrobras and the Venezuelan state oil company PDVSA, but they have also been seen with respect to natural gas pipelines and oil production platforms. Meanwhile, the rise in investment in petrochemicals follows the announcement this year of two planned acquisitions by the company that will significantly increase Petrobras's presence in the Brazilian petrochemicals sector.