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Petrobras Slashes 2017-2021 Budget By 25%

Offshore rig dusk

Brazil’s state-owned energy giant Petrobras said in a regulatory filing it will be spending US$74.1 billion over the next five years—a 25-percent reduction on the capex of US$98.4 billion for the previous five years. This is also the company’s lowest five-year budget since 2006. The figure missed consensus analyst estimates of US$82.7 billion as well.

In addition to the budget cut, Petrobras also said it still plans to sell US$15.1 billion assets by the end of this year, and generate another US$19.5 billion from asset sales and partnerships in the next two years. Petrobras’ biofuel operations will be among the assets to be divested, as the company sharpens its focus on its traditional core business. Total asset sales for the next 10 years are planned at US$40 billion.

The statement from Brazil’s oil and gas giant comes at the same time as a warning from OPEC’s secretary-general Mohammed Barkindo that cuts in investment by oil and gas companies are posing a threat to the future security of supplies.

Barkindo noted that this year will see an estimated 22-percent reduction in oil and gas investments, which would be on top of a cut of 26 percent last year. The oil and gas industry is still coping with the prolonged rout in prices, and investment cuts are the go-to solution for such problems. However, says Barkindo, this solution is far from perfect, especially in an industry that needs regular investment to remain sustainable and able to meet rising demand in the future.

Barkindo, however, was not quoted as addressing one of the two main causes of the price slump, namely some OPEC members’ strategy of keeping production at historically high levels in order to protect their market share.

By Irina Slav for Oilprice.com

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