Petrobras plans 25pc spending increase: CEO

Brazil's state-controlled Petrobras plans to increase capital spending by 25pc in its next five-year business plan, chief executive Roberto Castello Branco told lawmakers yesterday.

Addressing the mines and energy commission in Brazil's lower chamber, Castello Branco said spending through 2024 should reach $105bn, of which around 86pc will be directed upstream.

Capital investment under the company's current 2019-23 plan is $84.1bn, with about 82pc earmarked for upstream projects.

After nearing bankruptcy in 2015, the revitalized oil company has been selectively active in upstream auctions in Brazil since 2016. Petrobras earmarked $10.8bn for exploration under its current business plan, a 59pc increase over the previous plan, and is likely to significantly increase that amount under the forthcoming plan.

Castello Branco said divestments through 2024 should reach $35bn, a 30pc increase over the $26.9bn envisaged under the current plan.

The increase is partially related to the planned sale of around half of the company's 2.2mn b/d of domestic refining capacity. The transactions are expected to generate around $15bn, according to some estimates.

A recent federal supreme court decision and an agreement with anti-trust watchdog Cade have cleared the legal path for Petrobras to roll out the downstream sales of eight refineries.

Petrobras has been pursuing ambitious divestment plans for years in an effort to tame its massive debt load, much of it incurred when the company was compelled by the government to sell fuel at a loss.

"The reduction of debt will give us better conditions to invest, mainly in oil and gas production, and pay a lower level of interest rate," Castello Branco said.

Petrobras plans to release its new five-year business plan in the fourth quarter. Earlier this year the company unveiled a "resilience plan" focused on its core offshore business.

Before an oil price collapse in 2014, Petrobras' five-year business plans regularly exceeded $200bn, but domestic oil production has been stuck at around 2mn b/d for the last 10 years.

Petrobras plans to produce around 2.3mn b/d in Brazil this year, a 13pc increase over 2018, and is forecasting 5pc/yr growth through 2023.