Petrobras to invest $220bn in new fields

Petrobras, the Brazilian national oil company, will spend between $200bn and $220bn over the next five years as it ramps up capital expenditure to develop potentially enormous new oil fields discovered off Brazil’s coast in 2007, Almir Barbassa, financial director, said on Friday night.

The amount, which includes spending on all Petrobras’s activities from exploration to production and refining, is a significant increase over the $174bn previously planned for 2009-2013. This year, the company plans to spend $47.3bn, easily the biggest capital expenditure programme in the global oil industry.

Petrobras’s value, measured by market capitalisation, almost doubled during 2009 from $100bn to $199bn, overtaking peers such as Shell, BP and Chevron, the company said.

Mr Barbassa was speaking during a presentation of Petrobras’s 2009 results, which showed a fall in net profit to R$29bn (US$16bn) in 2009, down from R$33bn in 2008. Mr Barbassa said the fall was caused entirely by currency fluctuations: operating profit was almost unchanged at R$46.1bn, from R$46bn in 2008.

New regulations for Brazil’s oil industry are making their way through Congress, including a plan to issue new shares in Petrobras secured against 5bn barrels of oil and natural gas to be ceded to the company by the government. The fund-raising plan was approved by the lower house of Congress this month; it now goes to the Senate before returning to the Chamber.

Mr Barbassa said the company aimed to complete the rights issue by the end of July, as August is, in effect, a holiday on international capital markets and, from September, Brazil will be immersed in the run-up to general elections in October.

The international oil industry has increasingly focused its attention on Brazil over the past three years since the discovery of the pre-salt fields, so called because they are trapped under several kilometres of sea water, rock and a hard-to-penetrate layer of salt.

Enrique Sira, director for Latin America at IHS Cambridge Energy Research Associates in Mexico, said raising finance for Petrobras’s capex programme would be a challenge but that the numbers were in line with the likely cost of exploiting the pre-salt fields.

Mr Barbassa said Petrobras had raised a record R$74bn in funding during 2009, leaving it with a ratio of debt to earnings before interest, debt and amortisation of 1.2 times; he said the company would keep its debt below a maximum target of 2.5 times ebitda.