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Petrobras struggles to hit output goals.

Petrobras cut investment in 2011 for the first time in eight years as Brazil's state-run energy company struggled to buy the equipment, technology and services needed to carry out a $225 billion expansion plan and exploit one of the world's most promising offshore oil frontiers.

Petrobras invested 72.5 billion reais ($42.05 billion), a 5.1 per cent drop from 76.4 billion reais in 2010, executives said. The Rio de Janeiro-based company said fourth-quarter profit fell 52 per cent and also said it had signed a massive order for high-tech oil drilling ships. Incoming chief executive Maria das GraE*as Foster must turn around the company if Petrobras is to achieve its goal of nearly tripling output to 6.4 million barrels a day (mbpd) in 2020, enabling Brazil to challenge the US as the world's No 3 oil producer.

The plan centers on "the subsalt", an area the size of the US state of New York off the coast of Rio de Janeiro which could hold 100 billion barrels of oil, enough to meet all US needs for more than 14 years. Estimates of the cost of building the ships, rigs, wells and equipment to tap the offshore reserves start at more than half a trillion dollars. "The challenges we face are structural," said Jose Sergio Gabrielli, who will step down after more than six years as CEO.

"We are definitely in a moment of transition." That transition involves turning 150 billion reais of unfinished investments into productive projects, said Almir Barbassa, chief financial officer. "This is a terrible result," said Lucas Brendler, oil and gas analyst with Geracao Futuro a Porto Alegre, Brazil-based asset manager that owns Petrobras stock. "But there is still the outlook of strong production upswings in 2013." Petrobras' expansion has been held up by world-wide shortages of everthing from giant steel spheres for refineries to jet turbines needed to power oil platforms, said Renato Duque, Petrobras' head of supply services.

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Publication:Oil & Gas News
Geographic Code:3BRAZ
Date:Feb 20, 2012
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