Petrobras defends decision to invest in refining

* Company seeking to reduce Brazil fuel imports

* Critics say Petrobras boosting low-margin activities

RIO DE JANEIRO Aug 16 (Reuters) - Brazilian state oil company Petrobras defended on Monday planned refinery investments as crucial to reducing its fuel imports, responding to criticism it has drifted from more profitable upstream activities.

The company's $224 billion five-year business plan launched in June boosted the percentage of total investments dedicated to refining, sparking criticism that political influence was pushing it toward lower margin activities.

"In the 60s and 70s we invested a lot in refining, but in the 80s and 90s the investments were lower," said Petrobras (PETR4.SA)(PBR.N) supply director Paulo Roberto Costa during and industry conference.

"For three decades the investments in refining have been insufficient. We need to reverse that trend."

Brazil is self-sufficient in oil and for the most part in gasoline, but still imports almost 80,000 barrels per day of diesel and distillate fuels.

Earlier this year, the company imported gasoline for the first time in decades due to problems with sugar cane ethanol production, which accounts for as much as 40 percent of the fuel demand from light vehicles.

Petrobras hopes it will be able to meet Brazil's fuel needs by 2014 and later become an exporter of premium fuels through new refining capacity that will process oil coming from the vast deep water offshore region known as the subsalt.

Critics say the company's emphasis on the refining and transport sector, which will receive $73.6 billion over the next five years, is driven by political considerations such as job creation and spurring local economies and comes at the expense of private shareholders. (Reporting by Brian Ellsworth; editing by Andre Grenon)