Brazilian energy giant Petrobras plans to spend almost $107,000 a minute over the next four years as part of its immense and recently expanded $224.7 billion spending plan.
Petrobras will execute its first asset sale program and take on substantial debt to fund its 2011-2015 business plan, which will cost nearly $154 million each day, much of that planned for spending on exploration and production.
Petrobras expects to spend $224.7 billion from 2011 through 2015, a $700 million increase from the firm’s 2010-2014 spending plan. The company aims to sell $13.6 billion worth of assets and issue up to $91.4 billion in debt to fund expected spending levels, with allocations increasingly targeting the development of pre-salt reserves deep under the Atlantic Ocean.
Petrobras expects to allocate 57% of its 2011-2015 spending to exploration and production (E&P) through 2015, up from 53% in the firm’s previous five-year plan, issued in 2010. “The pre-salt areas will absorb 45% of the total E&P investment in Brazil and approximately 50% of the total amount allocated for production development,” Petrobras said.
Pre-salt development is critical to Petrobras’ goal of more than doubling production over the next ten years, and becoming one of the world’s five largest integrated energy companies by 2020.
Allocations for pre-salt spending have risen to $53.4 billion in the 2011-2015 plan from $33 billion in the previous plan. Discoveries to date underlie estimates of recoverable oil in the Tupi accumulation of 5-8 billion barrels, and in the Espirito Santo and Campos Basins at more than 2 billion barrels.
Gushing Production, Refined Refining
While pre-salt production is expected to account for just 2% of this year’s 2.1mn b/d target for domestic oil production, Petrobras expects that share to rise substantially in the next decade. The firm’s projections show pre-salt production accounting for 18% of its targeted 3.07mn b/d of domestic oil production in 2015, and 40.5% of its targeted target of 4.91mn b/d of domestic oil production in 2020. Petrobras attributes this rise both to increased investment and to efficiency improvements.
The firm’s projected total oil and natural gas output for 2015, at almost 4 million barrels/day of oil equivalent, represents a dramatic 44% rise over this year’s expected 2.772 million barrels/day.
But Petrobras appears to have pulled back slightly on the ambitious plans for additions and upgrades to refining capacity in its previous five-year capital budget. The firm has reduced the share of spending allocated to refining and marketing to 31% from 33% in the 2010-2014 plan.
Delaying Saves Dollars
The 2010-2014 plan included construction of three refineries in Brazil — the 230,000 barrel/day Abreu e Lima refinery, the 300,000 barrel/day Premium 1 refinery, and the 165,000 barrel/day Comperj plant. But alterations in scope and modifications to project schedules cut $30.1 billion from last year’s budget, according to Petrobras. Included in that figure is savings from delaying the start-up of the Premium 1 plant to 2016 from 2014.
Petrobras has more than offset those reductions in its most recent plan with $32.1 billion for new projects. Of that figure, 87% is allocated to exploration and production.
Not Just Oil
The firm has also increased planned spending for biofuels, allocating $4.1 billion to production and distribution from 2011-2015, up from $3.5 billion envisaged in the 2010-2014 plan. The firm plans to spend $1.9bn on ethanol production, with a goal of supplying 5.6 million cubic meters including partner contributions by 2015, up from 1.5 million cubic meters in 2011. The firm will spend an additional $600 million on biodiesel, to boost supply to 855,000 cubic meters in 2015 from 735,000 cubic meters this year.
While the lion’s share of Petrobras 2011-2015 spending will be in Brazil, the company has allocated $11bn to its international operations. These include the Cascade/Chinook, Saint Malo, and Tiber projects in the US Gulf of Mexico, as well as projects in West Africa and South America.
Photo Caption: View of the Corcovado hill and the Christ the Redeemer statue at sunset during winter’s first day in the south hemisfere on June 21, 2011 in Rio de Janeiro, Brazil. AFP PHOTO/Antonio SCORZA (Photo credit should read ANTONIO SCORZA/AFP/Getty Images)