Petrobras Plans to Expand 2009 Investment

Petrobras Plans to Expand 2009 Investment
Brazlian oil giant Petrobras expects to expand its investment in 2009 despite postponing the evaluation of its business plan due to the plunge in oil prices, which has raised doubts about the viability of some projects, CEO Jose Sergio Gabrielli said here Monday. "All the new projects are under review. We decided to not approve the plan because of the uncertainty created by the gigantic drop in the price of petroleum in recent months, and because the supply chain is slower to adjust its prices," Gabrielli said during a breakfast with reporters. Despite the volatility on the oil market, Petrobras expects investment to total between 50 billion and 55 billion reais ($21.25 billion and $23.4 billion) this year, with the figure rising in 2009. Gabrielli said he was confident that costs would drop across the company's operations, but he acknowledged that "no one knows" the time or extent of the cost reductions. "The price of steel has fallen about 40 percent and will bring down the price of drills, transportation, materials for equipment and services," the executive said. Gabrielli noted that the oil-price estimates used in formulating business plans were conservative. The executive added that cost estimates were "very conservative" to avoid placing the company's cash flow "at risk" due to price volatility. Petrobras's signature project - exploration of deepwater oil fields in the Atlantic - remains "viable" with crude selling in a range of $40 to $50 per barrel, Gabrielli said. In late 2007, Petrobras announced that it had found what could be the world's largest oil field, called Tupi, in the Santos basin, but the reserves are under the pre-salt layer, which is found beneath the sea bottom and contains a gel-like deposit of salt that could be up to two kilometers (1.24 miles) deep. Reaching petroleum in such fields requires drilling down to the ocean floor and then through the salt layer, making such projects expensive and technologically challenging. The offshore fields contain some 14 billion barrels of crude, according to Petrobras estimates, making them the new frontier in the oil industry. The ANP, Brazil's energy industry regulatory agency, estimates that the fields that have been put up for bidding could contain between 50 billion and 80 billion barrels of crude, well above the country's existing reserves of 14 billion barrels. The offshore fields are at depths of up to 7,000 meters (22,950 feet). Petrobras export and production director Guilherme Estrella said the team working on the offshore projects had made "great advances" in reducing costs. Estrella said postponing the evaluation of Petrobras's business plan would allow the company to be "more precise" about expectations, and he called for continuing to cut costs to make investments in the pre-salf layer "even more attractive." Petrobras, an integrated energy company and the global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe. Though state-controlled, Petrobras is a public company whose shares trade on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges. – Rigzone.com

Back

Top Headline

Grim Price Outlook Unwelcome News For Natural Gas Industry