By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The persistent decline of international oil prices, the appreciation of the US dollar and the deteriorating Brazilian economy led Petrobras, the country’s giant, to announce it was reducing by 25 percent, or US$32 billion, its investments until 2019. The total amount now the company expects to invest during this five-year period is of US$98.4 billion.

Brazil''sPetrobras has announced cuts in investments until 2019
Petrobras has announced cuts in investments until 2019, photo courtesy of Petrobras Agency.

“These adjustments are designed to preserve the fundamental objectives of deleveraging and the generation of value for shareholders established by the 2015-2019 Business and Management Plan (BMP),” said the statement released by Petrobras’ Board of Directors to the press and investors.

According to company officials 81 percent of the total investments, US$80 billion, will be directed towards exploration and production, including Petrobras’ foreign operations.

Approximately eleven percent, or US$10.9 billion will used for supply and refining, while six percent, or US$5.4 billion will be used in the gas and energy area. The other areas will count on US$2.1 billion in investments.

This is the second adjustment to the 2015-2019 BMP, announced in June of 2015, by Petrobras. The first was in October of 2015 when the company reduced investments by US$ 11 billion and operational expenditures by US$ 7 billion for 2015 and 2016.

The latest readjustment however, did not effect divestments in 2015-2016, which were maintained at US$15.1 billion, with most of the reduction to be seen this year. In 2015 divestments totaled US$0.7 billion.

The company now forecasts a reduction in the Brazilian oil production in 2016 from 2.185 million barrels per day (bpd) to 2.145 million bpd and from 2.8 million bpd to 2.7 million bpd in 2020. Petrobras’ disinvestment in 2015 affected the country’s overall GDP.

According to company executives Petrobras’ oil production in Brazil averaged 2.128 million bpd in 2015, 0.15 percent higher than the target of 2.125 million bpd, and 4.6 percent more than in 2014 (2.034 million bpd). The volume last year was a new annual record for the company, exceeding the previous record set the year before.

Petrobras stocks tumbled Tuesday after the announcement, closing at their lowest price in almost twelve years. On a single day, Petrobras’ preferred shares closed down by 9.19 percent at R$5.53, while common shares fell by 7.65 percent to R$7.00.

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