Petrobras slashes spending plan by 25 percent

Petrobras, the debt-laden Brazilian national oil company, is going to slash its planned investments by a quarter over the next five years in order to reduce debt.

Revealing its 2017-2021 strategic plan on Tuesday, its first such plan under the new CEO Pedro Parente, Petrobras said it would spend some $74.1 billion over the period, a 25 percent decrease compared to the previous 2015-2019 plan of $98.4 billion.

According to the Financial Times this is the smallest planned investment since 2006 and about a third of the $237 billion spending earmarked in 2012.

“In the next couple years, we will concentrate on recovering Petrobras’ financial strength as an integrated energy company that is focused on oil and gas,” CEO Pedro Parente said.

Worth noting, Petrobras’ planned investments will mostly be focused on exploration and production – around 82 percent; 17 percent will be invested in refining and natural gas, while other company areas will get the remaining one percent.

The oil and natural gas liquids production target in Brazil was set at 2.8 million barrels per day (bpd) in 2021, considering the entry into operation of 19 production systems in the period ranging from 2010 to 2021.

Apart from cutting the investment budget, the Brazilian oil firm aims at raising around $19.5 billion through strategic partnership and divestments in the next two years.

Petrobras intends to exit biofuel production, LPG distribution, fertilizer production, and investments in petrochemicals. In addition it said that it would enter strategic partnerships in in exploration & production, refining, transportation, logistics, distribution, and in sales.

While the aim is to raise almost twenty billion dollars through asset sales, one analyst told the Wall Street Journal this might be a hard sell, especially in a $45 oil market.

“You would need an incredibly vibrant M&A market, and it may be strong in some places but I’m not certain that it is in Brazil,” Wilbur Matthews of Vaquero Global Investments told the WSJ.

Offshore Energy Today Staff

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