Brazil's state owned Petroleos Brasileiro SA has slashed its 1992 capital budget by more than half for lack of adequate cash flow.
Petrobras Pres. Benedicto Moreira last week disclosed the cut, to $1.4 billion from $2.9 billion earmarked earlier, citing cash flow problems stemming from heavy subsidies for domestic products.
Petrobras Association of Engineers (Aepet) disputes the latest amount, claiming without elaboration the state company actually is cutting the current budget to $1 billion.
At either level, the severe budget cut bodes ill for Petrobras' plans to boost domestic production by a net 300,000 b/d to 1 million b/d by 1995, an ambitious program that calls for outlays of $18 billion (see related story, p. 52).
CASH FLOW PROBLEM
Petrobras' cash flow pinch also has forced the company to stop buying ethanol for Brazil's large alcohol fueled vehicle fleet, a move likely to cause the kind of widespread fuel shortages that occurred because of declining domestic ethanol production in Brazil in 1990.
That situation led Brazil to take steps to scrap the alcohol fuels program until the Persian Gulf crisis after Iraq's takeover of Kuwait gave it a last minute reprieve (OGJ, Oct. 8, 1990, p. 35). Iraq was Brazil's biggest oil supplier before its crude exports were embargoed.
Moreira also cited Petrobras' short term debts of $3 billion and accumulated losses of $3.84 billion related to subsidized ethanol and crude oil losses since 1988.
Aepet contends the government and other state owned companies still owe Petrobras more than $3 billion, even though the Federal Accounts Tribunal last December ordered the government to immediately pay this debt.
SUBSIDIES THE PROBLEM
Aepet claims Petrobras loses about $500 million/month in the form of subsidized prices for naphtha sold to the mostly state controlled petrochemical sector and $60 million/month from the sale of ethanol.
During the past 10 years, total losses from subsidized prices of those two commodities amounted to more than $5 billion.
Petrobras subsidizes other refined products as well via government controlled prices. The state company, which currently meets about two thirds of Brazil's demand for oil with domestic crude production, also imports crude at an average cost of $20/ bbl. However, the average price it receives from sales of refined products in the domestic market is $14/bbl, resulting in a net average loss of $6/bbl on crude imports.
Moreira contends the accumulated debt should be paid with proceeds from privatization of Petrobras subsidiaries, notably in the petrochemical sector, where some asset sales have occurred in recent months.
However, Brazil's government is equally strapped for cash and has proposed that Petrobras instead step up efforts to buy and sell more crude and products in foreign markets, market Petrobras products abroad, and pursue foreign service work contracts and refining deals.
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