Petróleo Brasileiro (NYSE:PBR), Brazil’s state-owned oil company and the 10th largest business on the planet, is not having its best year. After dealing with losses and a rise in the price of oil, Petrobras lost its position as the most valued Latin American brand earlier this year. But as the oil giant approaches 60 years of age, Brazil has announced an increase of 50 percent in production as a way to improve performance and raise revenues.
The company is installing nine new production units, that are expected to result in an extra million barrels a day, as outlined by Petrobras CEO María das Graças Foster.
"From 2011 to 2013 we had problems,” said Foster to Brazilian newspaper O Globo, “ but we will see important growth next year.”
The company’s ambitious plan outlined an investment plan of $236 billion from 2013 to 2017, and a production goal of 4.2 billion daily barrels by 2020.
Petrobras has been steadily declining in market value. On the São Paulo’s stockmarket it currently has a capitalization of 240 billion reais (approximately $108 billion). Three years ago, its value was almost double, at 453 billion reais ($204 billion).
Among the reasons behind this drop analysts mentions the problem of price controls in Brazil, since Petrobras buys oil at a higher price than the one at which it is allowed to sell in the country. This is due to the government’s intervention in gas prices, which have been frozen in order to control the country’s spiraling inflation (currently at 6 percent).
Another reason is the obligation of the company to participate with at least 30 percent in exploration projects in Brazil, and excessively protectionist policies which have scared away investors, like the recent auction of the off-shore oil site Libra, estimated to be the largest in the world, sat out by oil giants like Chevron (NYSE:CVX) and BP (LON:BP).
Petrobras Wants To Increase Production 50% To Save Company From Crisis
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