While large raw materials companies around the world are cutting back budgets in the face of falling prices and demand Brazil's government controlled oil and gas multinational Petrobras announced a 55% increase in its five year investment plan.
Petrobras said it plans to invest a massive US$ 174.4 billion from 2009 through 2013, compared with the 112.4 billion planned for investment for 2008-12. The company will invest US$ 28.6 billion in 2009 alone.
"It is a very robust investment for Petrobras, for the oil and gas sector and the supply chain, which will have a significant impact on the national economy," Chief Executive José Sérgio Gabrielli told reporters during the announcement last Friday.
Brazil's promising new sub-salt oil reserves that could hold well over 50 billion barrels of light oil and gas will receive US$ 28 billion of the budget over the next five years.
Gabrielli added that he hoped to revise the budget down overtime, as the cost of equipment and services in the energy sector are expected to fall with a slowing world economy.
Petrobras had delayed the release of its investment plan four times over the past six months due to the deteriorating global financial crisis. The plan for 2008-2012 was announced in August 2007. More details of the overall investment have been promised for this Monday.
Gabrielli said the budget-setting process was not typical this time as the board of the company met in Brasilia earlier on Friday where President Lula da Silva was present in the final budget discussions for the first time.
Over US$ 157.3 billion of the investments through 2013 will be applied in Brazil with US$ 16.8 billion going to projects abroad.
The company sees its crude output in Brazil growing to 3.3 million barrels of oil equivalent per day by 2013, boosted by output from its massive, recently discovered sub-salt reserves.
Petrobras sees sub-salt oil output at 219,000 bpd by 2013; 582,000 bpd by 2015 and 1.8 million bpd by 2020, Gabrielli said.
Of the total investments, Petrobras will allocate US$ 104.6 billion for exploration and production, including the sub-salt reserves, compared with US$ 65 billion that was directed to E & P during the previous 2008-12 plan.
The company will also boost its investments in biofuels to US$ 2.8 billion through 2013, US$ from 1.5 billion previously.
CEO Gabrielli said that the plans were based on the presumption that world oil prices would average about US$ 42 a barrel over the period but saw prices as low as US$ 37 a barrel in 2009.
Gabrielli said company cash flow will be enough to bankroll US$ 120 billion of the investments through 2013 and the remainder will come from capital markets.
In 2009, Petrobras plans to raise US$ 18.1 billion, having already secured US$ 11.9 billion from Brazil's BNDES development bank and another US$ 5 billion from international banks, revealed Gabrielli.