RIO DE JANEIRO – Brazil’s Petrobras will reduce its five-year investment plan by about one-fifth next month as low oil prices, according to Reuters “massive debt and fallout from a corruption scandal hobble its ability to fund offshore projects, two sources helping draft the plan”.

It was also stated that the state-led oil company’s capital spending program will fall to about $80 billion in the period 2016-20, which is approximate to almost $16 billion per year, said the sources, who requested anonymity since the plan is not final.

However once approved, it would be the smallest five-year investment program for the company, formally known as Petroleo Brasileiro SA, since 2006 and mark the latest in a swift succession of downward revisions.It would be roughly 20 % smaller than the $98.4 billion plan publicized in January, which was the third downward revision of Petrobras’ $130 billion, 2015-19 plan unveiled last June.

The dramatic downturns in Petrobras’ prospects were underlined by the serial cuts since it exposed some of the largest-ever offshore oil resources a decade ago.

The new plan would be only one-third of the $235 billion, or $47 billion a year, in projected capital spending under the 2012-16 plan, at the time the world’s largest corporate spending program.
“Forget that. That Petrobras no longer exists, despite of reasons, whether it is because of the economic situation, or because of bad actions that slayed the company,” the first source said.
Petrobras’ press office declined to comment.

The sourced added that agreement around a plan of about $80 billion has hardened in the recent weeks as top executives understood the depth of Brazil’s worst recession in decades and lowered thus their expectations that oil prices would rebound this year.

Furthermore the drive up of Petrobras’ dept was a result of the government’s refusal to allow Petrobras to raise domestic fuel prices in line with world prices as an anti-inflation measure. A widespread price-fixing and political kickback scandal has driven up costs, delayed projects and devastated the company’s relationship with investors. More cuts may be in the offing.

Another source added that “This isn’t just about oil prices, it’s about years of poor management and poor project execution too,” Petrobras determinations may have to be scaled back even more if it seeks to survive.

The sources said, an average annual spending under the 2016-20 plan is predicted to be around $16 billion. Spending could trend as low as $15 billion some years, one source said, especially if efforts to sell assets and reduce its $130 billion of debt, the world oil industry’s largest, are unsuccessful.

Petrobras hopes to raise $14 billion this year by selling oil fields, refineries, gas pipelines and other assets.Despite the ambitious plan, few assets have been sold. Petrobras expects to receive tenders for a gas network in Brazil’s industrialized southeast on Tuesday, but other sales seem stalled.