Investment plan

Petrobras Doubles Hydrocarbon Purchases Under $ 68 Billion Investment Plan

Brazil’s Petrobras, Latin America’s largest oil producer, will increase capital spending to $ 68 billion over the next five years, as the state-controlled group bets on its role as a supplier of oil. low-cost hydrocarbons in the energy transition.

The company, whose full name is Petróleo Brasileiro, this week announced its spending plan for 2022 to 2026, with an increase of almost a quarter from its previous budget of $ 55 billion for the period starting this year. .

Most of it will go to oil exploration and production, with the bulk going to its lucrative deep-water “pre-salt” reserves. Among the biggest offshore discoveries of this century, the company says its fields are cheaper to operate and have lower carbon emissions per barrel.

“[Our focus is] save time in this race towards 2050, when the use of fossil fuels could decrease in the world. We want to be an option. As long as there is a need, Petrobras will be [there] because of its efficiency and low carbon content, ”Joaquim Silva e Luna, managing director, told the Financial Times.

Although the overall spending plan is still lower than that envisioned before the coronavirus pandemic began, it shows how much Petrobras believes its future lies in maximizing production.

A number of major international rivals are grappling with pressure from shareholders and activists to drop new drilling in the fight against climate change.

Wells in pre-salt areas are very productive, which means that “the mining activity has less carbon emissions per barrel than average. Also, it’s a lighter oil that requires fewer carbon emissions to process, ”said Francisco Monaldi, Latin American energy policy researcher at the Baker Institute at Rice University.

Petrobras is committed to reducing its operating emissions by 25% by the end of the decade. The company highlighted a pledge of $ 2.8 billion for decarbonization and other projects, a figure critics say is insufficient.

“If in today’s global matrix you replace Petrobras oil with another, it will definitely have more emissions,” said Rodrigo Araujo Alves, CFO.

The comments came as oil benchmarks and global stocks fell on Friday over fears over a new strain of coronavirus, which is believed to be behind a spate of Covid-19 cases in southern Africa.

After falling 3.9% on Friday, São Paulo-listed preferred shares of Petrobras fell 1.5% in 2021, still outperforming the larger Bovespa index which fell 14%.

A recent rally in crude prices has helped Petrobras generate higher profits and meet its goal of reducing gross debt to less than $ 60 billion ahead of schedule.

It marked a milestone in a corporate turnaround, in which the state has a stake of around 37% but just over half of the voting rights.

Under previous governments, Petrobras was rocked by a massive corruption scandal and pushed to the brink of bankruptcy, after fuel price controls resulted in tens of billions of dollars in losses.

With double-digit inflation ahead of next year’s election, Brazilian President Jair Bolsonaro has taken on the company’s practice of aligning diesel and gasoline prices with international market rates.

Silva e Luna insisted he would stick to the pricing policy despite political and public pressure, and said corporate governance rules prevent external interference.

“We understand the political debate, but we believe that there is no room for interference,” he said. “On this point, our investors can feel secure.

A Reserve Army general with no experience in the oil and gas industry, Silva e Luna was appointed in February after his predecessor was sacked by Bolsonaro in a dispute over fuel prices.

Additional reporting by Carolina Ingizza in São Paulo

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