Despite the collapse in the price of oil, Petrobras Strong Bet

Despite the plunge in oil prices, Petrobras invests heavily

Buenos Aires, Argentina

January 26, 2009

There is no doubt that in the current situation of world economy, the incentive to invest in the oil sector are much smaller than those that existed until the middle of 2008.

Oil prices barely touching $ 40 a barrel (a level unimaginable honestly a couple of months ago), and with prospects for continued depressed throughout 2009 and part of 2010, make the investment projects in the oil area are much less profitable when a barrel of crude was trading nearly four times its current level.

However, several companies are investing and expanding gambling advantage this time of uncertainty and depression, to reposition themselves in the global oil market. So at the end of December I commented in an article The crisis slows Colombia, but not to Ecopetrol, the Colombian oil projects Ecopetrol (BVC: ECOPETROL, NYSE: EC), which had decided to increase its investment plans for 2009. Ecopetrol announced in late 2008 investments of U.S. $ 6,224 million this year, three times the amount invested in 2007 (and 35% more than in 2008).

In Colombia and Ecopetrol aims to expand and grow to make the country self-sufficient and even oil is a net exporter, also Petrobras (BVSP: PETR3, NYSE: PBR) plans to invest U.S. $ 174,400 million during the period 2009-2013, according released late last Friday its president, Jose Sergio Gabrielli.

The investments of the new plan represents an increase of 54% compared with the five-year 2008-2012 (which amounted to U.S. $ 112,000 million).

Also, the Brazilian mixed oil (controlled by the State of Brazil), announced that its objective is to produce 3.3 million barrels per day by the year 2013 (and 4.6 million bpd by 2015). Petrobras currently produces 2.4 million barrels per day (both inside and outside the borders of Brazil).

These projects include investments in exploration and production at great depths in the Atlantic Ocean, the new frontier called "pre salt". Investments in exploration and production account for 71% of total planned investments. On the location of investment, the oil announced that 90% of investments will target Brazil, while only 10% is allocated to investments abroad.

It is worth remembering that the last time in Brazil have discovered large oil deposits. The downside is that they are under an extensive layer of salt. The deposits of the "pre-salt" represents a technological challenge for the modern oil industry, as they are at depths of up to 7,000 meters from the sea surface beyond a layer of salt (which can exceed 2,000 meters), gelatinous state.

In relation to this, within the investment plan announced, the president said the oil company will invest in mining in three mega-gas fields discovered oil in 2007 in the Santos Basin, at 6,000 meters deep.

On the other hand, among the areas where Petrobras announced it will invest, the company issued to allocate U.S. $ 2,400 million to expand its market share of ethanol and biofuels, U.S. $ 16,800 million in the petrochemical sector and U.S. $ 10,600 million in the sector gas and energy.

The José Sergio Gabrielli, said the following about the investment plan, "significantly increases the productive capacity and long term Petrobras has become one of the largest energy companies in the world?.

The business plan estimates a price tag of U.S. $ 42 a barrel for Brent oil, an estimated price with high probability of occurrence (most likely in just over a year, the oil price exceeds the price objective on which the estimates were made). On how to finance the investment plan, oil estimated to get between 25% and 35% funding through various sources, including Brazilian and international banks.

In the meantime, by 2009 the investments of the total U.S. oil company $ 28,600 million (with a reference price of U.S. $ 37 a barrel for Brent). Of the U.S. $ 28,600 million in cash Petrobras owns $ 10,500 million and the rest get through the financial market (where the main financier is the BNDES).

This announcement comes at a time investments in the Brazilian economy was beset by bad news about his performance that demonstrated the strong impact of the global financial crisis on it, so this announcement is a bit of relief in terms of the economic outlook this year.

With this investment plan, Petrobras strengthens its good prospects for the medium and long term but perhaps for the Brazilian oil company, 2009 will be a tough year as it is expected that the results are reduced, say the analysts at Morgan Stanley, in a 60% compared to 2008 if they remain low international oil prices (below $ 50 a barrel).