Petrobras bids to regain financial strength

A worker paints a tank of Brazil’s Petrobras oil company in Brasilia. (Reuters)

RIO DE JANEIRO: Brazil’s state oil company Petrobras, reeling from a massive corruption scandal and low oil prices, announced it will cut investments by 25 percent over the next five years.
Investments from 2017 to 2021 are projected at $74.1 billion, the company said, a quarter less than in the previous five-year plan.
“In the next couple years, we will concentrate on recovering Petrobras’s financial strength,” new CEO Pedro Parente said in a statement.
“In the total five-year horizon this plan encompasses, we propose that the company will have been restructured, that it have unquestionable governance and ethical standards.”
The new business plan is the first released under Parente, who was appointed by new center-right President Michel Temer in June to take over the troubled company.
Petrobras has been at the eye of a corruption storm upending Brazilian politics.
Corrupt executives allegedly colluded with construction firms to fleece the company of billions of dollars on contracts for big projects.
Investigators say much of the dirty cash went to politicians and political parties who helped orchestrate the scheme.
The scandal contributed to the downfall of leftist president Dilma Rousseff, who was suspended in May and convicted in an impeachment trial last month on unrelated charges of fudging the government’s budget.
The scandal is also a threat to Temer, who has had several key allies implicated.
Petrobras has simultaneously been battered by the plunge in global oil prices from more than $100 a barrel in mid-2014 to around $45 today.
The new five-year plan includes an 11-percent cut to operating costs. It also targets an “intense pace” of sell-offs and joint ventures for less-lucrative oil fields, expected to bring in $19.5 billion in the next two years.
Petrobras began the sell-offs in July when it announced the $2.5-billion sale of a “pre-salt” field to Norway’s Statoil.
It was the first time Petrobras agreed to sell a pre-salt field — massive deep-water oil deposits that are the company’s crown jewels but are expensive and technically difficult to reach.
The company also said it plans to continue voluntary severance packages that will reduce its payroll by 9,200 workers this year and an estimated 9,700 next year.
The announcement comes as it faces a potential strike by workers furious over a pay freeze.
Petrobras ended 2015 with losses of $9.6 billion — its second year in the red, and worst performance since its founding in 1953.
It returned to the black in the second quarter this year, posting profits of $106 million.
But Petrobras, the largest company in Brazil, has become a symbol of the decline of Latin America’s largest economy.
After posting strong economic growth during a commodities boom in the 2000s, Brazil is now mired in its worst recession in decades.
Its economy is set to contract 3.3 percent this year, before returning to meager growth of 0.5 percent next year, the International Monetary Fund forecast in July.