Brazil’s Petrobras cuts investments, deprioritises some Equatorial Margin wells on lower crude prices

The state-owned company’s board has approved the plan.

WHAT  Petrobras has okayed a new five-year plan with reduced investments.

WHY Globally, oil prices are flat amidst warnings of a deepening supply glut.

WHAT NEXT Spending in the high-potential Equatorial Margin is cut by $500mn compared with previous plans.

Petrobras approved a $109bn business plan for 2026-2030, reducing total investments by nearly 2% from its previous five-year plan while lowering dividend forecasts as Brazil's state-owned oil major navigates a scenario of depressed crude prices.

In a statement, Petrobras said it expects to distribute between $45bn and $50bn in ordinary dividends during the period, down from up to $55bn projected in last year's 2025-2029 plan, which had been a high point.

The new plan makes no mention of extraordinary dividends, which had been estimated at up to $10bn in the previous plan.

The cuts mark the first reduction in investments under President Luiz Inácio Lula da Silva's current administration, which has pushed Petrobras to boost spending ahead of the 2026 presidential election.

The last investment decrease occurred in the 2021-2025 plan under former President Jair Bolsonaro's administration during a divestment period.

Investment allocation

Of the total $109bn budget, $91bn is allocated to the Implementation Portfolio, with $18bn designated for the Evaluation Portfolio comprising opportunities with lower degrees of maturity, according to the company's statement.

To ensure financial resilience, Petrobras introduced a new mechanism dividing the Implementation Portfolio into two classifications: a "Base Implementation Portfolio" of $81bn for projects with approved budgets, and a "Target Implementation Portfolio" of $91bn that includes an additional $10bn in projects whose budget confirmation depends on financing analysis.

Exploration and production will receive $78bn, representing 71.6% of total spending, Bloomberg reported, and this would include boosting output at deep-water fields in the so-called pre-salt region whilst exploring new areas in Brazil and abroad.

Refining, transportation, marketing, petrochemicals and fertilisers will account for approximately $20bn, Petrobras said.

The gas and low-carbon energy segment is allocated $4bn in the Target Implementation Portfolio.

The company plans to implement eight new production systems by 2030, seven of which are already under contract, with an additional 10 projects starting in 2030. In the Búzios Field in the pre-salt layer, Petrobras expects to complete deployment of 11 floating production, storage and offloading vessels by 2027.

Production targets

Petrobras projects reaching peak oil production of 2.7mn barrels per day (bpd) in 2028, up from previous plan ceilings, and peak total production of 3.4mn barrels of oil and gas equivalent per day in 2028 and 2029, the company said.

For 2025, current oil production projections stand at approximately 2.4mn barrels per day, with expectations of closing the year in the upper range of the projected target of 2.3mn bpd, plus or minus 4%.

Petrobras’ CEO Magda Chambriard told journalists that Petrobras expects to maintain oil production at approximately 2.6mn or 2.7mn bpd until 2034 after ramping up around 2027, as reported by Reuters.

The company raised its short-term target to 2.5mn barrels of oil per day next year from the previous 2.4 million, potentially adding to global oversupply at a time when the International Energy Agency (IEA) has expressed concerns about excess production, Bloomberg noted.

Cost optimisation

Facing lower oil price assumptions — $63 per barrel for 2026 compared with the $77 estimate in the previous plan — Petrobras outlined measures to optimise costs with estimated savings of $12bn in manageable operating expenses between 2025 and 2030, representing an average annual reduction of 8.5% compared with the previous plan.

Initiatives include reducing expenses on non-producing platforms, optimising air and sea logistics, postponing non-priority routine services and maintenance, and utilising return freight, according to the company’s statement.

The firm forecasts an average total cost of oil produced of $30.4 per barrel of oil equivalent during 2026-2030, representing a reduction of approximately $6 per barrel compared with estimates in the previous plan.

Equatorial Margin exploration

Petrobras allocated $2.5bn to exploratory activities in the Equatorial Margin over the five-year period, a $500mn reduction from previous plans, Reuters reported.

Chambriard said the company could review some of the 15 wells planned for the region, which extends along Brazil's northern coastline.

"We had a large set of wells for the Equatorial Margin; some were prioritised, others were, let's say, deprioritised depending on the price of Brent crude oil," she said.

The Equatorial Margin is considered Petrobras' most promising oil frontier, with the firm commencing drilling this year in an environmentally sensitive area off the coast of Amapá known as Foz do Amazonas.

Energy transition

Investment in energy transition reaches $13bn, encompassing projects in low-carbon energy, bioproducts, actions for decarbonising operations, and research, development and innovation across all segments, representing 12% of total investment, the company said.

Petrobras maintained commitments to reduce total absolute operational emissions by 30% compared with 2015, achieve zero routine flaring, and reach greenhouse gas intensity targets in exploration and production of 15 kg of carbon dioxide equivalent per barrel of oil equivalent.

The producer’s CFO Fernando Melgarejo told journalists that cuts will impact extraordinary dividends to shareholders, with the possibility being low of distributing extra cash in the coming years, Reuters reported.

The plan anticipates resilient cash flow with Brent crude oil at breakeven to net debt neutrality of $59 per barrel in 2026 and $48 per barrel in 2030, according to company projections.

Shares fell

Petrobras’ shares fell the day after the company announced its latest spending plan, Bloomberg noted, dipping by 3.4% in Sao Paulo.

"The absence of short-term capex optimisation could result in single-digit dividend yields," Itau Unibanco stated in a note to clients cited by Bloomberg. "This could be perceived as disappointing by investors."

"[The plan] could make investors more sceptical toward the Petrobras investment thesis, as it shows a tight financial situation amid lower Brent prices, despite solid operating performance," said BTG analyst Gustavo Cunha, also as quoted by Bloomberg.

Cunha added that the company's outlook now depends even more on a decline in Brazil's sovereign risk heading into the 2026 elections.