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Brazil's Petrobras boosts oil production, abandons refinery plans amid upstream push

RIO DE JANEIRO (Reuters) - Brazilian state-run oil firm Petrobras flagged another major production boost on Wednesday, while formally scuttling a refinery project outside Rio de Janeiro, underlining its laser-like focus on offshore oil exploration and production.

The facade of the headquarters of Petroleo Brasileiro S.A. (PETROBRAS) is pictured in Rio de Janeiro, Brazil December 9, 2019. REUTERS/Sergio Moraes

At a breakfast with journalists, Petrobras Exploration and Production Director Carlos Alberto de Oliveira said the firm would produce more than 2.7 million barrels of oil equivalent per day (boepd) in 2019, with total production coming in on the upper end of the firm’s target range.

In its formal guidance, Petroleo Brasileiro SA, as the firm is formally known, predicted it would produce 2.7 million boepd this year, though actual production could vary 2.5% above or below the target. The firm produced a record 3.1 million boepd in November, the executive said, with production hitting 3.2 million barrels during one day in the month.

At the same breakfast, Chief Executive Roberto Castello Branco said studies carried out alongside China National Petroleum Corp (CNPC) in recent months determined that it would not be economically viable to complete the Comperj refinery outside Rio de Janeiro.

The formal announcement was not unexpected.

Comperj has long been a symbol of endemic graft, and Castello Branco called it a “cemetery of corruption” on Monday. Petrobras is also rapidly exiting its downstream business and is currently selling off eight refineries throughout Brazil.

The announcement appeared to put a nail in the coffin of the troubled refinery project, although Petrobras executives have signaled they plan to continue using the Comperj facility for less ambitious projects such as boosting industrial lubricants production.

SELLING ASSETS

During the breakfast, executives also detailed how they plan to make $20 billion to $30 billion in divestments the firm has planned for the next five years.

The company is negotiating with Japan’s Mitsui, which has a 49% stake in Petrobras’ gas distribution unit Gaspetro, to carry out an initial public offering for the unit in the second half of 2020, Castello Branco said. After the IPO, Petrobras would sell its entire stake in the unit, he said.

While the firm had previously announced its intention to exit Gaspetro, executives had not specified details of the divestment plan.

Petrobras has hired Goldman Sachs to determine how it will carry out its previously announced intention to sell some of its powerplants, Castello Branco said. He added that Petrobras received non-binding offers for its REGAP refinery in the interior state of Minas Gerais last week.

Reporting by Marta Nogueira; Writing by Gram Slattery; Editing by Chizu Nomiyama, Nick Macfie and Tom Brown

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