Brazilian state-run energy giant Petroleo Brasileiro S.A. (PBR), or Petrobras S.A., announced its 2010-2014 strategic plan, projecting investments of $224 billion during the five-year period.
 
This is up from $186.6 billion earmarked for 2009 – 2013 and also exceeds the company’s previous guidance of $200 – $220 billion. Petrobras attributed the budget hike to the approval of new projects worth $31.6 billion, with $19.7 billion of that going into exploration and production.   
 
Of the total capital expenditure, $212.3 billion (or about 90%) will be invested in Brazilian projects, with the remaining portion going to overseas ventures. The Rio de Janeiro-based firm has earmarked the lion’s share of the funds (approximately 53%) for upstream activities, while 33% of the capital will be spent on downstream projects (refining, transport and marketing).     
 
Petrobras plans to finance the massive investment with $165 billion in operational earnings (based on an average price of oil of $80 per barrel), supplemented by a capital infusion of $58 billion.
 
Under the new investment plan, Petrobras hopes to ramp up production from the current 2.5 million barrels of oil equivalent per day (MMBOE/d) to 3.9 MMBOE/d in 2014 and 5.4 MMBOE/d in 2020. The targeted rise in output will be driven by the company’s attractive portfolio of deep and ultra-deep reservoirs lying below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. Petrobras is the operator in most of these exploration areas, and holds interests ranging from 20% to 100%.
 
Brazil’s largest company further reiterated that it expects the two Gulf of Mexico (GoM) fields (Cascade and Chinook) to start production in the second half of 2010. Petrobras said that it was still unclear as to the effects of the GoM drilling moratorium on the company’s costs.
 
In a separate development, Petrobras announced the purchase of a 49% stake in a new ethanol joint venture with sugar producer Sao Martinho group. As per the $238.5 million deal, Petrobras’ biofuels unit, Petrobras Biocombustíveis S.A. (PBio), will acquire a stake in Sao Martinho’s wholly-owned subsidiaries – Usina Boa Vista S.A. and SMBJ Agroindustrial S.A. – both located in the central state of Goias. The strategic alliance will result in the creation of a new company, Nova Fronteira Bioenergia, which will control the two plants.
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