Brazil’s state-run oil company Petrobras slashed its long-term spending plan to the lowest level in eight years on Monday as new management moved to reduce the industry’s largest debt burden and pull the company out of a giant corruption scandal.
Petroleo Brasileiro SA, as the company is formally known, will invest $130.3 billion in the 2015-2019 period, 41 percent less than the $221 billion in its previous 2014-2018 five-year plan.
It also trimmed its outlook for world-wide 2020 production of oil and natural gas by nearly a third to 3.7 million barrels of oil and equivalent natural gas a day (boepd) from its estimate of 5.3 million boepd a year ago.
While the spending cuts should help Petrobras prevent its debt from growing, the lower production target will also crimp revenue and reduce the expected tax and royalty take for the government.
Since the discovery of giant new offshore resources south of Rio de Janeiro nearly a decade ago, Brazilian President Dilma Rousseff, then energy minister, had promised to use those resources to build schools and hospitals and help Brazil join the developed world.
About 83 percent, or $108.6 billion, of the new plan will go towards exploration and production. The biggest cuts come in refining and supply which saw its budget reduced 67 percent to $12.8 billion.
Petrobras preferred shares, the company’s most-traded class of stock, rose 2.2 percent in early trading in Sao Paulo, after falling as much as 2 percent at the opening.