Petrobras sees investment as part of plan to diversify revenues and boost cash flow amid market challenges

Brazil's state-run oil company Petroleo Brasileiro SA said that a consortium led by it would invest $400 million to $500 million this year in Brazilian offshore oil field Libra, as part of its efforts to generate revenue from its lucrative deepwater deposits.

Brazilian President Dilma Rousseff attended the signing ceremony in December in which Chinese oil company CNOOC Ltd, as part of a consortium composed of Petrobras, Shell, Total and another Chinese oil company CNPC, won a 35-year contract to develop the Libra oil discovery in the Santos Basi of Brazil. CNOOC Ltd CEO Li Fanrong (left) and Vice-President Bo Qiliang joined her in the celebration. Xinhua

Petrobras said the move is part of its massive restructuring program that seeks ways to diversify revenue streams, boost profits and bring in more cash for projects.

According to experts, the Brazilian government's decision to heavily subsidize domestic diesel and gasoline consumption has led to severe revenue erosion for Petrobras and cash shortfalls. The state-run Brazilian energy corporation said it has already started to ring in the changes and hopes to restrict capital spending on all its projects within the $237 billion capital expenditure budget earmarked for 2013-17.

The plan, one of the world's biggest corporate spending programs, however, envisages more spending on development of lucrative offshore deepwater deposits.

The offshore Libra oil field is estimated to contain 8 billion to 12 billion barrels of recoverable oil and is jointly owned by Brazil's Petrobras, Anglo-Dutch oil giant Royal Dutch Shell Plc, France's Total Plc, China National Offshore Oil Corporation and China National Petroleum Corp.

The consortium holds production rights from the filed for 35 years and hopes the additional investment will help it realize more revenue.

Petrobras, which owns 40 percent of Libra, is also the sole operator of the project as per government norms. In order to cut its operating costs the company said on Friday that it would offer voluntary buyouts to some workers.

In a statement, the company said the plan was aimed at workers aged 55 and above who are already preparing for retirement. According to the statement, the aim of the Voluntary Redundancy Incentive Plan is to reduce the workforce in line with its Business and Management Plan.

Though Petrobras did not indicate as to how many workers would be affected, the National Oil Workers Federation, a trade union, indicated that the company plans to cut 8,500 employees from its payrolls.

Earlier this month, Petrobras said it would sell $5 billion in bonds to generate more cash for investment. The company is believed to have raised funds to the tune of 5.17 billion denominated in euros and British pounds according to a report in the Wall Street Journal.

Though the foreign consortium members have limited control in the Libra project, they are enthused by the future prospects.

Li Fanrong, chief executive officer of CNOOC, told Chinese media recently: "It's a world-class project. But it's still at the exploration stage. In the next one to two years, we need to invest more to determine the size of reserves. After that, based on a development plan, we will share our investment plan with shareholders," he said.

Eliana Kirshenblat in New York contributed to this story and can be contacted at elianakirshenblat@chinadailyusa.com