Brazilian oil major Petrobras announced a 2% decrease in its next five-year investment plan to US$109 billion ($141.32 billion), in a move to shield its cash flow at a time of lower international oil prices.
Petroleo Brasileiro SA, as it is formally known, will direct US$91 billion of the total capital expenditure to projects under implementation, of which US$10 billion will still need budget confirmation subject to a financing analysis. The rest is still under analysis “with a lower degree of maturity,” it said in a filing on Thursday.
Brazil’s state-controlled oil producer is caught between the government’s desire to grow the economy — especially ahead of a 2026 presidential election — and investors who demand high dividends and low debt. Cutting capital spending could bolster resilience to weaker crude prices and support shareholder payouts.
The spending plan is being closely watched by investors, as it has an important political dimension in Brazil. The company is a major source of cash for the federal budget. It is the first time Petrobras has reduced its five-year budget after President Luiz Inacio Lula da Silva took office in 2023.
The previous plan was based on an oil price assumption of US$83 a barrel, while Brent crude is currently trading near US$63.
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Petrobras earmarked 71.6% of the 2026-2030 plan, or US$78 billion, for exploration and production. That includes boosting output at its deep-water fields in the so-called pre-salt region, while also exploring new areas in Brazil and abroad.
The Rio de Janeiro-based company’s plan includes eight new offshore production units by 2030, and an additional 10 production vessels that are being considered for after 2030. It expects to drill 15 wells at Brazil’s Equatorial Margin — an offshore region where it recently got a permit for its first well — and is hoping to find discoveries similar to the ones Exxon Mobil Corp has made off the coast of Guyana.
Oil production
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Oil production is expected to peak at 2.7 million barrels a day by 2028, up from a previous plan ceiling. Petrobras also raised the short-term target to 2.5 million barrels of oil a day next year from the previous 2.4 million, potentially adding to a global glut at a time the International Energy Agency is concerned about oversupply.
Refining and related business lines such as fertilisers and logistics will account for about US$20 billion of spending over the next five years. Petrobras is developing a portfolio of renewable fuels in an effort to decarbonise industries, including shipping and aviation. The company said it will not build new refineries.
Planned spending on gas and low-carbon projects is at US$4 billion, driven by biofuels, biomethane and a return to ethanol production. Petrobras is looking at taking preferably strategic minority partnerships or shared control with relevant players in these areas, it said.
The Brazilian company has proposed a regular dividend payout of at least US$45 billion for the period 2026-2030, similar to the previous plan. Petrobras kept its debt ceiling at US$75 billion.
The oil producer hasn’t committed to pay any extraordinary payouts to shareholders over the five-year period. The company is under pressure to continue paying dividends, which have made it appealing to investors in recent years. Payouts also bolster government coffers, as the state is the company’s largest shareholder.
