* Overall 2013-2017 plan little changed from year ago
* Exploration and production spending to jump 4 pct
* Refining spending cut 1.1 pct, biofuels cut 24 percent
By Jeb Blount
RIO DE JANEIRO, March 15 Brazil's
state-controlled oil company Petrobras announced a $236.7
billion five-year investment plan on Friday, beefing up
exploration and production spending as it moves to boost output
and prepare for its first oil rights auctions since 2008.
Planned 2013-2017 capital spending at the company, formally
known as Petroleo Brasileiro SA was virtually
unchanged from its $236.5 billion 2012-2016 plan announced last
year, the company said in a securities filing.
Spending on drilling, well construction, oil platforms,
ships and other exploration and production (E&P) investments
aimed at developing giant new offshore reserves rose 4 percent
to $147.5 billion, or 62.3 percent of planned total spending.
The $5.7 billion boost in E&P was made up for by steep cuts
to politically popular but financially questionable spending on
biofuels and new refineries.
Chief Executive Officer Maria das Graças Foster, who took
over a year ago, needs new oil production and exploration areas
to generate the cash needed to pay the company's soaring debt
and to finance the plan, the world's largest corporate spending
Her job has been made difficult by anti-inflation policies
that force Rio de Janeiro-based Petrobras to sell gasoline and
diesel fuel at a loss. At the same time, she will need to gather
up more cash as the company prepares to take part in Brazil's
first oil-rights auctions in five years.
"They need new exploration areas to maintain their position
in Brazil, and if Foster doesn't make some cuts there won't be
any money left for the auctions," said Cleveland Jones, an oil
geologist and energy researcher at the National Petroleum
Institute at the State University of Rio de Janeiro.
"If they don't move faster on developing production, they
won't have the cash needed to pay for all the investments they
want to do," he added.
Brazil will auction areas in frontier offshore and onshore
regions under the country's traditional concession contracts,
that give winners ownership of any oil produced in exchange for
In May, Brazil plans its hold its first ever
production-sharing auctions for areas in the so-called subsalt
polygon near Rio de Janeiro. Winning companies or groups will be
those who offer the largest share of oil to the Brazilian
government to sell on its own account. The polygon covers nearly
all of the Campos and Santos offshore basins where about 80
percent of Brazil's oil and gas is already produced.
Ominously for Petrobras, the company will have to take a
minimum 30 percent stake in each winning group and serve as the
operator. Under these rules Petrobras could find itself being
forced to spend money on projects it has insufficient cash to
fund or no interest in developing.
To increase exploration and production spending the company
cut expected refining spending 1.1 percent to $64.8 billion, the
Petrobras statement said. It also cut cash for natural gas and
energy projects 28 percent to $9.9 billion and fuel distribution
and biofuel spending plans were cut by 11 percent and 24
The outlook for Petrobras Brazilian oil production in 2020
was unchanged at 5.2 million barrels of oil and natural gas
equivalent a day, the statement said.
Petrobras expects the production of crude oil in Brazil to
remain stable in 2013 at 2 million barrels a day - the same as
For the first time in a decade the company did not give an
immediate outlook for international output but said that it
planned to spend $3.2 billion outside Brazil over the next five
years, 90 percent of it in E&P.