Oil at $65 pays for Petrobras subsalt plan -report
SAO PAULO, Sept 10 |
SAO PAULO, Sept 10 (Reuters) - Brazil's state-controlled oil company Petrobras (PETR4.SA)(PBR.N) would be able to fulfill its planned investments for the next five years with no need for additional capital if the price of oil CLc1 stayed around $65 a barrel, its chief executive told Valor Economico in an interview published on Thursday.
President Luiz Inacio Lula da Silva unveiled last week long-awaited plans to overhaul Brazil's oil sector. Among the proposals was for a capitalization of Petrobras worth 5 billion barrels of oil, using yet-to-be-proven reserves instead of cash.
Petrobras CEO Jose Sergio Gabrielli said that, if for some reason the capitalization plan collapsed, oil at that level would be enough to provide the company with cash to finance its investment plan, according to Valor. Crude prices were up 0.5 percent on Thursday to $71.67 per barrel.
"If the price of oil stayed at around $65 we wouldn't need any additional capital for the projects we have," Gabrielli told Valor.
Petrobras has a capital spending plan of $174.4 billion for the next five years.
Gabrielli also said that the capitalization could be performed with oil coming from fields that require no unitization, Valor reported. Under Brazilian law, when an oil deposit sits in more than one block, the owners of the blocks need to share the oil as part of a process known as "unitization."
He said the Lula-sponsored changes would not spark a run in foreign investment in the industry, Valor reported.
But tapping the oil, which lies about 160 miles (260 km) off the southern coast under 5 miles of water, rock and salt, would be a huge challenge, and some say the government has played down the exploration risks -- and the need for leverage.
Petrobras has been forced to increase borrowing since the intensification of the financial crisis a year ago when credit markets collapsed. Net debt jumped 63 percent by the end of the second quarter from about $18 billion a year earlier. (Reporting by Guillermo Parra-Bernal, editing by Gerald E. McCormick)
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