What to expect in Petrobras’ new 5-year business plan

After the publication of this article, Petrobras released its business plan, which foresees capex of US$102bn between 2024 and 2028.

On Friday, BNamericas will publish a new report detailing and analyzing the state-owned company's new plan.

Brazil’s Petrobras may announce its new business plan on Friday, according to CEO Jean Paul Prates. 

Analysts believe that the plan, which will cover the 2024-28 period, will have higher capex than the program for the previous five-year period (2023-27), which outlined forecast investments of US$78bn. 

That expectation comes mostly as a reflection of a new company orientation calling for lower dividends for shareholders and increased investments in “non-core” areas, such as refining and renewable energy projects. 

All of that will be combined with the continuation of large exploration and production (E&P) investments. 

"Faced with the need for Brazil to enter the energy transition agenda in a sovereign manner, it is expected that Petrobras will increase its volume of investments in the forthcoming plan," Mahatma Santos, director of local strategic petroleum studies think tank Ineep, told BNamericas.

Brazil oil workers union FUP – an important political ally of Brazilian President Luiz Inácio Lula da Silva – believes that the new plan should outline capex of around US$100bn. 

“The country's largest company must play a central role in promoting development, employment and income for Brazilians, seeking self-sufficiency in oil derivatives at a fair price and being the driving force behind Brazil's energy transition,” the FUP said in a statement. 

According to the union, 90% of the total amount could be financed with own resources (operating cash generation) and 10% (US$10bn) with increased debt.

"If Petrobras better measures the ratio between investments made and dividends distributed, I think it's possible to achieve this capex of US$100bn. But, of course, that will depend on external factors, such as the situation in global oil prices," added Santos.

Carolina Chimenti, senior analyst at Moody's, does not expect any major changes from the current plan, which foresees most investments in E&P and an increase in spending on ESG-focused projects. 

“Perhaps we'll have some additional clarity regarding M&A, given that this is currently the big question mark. On the downstream side, the focus should be on continuing to increase refinery capacity,” she told BNamericas. 

For Chimenti, in terms of the energy transition, the focus should be on biofuels and decarbonization of operations, among other investments.

Fabrício Gonçalvez, CEO of investment consultancy Box Asset Management, said that since the federal government has indicated that Petrobras should head down "paths that are less healthy for minority shareholders," investors may pay more attention to the news coming out of federal capital Brasília than to the new plan as a guide to the company's future.

"What there may be in this process is greater freedom of administrative action on the part of Prates and the directors who, together with him, are responsible for setting fuel prices," he told BNamericas. 

The concept of alternative costs – provided for in the state-owned company's new fuel pricing policy – suggests that Petrobras will continue to compete with imports in the domestic market, according to the analyst. 

Meanwhile, in regions where there are no private refiners to compete with Petrobras, the strategy will likely be to analyze how much importers will be paying to import products.

"The scenario that has emerged induces Petrobras and the other oil producers to assess the best way to manage their assets, especially their refineries, in order to simultaneously optimize production and comply with tax and operating cost restrictions," Gonçalvez added.