Petrobras increase E&P spending for 2009-2013 despite low oil price
Petrobras, a Brazilian international energy company, announces that its Board of Directors has approved today the Business Plan for 2009-2013 period. This Business Plan is based on the fundamental strategies of the Strategic Plan 2020.
The Plan has been revised and up-dated to take into account the changes in the international macroeconomic scenario and its impacts on oil and oil products market.
The Plan did not incorporate potential cost reductions as a consequence of the drop in the international oil price although the Company recognizes that the decline in oil should create the opportunity for cost reductions and will make its best efforts to lower
the cost of its investments.
The Business Plan 2009-2013 retains the aggressive growth targets for Petrobras and incorporates the investment required for the exploration and development of the oil discoveries in the pre-salt area.
In addition to the Tupi Pilot System, to begin production in 2010, three systems are scheduled to go into production in the pre-salt layer of the Santos Basin during the period 2009-2013: Tupi 1 and Guará 1 in 2012 and Iara 1 in 2013. The 2015 target in the 2008-12 Business Plan of 2,812 thousand bpd has been increased by 528 thousand bpd as a result of these additional production projects.
The plan, which for the first time includes investments in the pre-salt area in Santos Basin, envisages total investments of US$ 174.4 billion in 2013, . This represents an annual average of US$ 34.9 billion, 90% of which (US$ 157.3 billion) in Brazil and 10%
(US$ 16.8 billion) abroad and 55% more than the previous Plan.
Exploration and Production accounts for 76.4% of the total US$ 47.9 billion allocated to new projects or equivalent to US$ 36.6 billion. For the first time, the Company is dedicating significant efforts in evaluating, developing and production of discoveries in
the so-called pre-salt layer of the Santos and Espírito Santos basins. Of the new projects in the E&P segment, about US$ 28 billion relate to pre-salt development.
Despite the current financial crises potential impacts in the short term oil demand, in the long term, the supply of oil is still expected to be lower than the demand due to depletion in the existing production fields. Petrobras uses the average Brent price
assumption of US$ 42 per barrel for its analysis of financiability, leverage targets and rates of return. The Plan also contemplates the analysis of the world production growth, exchange rate and oil and oil products price assumptions.
The target for average financial leverage of 25-35% is maintained and Petrobras will continue to seek financing from various sources in Brazil and overseas, be it in the capital and banking markets, or through securitization, development agencies, etc.
The 2009 estimated investments of US$ 28.6 billion and the average Brent price assumption of US$ 37 for the cash flow generation, results in a funding needs of US$ 18.1 billion, which US$ 11.9 billion is already committed with BNDES and US$ 5.0 billion with other sources.
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