Petrobras approves development funds

Brazilian state-run oil company Petrobras will earmark more money for exploration and production in its five-year investment plan, signalling a shift toward the more profitable activities that investors have called for. The Rio de Janeiro-based company approved a $224.7 billion (Dh825.32 billion) investment programme for the 2011-2015 period that showed significant changes in its composition but totalled little more than the $224 billion plan for the 2010-2014 period, according to a securities filing. Petrobras will invest 57 per cent of total capital expenses in extracting oil, compared with 53 per cent in the previous plan, the filing said. Refining, transport and sales activities will account for 31 per cent of total investment, compared with 33 per cent previously. "Markets will welcome the plan if a good chunk of it goes to upstream activities exploration, production and less to refining," Andres Kikuchi, an analyst with Link Investimentos, a Sao Paulo-based brokerage, said before the announcement. The investment plan, the oil industry's largest, aims to tap some of the world's largest deep-sea oil deposits and more than double production by the end of the decade to 6.42 million barrels a day. For the first time in five years, Petrobras refrained from major increases in its capital spending plan, signalling a possible shift toward more budget discipline. Chief Executive Jose Sergio Gabrielli has defended spending increases by saying they could generate new revenue, keeping finances sound. The firm had originally pitched a larger plan of about $260 billion but were told by government representatives to cut back because of inflation and other policy concerns, sources familiar with the situation told Reuters in June. By keeping spending stable, Petrobras might not need to raise domestic gasoline prices, one of the government's biggest worries, Paula Kovarsky, an oil industry analyst with Itau Unibanco, recently said. From / Gulf News