Petrobras to Invest R$97.7 Billion in 2013

By Maria Lopez Conde, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazilian state-controlled oil and gas giant Petrobras has said it will keep its promise to invest R$97.7 billion (US$48 billion) in petroleum and natural gas exploration and production in the country this year, affirmed its financial director, Almir Barbassa, at the company’s first trimester results presentation this week. The announcement comes amid the firm’s continued production slowdown and profit losses.

In January, the company’s president, Maria das Graças Silva Foster, had said that the firm, officially known as Petróleo Brasileiro S.A., would invest R$92 billion in 2013, up from R$84 billion in 2012.

This is part of Petrobras’ plans to finance the development of recent oil discoveries in Brazil, most of which are found in the country’s oil-rich pre-salt layer.

In March, the company announced it plans to invest over R$470 billion (US$236.7 billion) until 2017 to fund the expansion of its output capacity, with over sixty percent of that amount destined to increasing exploration and production.

However, Petrobras’ executives said the oil giant will continue to see drops in production in the following months due to scheduled closures at various platforms. In the year’s first trimester, the company’s output decreased to 1.91 million barrels per day, which represents a four percent decrease from the same trimester in 2012.

Augmenting output in a country that has sizable, high-quality oil reserves has long been Petrobras’ goal, but slowing output from mature fields and the shutdown of many older platforms for maintenance have been driving a decrease in Petrobras’ domestic production over the past year.

In March, production dropped for the tenth consecutive month, according to Reuters, and in addition to that, public fuel subsidies and high debt have cut into the company’s profits. While scheduled repairs may take some fields out of commission, other areas might make up for the fall by stepping up their productivity, including wells in the Campos Basin, responsible for more than eighty percent of Brazil’s oil.

“In the second trimester, we will have a lot of scheduled stops, but we will continue with our production projections for this year,” said director of Exploration and Production, José Formigli, this week, according to O Globo.

The firm’s directors also announced two more refineries, Premium I and Premium II, located in the northeastern states of Maranhão and Ceará, are set to be completed by 2017. Both refineries should increase crude processing capacity by over 900,000 barrels per day. Petrobras’ Formigli also reaffirmed Brazil will once again reach oil self-sufficiency next year.

Last Friday, Petrobras said its profit for the first trimester of the year reached R$7.7 billion, down seventeen percent from the same period last year.

“As we expected, there was a decline in oil production in the first quarter,” president Foster said on Friday. “As we said in our 2013-2017 investment plan, oil and gas output in Brazil in 2013 should be stable compared to 2012.”

Decreased production and output, among others, are dragging down profits, which, although far from ideal, surprised analysts and industry experts who expected much worse results.

The relatively positive news sent São Paulo’s Ibovespa index, which has registered steep losses in 2013, soaring at the beginning of this week. Ordinary stocks for Petrobras also rose by over six percent, and preferred shares gained 5.5 percent.