RIO DE JANEIRO: Brazil’s state-run oil company Petrobras will likely delay details of major cuts to its US$221bil five-year spending plan until July, two sources said, when the government plans to announce a rescue programme for the industry.
Petrobras, which is struggling with a corruption scandal, falling oil prices, stagnant output, and the largest debt of any oil company, had planned to announce deep spending cuts, expected to be about 30% of the proposed spending, by the end of June.
However, executives at Petroleo Brasileiro SA, as Petrobras is formally known, had run into internal and political resistance to cuts given the major role the company played in Brazil’s economy, a top Petrobras executive with direct knowledge of company discussions told Reuters.
The announcement would be delayed until at least July to coincide with a government rescue programme for the industry, one of the sources, a senior member of Brazilian President Dilma Rousseff’s ruling coalition said.
The government is only coming to terms with Petrobras’ economic fragility and how government efforts to increase control over the country’s natural resources could make Petrobras weaker still, the senior coalition member said.
Both officials requested anonymity because final details of the government’s and Petrobras’ plans had yet to be decided.
Both have regular contact with Rousseff and other top government and Petrobras officials.
“The plan will be delayed until July to coincide with a government programme for the entire industry,” the senior ruling- coalition member said. “The industry depends on Petrobras, and the government wants a coordinated response, but they also know they can’t wait too long.”
In recent years, Petrobras’ more than US$40bil of annual spending on ships, platforms, oil systems and refineries has been nearly double the Brazilian government’s own discretionary spending on infrastructure. Now, as Petrobras cuts back, the government, faced with inflation and a stagnant economy, is cutting its own budget too.
Meanwhile a price-fixing, bribery and corruption scandal has forced Petrobras to stop payment to leading suppliers, leading to bankruptcy filings by major contractors and widespread layoffs.
The government’s July oil plan was likely to mimic a programme announced earlier this month to bolster shrinking government funds for investment in ports, highways and other infrastructure with private capital, one of the officials said.
Making Brazil’s oil industry more attractive to non-government investment from Brazil and abroad would require more than broad policy statements, the senior ruling-coalition official said.— Reuters