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Petrobras details its 2009/2013 Business Plan

Petrobras’ president, José Sergio Gabrielli de Azevedo, Company directors and executives from its subsidiaries detailed today (01/26), during a press conference, Petrobras’ 2009/2013 Business Plan. The company estimates it will invest $174.4 billion by 2013, some $62 bn more than the amount the previous plan laid down, i.e. $112.4 bn. Most of the investments will be earmarked for Exploration & Production ($104.6 billion); followed by Downstream ($43.4 billion); Gas & Energy ($11.8 billion); Petrochemicals ($5.6 billion); Distribution ($3 billion); Corporate ($3.2 billion); and Biofuels ($2.8 billion). A total of $28.6 billion is expected to be invested this year alone.

While detailing the plan, Petrobras’ president highlighted that the Company will maintain its degree of investments, that it will endeavor to slash costs, and said it is in a privileged position when compared to other companies. “Petrobras has both a significant volume of reserves to develop and identified resources that can turn into reserves and support a very accelerated production growth rate.”

From the strategic viewpoint, the plan has a long-term vision, without taking the short-term conjuncture for granted. “Our price perspective is conservative. On one hand, we projected revenues based on prices that are at the minimum limit of the market projections, while, on the other costs at the peak of the 3rd quarter of 2008,” said the Company’s president.

Gabrielli also announced the commitment with the minimum national content of 64% will be maintained in Petrobras’ projects, within the principle of competitiveness. “The company will put demands of some $20 billion per year in the (domestic) market, which we want to be reduced with lower costs,” he said. The program also involves maintaining 1 million jobs and is expected to contribute with some 10% of Brazil’s GDP.

Financial feasibility

Director Almir Barbassa said the company’s cash generation, in the next five years, is expected to range from $120 billion and $150 billion. “The two first years will be the most challenging, but we are in a very comfortable scenario.” Resources have already been secured for the 2009 investments, with $11.8 billion (R$25 billion) in funds from the BNDES, and $5 billion (R$11 billion) from international banks – which will involve operations in the capitals market with the issuing of debentures in the upcoming years.

In 2010, the company intends to raise $18 billion, and it can get $10 billion in funds from the BNDES, if necessary. The director noted that the loans are in line with market rates and within Petrobras’ cost curve, without any type of subsidy. “It must be emphasized that the funding is for the very long term and is above what is needed to reach peak production at the pre-salt layer, giving Petrobras peace of mind to maintain its capital structure,” he said, when mentioning the loans’ 30-year term.

Cost reduction

Service director, Renato Duque, said the Company will work on three fronts to optimize costs: project simplification and uniformization, agreement clause revisions, and revisions of the company’s culture. “We will use new contracting approaches, reducing packages and increasing competition among companies.” Petrobras currently has some 5,000 registered vendors, but it hopes to boost this number even more. “The market is already showing sings costs will fall because of the changed scenario,” said the director.

When speaking about new hirings, Duque said Petrobras intends to build 28 drilling rigs in Brazil, the first seven of which are expected to be delivered between 2013 and 2017.

Exploration and Production

The Exploration & Production (E&P) segment in Brazil will get $92 billion, 49% of which to develop production, said Exploration & Production director, Guilherme Estrella. The goal for 2013 is to produce 2,680 million barrels of oil per day by developing young fields and maintaining the old ones, still with a reduced participation of the pre-salt layer. In the gas area, the target is to reach 70 million cubic meters in 2011.

Petrobras estimates it will be producing 120,000 to 130,000 barrels of oil per day in 2013 in the pre-salt, which includes the Santos Basin and the Parque das Baleias, in the Campos Basin (off the coast of the State of Espírito Santo). “In terms of investments, we are foreseeing some $29 billion for the entire pre-salt layer, $19 billion of which in the Santos Basin,” said Estrella.

Downstream

Downstream director, Paulo Roberto Costa, confirmed he will maintain the deadlines for the delivery of the new refineries, enhancing the refining capacity in Brazil and maintaining balance with oil production. The Abreu e Lima Refinery will be capable of processing 230,000 barrels per day. The Comperj, 150,000 barrels per day. The Premium I Refinery, in Maranhão, 600,000 barrels per day. Premium II, in Ceará, 300,000. And, finally, the Rio Grande do Norte unit will be able to process 30,000 bpd.

The director also announced that the plan calls for the deployment of the third fertilizer plant, capable of producing 1 million tons per year.

Biofuels

The biofuels segment will get $2.8 billion in investments. Of this total, $2.4 billion will be allocated to biodiesel and ethanol production (Petrobras Biocombustível), while $400 million to infrastructure, basically ethanol pipelines. The resources represent an 87% increase compared to the previous Business Plan.

Of the total of $2.4 billion, 91% will be invested in Brazil, while 9% abroad. In biodiesel, the goal is to be producing 970 million liters in 2013, with 535 million liters produced in Brazil. “Overseas, we have projects foreseen for Portugal, South America, and Africa,” informed the President of Petrobras Biocombustível, Alan Kardec.

Gas & Energy

Gas & Energy director, Maria das Graças Foster, emphasized the company is working on enhancing its performance: “We are implementing our infrastructure in this sector and will consolidate our participation in the gas and energy business,” she said. The challenge is even bigger on account of the increased internal demand for gas as a source of energy. Consumption is expected to surge from 58 million cubic meters per day, in 2008, to 135 million cubic meters per day in 2013. Fifty percent of this volume is currently supplied by Bolivian gas, while 50% by internal production.

To meet the 135 million cubic meters per day projected for 2013, Petrobras will increase its internal production by 150%, i.e., 73 million cubic meters per day. The company will also continue importing Bolivian gas, at a rate of 30 million cubic meters per day, and get the reinforcement of the Liquefied Natural Gas (LNG), which is currently not part of the supply and can add up to as much as 32 million cubic meters per day.

International

Petrobras will invest $15.9 billion in the International Area, the same as projected previously. “We will maintain our investments in several assets abroad,” said International Area director, Jorge Luiz Zelada. To the director, resources may be reallocated from one project to another, according to the company’s priorities.

The US concentrates the biggest volume of investments, at 28% of the total, trailed by Argentina (16%), Peru (5%), and Chile (3%). And the limelight is still on the African continent: Nigeria will get 12%, and Angola 5%. Zelada announced the Akpo field, in Nigeria, is expected to go on stream in the first half of 2009, and exploratory activities are slated begin in five Angolan blocks yet this year.

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.
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