Brazil’s state-led oil company, Petrobras, slashed its target for oil and gas output in a $236.5 billion, five-year investment plan announced, scaling back its ambitions as the cost of developing offshore resources soars. The new spending programme will earmark more money for exploration and less for refining, continuing a shift toward the company’s most profitable operations. Under the 2012-2016 plan, Petrobras will produce 5.7 million barrels of oil equivalent per day (boepd) in Brazil and abroad in 2020, 11 per cent less than expected in its previous five-year plan. The 700,000-barrel a day cut in the 2020 output target represents forgone revenue of about $25 billion a year at the current market price for Brent crude of $96.97 a barrel, a level within the $90 to $100 a barrel benchmark Brent price estimate Petrobras uses in the plan. Investors and industry analysts worry that Petrobras, which is controlled by the federal government, but with most of its stock in the hands of private shareholders, is increasingly being used as a political and economic tool for President Dilma Rousseff and that its spending goals are unrealistic. “Recent Petrobras plans have all been fictions, but this plan looks less fictional than its predecessors,” Adriano Pires, head of the Brazilian Infrastructure Institute, a Rio de Janeiro-based energy research group. “The key now is to provide clear and reachable goals, to dial down the politics and improve results.” The plan also estimates 2016 output at 3.3 million boepd, nearly one-fifth less than the prior plan projected for 2015. The plan is the first to be announced by Chief Executive Maria das Graças Foster, a career Petrobras employee appointed in January. Foster is widely believed to be more of a technocrat and closer to Rousseff than her predecessor. Petrobras, which has seen costs soar on refineries and offshore oil production systems, said it will seek to “perfectly align fiscal and financial goals for every project.” Petrobras intends to start meetings with investors and the media to explain the plan on June 25, the company said. Despite years of growing investment and 14 months of spending averaging about $20 million a day, the largest in the industry, Petrobras output in February was 2.70 million boepd -less than the 2.73 million boepd recorded in December 2010. Petrobras said on Thursday that there will be no major increases in oil and gas output until after 2014. Despite the cut in the production outlook, current targets would still have Brazil join Russia, Saudi Arabia and the United States among the world’s top four oil producers by 2020. Christian Audi, an analyst with Santander Investment Securities, said in a report that Foster’s pragmatic approach likely helped the company pursue “more realistic production targets” for the coming years. More realistic, though, does not necessarily translate into an improving outlook for the company, said Auro Rozenbaum and Bruno Varella, analysts at Bradesco BBI. “Taken together the higher capital spending and lower production targets appear to be negative,” they wrote in a note to clients after the plan was announced. Shares may keep pricing “with no direction for a while.” Petrobras’ preferred shares, the company’s most-traded class of stock, fell 3.9 per cent to 18.17 reais, its biggest one-day drop in nearly a month and its lowest close in 34 weeks. The investment program for the 2012-2016 period is 5.3 per cent larger than the $224.7 billion plan for 2011-2015. Despite the discovery of some of the world’s most promising oil fields and the largest-ever stock sale in 2010, the company’s shares are worth less today than in October 2007, when the first of the giant offshore “subsalt” finds was announced. While the share price fell, oil markets were muted in response to Petrobras’ output cuts, with Brent little changed from on Wednesday. That could be a sign that rising output of shale oil and gas in North America and the threat of a world economic slowdown has made traders and oil consumers less concerned about future petroleum supplies. from gulf today.