Pakistan has asked Argentina to submit formal written proposal to provide financing and technical expertise for carrying out the construction of Bhasha Dam project, sources told Daily Times Friday.
Ambassador of Argentina to Pakistan, Rodolfo Martin Saravia who called on Federal Minister for Water and Power and Tourism, Raja Pervez Ashraf here Friday and offered to invest in the Basha Dam and to provide technical expertise for the project.
Ambassador informed minister that Argentina could contribute some portion of investment in the construction of Bhasha Dam project. The minister welcomed the offer to invest in Bhasha Dam and asked to submit formal written proposal regarding the investment and technical expertise so that Pakistan could evaluate the proposal to accept the offer.
Minister said that after the submission of written proposal all the required information would be provided and assured to extend full cooperation in this regard. Pakistan needs $8.5 billion investment for construction of Bhasha Dam project that would generate 4,500 MW electricity.
The Ambassador informed the minister that his country had great experience in hydel and thermal power generation, particularly in construction of dams. He said that the Argentinean investors are also keen to invest in power projects in Chitral and NWFP. The envoy said that they are also looking possibilities of investment in the areas near Basha dam for tourism purpose.
The developed area with all facilities near the dam will attract the tourist from all over the world. The envoy invited the Minister to visit Argentina to meet the investors and discuss with them the avenues for investment.
The minister said that the new political government of Pakistan is fully determined to facilitate the foreign investors and remove all bottlenecks to promote investment in the water and power sector. He said that today Pakistan is facing great challenges, especially in power sector and need about 4,000 to 6,000 MW additional power per day to meet the growing demand of electricity. He said that the country is now focusing on hydel and coal power generation and run of river projects.
The power sector in Pakistan has great potential and the investment in this sector will be welcomed. While discussing the tourism sector, he said that the government is planning to take effective measures to promote tourism in the country and there is proposal to set up budgeted hotels and motels in the potential sites for the tourists. He said that joint ventures projects to promote tourism would also be welcomed.
Brazil and Argentina have agreed to work together to build a nuclear submarine, laying the groundwork for a South American defence industry, Argentina's media has reported.
Brazilian Defence Minister Nelson Jobim and his Argentine counterpart, Nilda Garre, discussed plans last week to form a bi-national company to construct the submarine and could convene a South American Defence Council in Brazil in October, Jobim said.
South American militaries are fundamentally "deterrent" rather than "expansionist," he said minutes before leaving Argentina on Sunday.
"But that deterrence power can only be exercised if there is behind it a regional military industry that makes us independent of foreign supplies," the newspaper quoted Jobim as saying. A spokesman for Argentina's Defence Ministry had no comment on Sunday's report, and a spokesman for Brazil's Defence Ministry was unavailable.
The project to build Latin America's first nuclear submarine would combine Argentine experience crafting the sort of compact reactor that could power the vessel with Brazilian access to other necessary parts, including nuclear fuel, the reports said.
Jobim travelled to France in January to explore buying a Scorpene class diesel submarine that could be used as a model for the sub. Brazilian President Luiz Inacio Lula da Silva announced USD 540 million in new funding for Brazil's nuclear sub and uranium enrichment programs last year.
Silva and Argentine President Cristina Fernandez agreed in a meeting last week to cooperate in enriching uranium for nuclear power and to consider building a shared reactor.
Capitalizing on its large crude oil reserves, which is second only to Venezuela in South America, Brazil has increased its offshore oil extraction efforts. Well-developed infrastructure, an ongoing deregulation process, market reforms, and privatization process have created a positive environment for energy investment in Brazil. New Country Industry Forecasts from Frost and Sullivan's Economic Research and Analytics team addressing the Brazilian Energy Industry reveal that there are bright prospects in the Brazilian onshore and offshore oil markets in the areas of automation, predictive and preventative maintenance techniques, pipeline inspection and repair.
These are supplemented with opportunities for offshore support services including bases, boats, and helicopters. There could also be openings for third-party shared services.
If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the latest political, economic, and social analysis of the Brazilian Energy Industry then send an e-mail to Jose María Jantus, Latin America Corporate Communications, ERA, at jose.jantus@frost.com with your full name, company name, title, telephone number, e-mail address, city, state, and country. We will send you the overview by e-mail upon receipt of the above information.
Due to the partial privatization of the energy industry, the Government still holds the reins in key areas such as pipelines and generation ownership, as well as ownership of local distribution companies. Although this partial reform has created uncertainty in the industry, it has gone a long way in removing market barriers to distribution.
While previously consumers were forced to buy electricity from within their own state, privatization has enabled industrial and commercial consumers to source electricity anywhere from the country. This flexibility was extended to residential consumers in 2005, driving up competition, as this system allows consumers to buy electricity directly from generators.
"For instance, Petrobras' (a state-controlled oil company) decentralized procurement activities allow its various business units to procure directly or through its Materials Procurement Department (MPD)," says Srinivasa Reddy N.S., Research Analyst for the Frost and Sullivan ERA group. "This will help the supplier establish business cooperation directly with the materials procurement department for the supply of machinery and equipment."
Brazil strengthened its energy policies after implementing privatization programs and energy reforms to meet its growing energy needs. It introduced the renewable energy policy in 2001, which is encouraging the purchase of more than 3,000 Mega Watt (MW) of renewable energy by 2016.
The Government has also innovatively leveraged the country's position as the world's largest producer and exporter of ethanol by implementing its national alcohol program, Proalcool. This program mandates the use of biofuel in transportation and is likely to help phase out all automobile fuels generated from fossil fuels such as gasoline.
The Brazilian biofuel segment is expected to become a leading participant in the international market, as an increasing number of signatories of the Kyoto Protocol are turning to biofuels in order to reduce emissions. Investors in the biofuel sector will enjoy ample government support in the form of tax incentives.
The Petroleum Regulation Act of 1997, another effort at energy reform by the Government, encouraged private sector participation in the oil and gas industry in exploration, production refining, and distribution.
Brazil is the leading producer of renewable energy and is anticipating newer technologies for energy generation, efficiency, and flexibility. The Government launched the $2.50 billion 'Electricity for All' program in November 2003, to provide electricity from renewable energy sources to over 12.0 million people by 2008.
Brazil also has the sixth largest uranium reserve in the world, with a store of nearly 301,800 tons, and this provides great scope for nuclear power generation.
Brazil's political stability, favorable policy environment, enforcement of contracts, large internal markets, easy access to neighboring countries, and energy integration program with Argentina, Bolivia, and Venezuela make it a favored destination for investment.
"The Government has laid the foundation for strong economic growth by improving the external solvency and liquidity indicators as well as fiscal and public debt position," notes Reddy. "The increasing macroeconomic stability can help sustain economic growth and may have a positive impact on energy demand."
In line with the expected economic growth rate of 4.0 percent from 2008 to 2013 in Brazil, the energy supply is likely to continue increasing at a fast pace till 2020. This growth is likely to be spearheaded by electricity and renewable energy resources.
Another factor driving the growth of the Brazilian energy industry is the country's favorable demographics. Brazil is the most populous country in Latin America, and the majority of its population is located in urban areas. The penetration of power consuming devices and growing automotive fleet in urban markets are having positive impacts on energy demand.
El Gobierno argentino anunció su intención de prohibir a Repsol YPF y al resto de petroleras en el país la exportación de combustibles líquidos, gasolina y gasóleo y ordenó que los precios de estos productos vuelvan a su coste del pasado 31 de octubre.
De esta manera, y por el tiempo que decida el Ejecutivo, la venta del petróleo refinado al exterior no se podrá realizar, por lo cual el combustible se volcaría así al mercado interno, que sufre un déficit de estos productos y un aumento considerable de precios, según denunciaron funcionarios de distintas provincias y expendedores, explicó la agencia de noticias argentina Telam.
Esta medida responde a la necesidad de medidas en contra de las fuertes subidas de los precios en surtidor en las últimas semanas. La la Secretaría de Comercio Interior, que dirige Guillermo Moreno, se basó en la ley de abastecimiento como herramienta para cerrar las fronteras los combustibles líquidos, con el argumento de que las petroleras privilegian la exportación y no están satisfaciendo debidamente la demanda local.
"Hay muchos problemas en el interior", argumentaron fuentes allegadas al funcionario, citadas por el diario argentino 'La Nación'. Aun así, el Estado dejará de recibir ingresos por las retenciones a las exportaciones que las petroleras no podrán hacer y las empresas dejarán de percibir los ingresos, cada vez menores, que tenían por sus ventas al exterior.
Por su parte, las estaciones de servicio tendrán más combustibles para vender, pero a precio más bajo; por lo tanto, caerá la rentabilidad, que venía en alza junto con los precios de los combustibles y los consumidores volverán a acceder estos productos a un precio más barato, explicó 'La Nación'.
REUNION CON LOS PETROLEROS Moreno se reunió ayer con los Repsol YPF y el resto de petroleros y "allí les anticipó que la decisión estaba tomada, que hasta que no estuviera normalizado el mercado interno, no iba a extenderse ninguna autorización para la exportación de combustibles líquidos", confió una fuente anónima.
Actualmente, para que las petroleras puedan exportar deben pedir permiso a la Secretaría de Energía. "De ahora en adelante, no habrá más permisos para vender al exterior hasta que el mercado interno esté totalmente normalizado", aseguró la fuente.
"No hay ninguna resolución. No se darán permisos, y nada más", resumieron fuentes cercanas al secretario de Comercio. La novedad fue bien recibida por los dueños de estaciones de servicio, que ahora tendrán, se supone, todo el combustible que necesiten.
REACCIÓN DE LAS PETROLERAS En las petroleras, en cambio, se reaccionó con cautela. "Estamos analizando la medida", fue el comentario mas escuchado entre los directivos, citados por 'La Nación'. Las petroleras tenían en la exportación de productos refinados un nicho de negocios en un mercado devastado por las continuas regulaciones.
Entre los analistas del sector energético hubo críticas a la medida. "El consumo interno está desbocado. Sube a razón de un 20% anual y con los precios más bajos será aún peor", aseguró un consultor, mientras que otro dictaminó que "va a haber un problema en la venta mayorista de petróleo, ya que se acentuará la reducción de ingresos de los refinadores, y éstos buscarán trasladársela a los productores".
Venezuelan President Hugo Chavez presided Friday at the opening of a regional petroleum summit in Cuba, pressing his efforts to counter U.S. influence in Latin America and the Caribbean by offering cheap oil.
Chavez, who wants to use Venezuela's vast oil reserves to help create a "confederation of republics" free of U.S. interests, called on regional leaders to band together against the failed "dictatorship of world capitalism."
Opening the Petrocaribe summit in Cienfuegos, a southern coastal city about 150 miles from Havana, Chavez said his plan should go beyond mere financing mechanisms and suggested that some countries repay the oil with social services.
Chavez on Thursday suggested the summit could pave the way for other countries to repay the oil under plans modeled on Venezuelan agreements with Cuba. Cuba repays by providing doctors and other health professionals who offer free services in impoverished areas of Venezuela.
He also called for creating an international fund to promote alternative energy sources.
"Despite the Yankees, our gas is at the service of Venezuela first, and next to our brothers in the Caribbean," Chavez said in a reference to the United States.
Venezuela has the largest oil reserves outside the Middle East and is the fourth-largest supplier of crude to the United States.
Chavez spoke as leaders studied the Petrocaribe pact under which his country provides fuel to countries around the region through long-term, low-interest financing.
Chavez blasted Washington's proposals for free trade pacts.
"Free trade doesn't exist," he said. "What exists ... is a dictatorship of world capitalism." He said Petrocaribe is based on fairness and promoting social equality — not profit margins.
Venezuela's president also paid tribute to his friend and ally, the ailing Fidel Castro, who before failing ill had been the central figure at such events.
The 81-year-old Castro has not been seen in public since ceding power to his younger brother Raul following emergency intestinal surgery 17 months ago. But Chavez met behind closed doors with him for "an emotional" 2 1/2 hours Thursday, official media said.
Although both Chavez and Raul Castro gave Friday's opening remarks, it was the more talkative Venezuelan who was center of attention during the daylong summit of Petrocaribe, created in 2005 as an alternative to Washington's unsuccessful Free Trade Area for the Americas and encompasses 16 Latin American nations.
Venezuela provides about $5 billion to countries in the region, according to Chavez, who promotes Petrocaribe as part of a larger effort to create a regional confederation from Argentina to Cuba that will help counter U.S. influence.
Driven by record melting of the polar ice cap and potential oil riches, Russia this summer asserted its right to land beneath the Arctic Ocean by completing a flag-planting mission at the North Pole seabed. Now, Britain is moving the hunt for oil and gas to the South Pole, planning to lay claim to huge tracts of the Antarctic. The Foreign Office is drawing up a submission to the United Nations for more than one million kilometres of seabed in the south Atlantic. The basis for the claim is that Britain can claim sovereignty under the British Antarctic Territory.
The news of the planned UK claim in Antarctica has raised the spectre of a battle over the southern polar region, which is disputed in part by both Chile and Argentina. Chile staked a claim to a portion of Antarctica with the UN Commission on the Limits of the Continental Shelf on October 22 in the face of a May 2009 deadline. Argentina has also signalled its intention to make a claim, which is expected to include territory surrounding the British-owned Falkland Islands.
“The resources are getting tighter and tighter, the technology is getting more sophisticated and the prices are very high and this makes the hunt for oil more attractive,” Fadel Gheit, an oil analyst at Oppenheimer and Co. in New York, told New Europe on October 23.
The UK has Margaret Thatcher to thank for winning the Falklands War in the early eighties, solidifying Britain’s presence in a region, which is understood to have huge oil reserves under the sea.
Gheit said it is irrelevant whether the UK has a legitimate claim to the region. “I’m not sure about legitimate. There so many illegitimate claims that are being enforced by brute force or arm-twisting or by whatever ... The UK has a foothold into the Falklands Islands and finding a pivot,” he said.
Fadhil Chalabi, executive director of the Centre for Global Energy Studies in London, cast doubt over the accessibility of future oil reserves in Antarctica. “The question is how much oil this could bring to the world -- new oil,” Chalabi told New Europe on October 23. “The real bulk of oil reserves is in the Gulf, in the Middle East, and I don’t think that finding new oil in the poles is going to change much the geography of oil. You have to keep in mind the amount of potential reserves and the cost ... because bringing oil from the poles is very costly.”
BP said it was too early to consider oil exploration in Antarctica, but the company is open to the possibility. “I’m not aware of any plans at the moment,” BP spokesperson in London, Robert Wine, told New Europe on October 24. “We look at opportunities all around the world and consider them on their merits when they are available and I guess it’s the same in this case. If the opportunity ever arose (in Antarctica),” he said.
However, all claims to the territory are theoretical because it is protected by the 1959 Antarctic Treaty, which aims to preserve the frozen continent's fragile environment from commercial and military exploitation. Nevertheless, the countries involved want to safeguard their interests by submitting their claims for the energy rich-region.
Environmental campaigners say the hunt for oil in Antarctica poses a threat to the southern polar environment, one of the world's last remaining pristine ecosystems. “It seems unbelievable that a government like the UK that says it’s committed to fighting climate change would want to look for new fossil fuel sources in an area as pristine as the Antarctic. It’s very disappointing,” Ben Stewart, press officer for UK Greenpeace in London, told New Europe on October 24. “In the UK we have more tide, wind and wave power than anywhere else in Europe; we don’t need to go down to the Falklands Islands for energy resources. It exists on our island but we are not exploiting it at the moment and we think that’s what our government should be doing.”
The issue for Greenpeace and environmentalists and indeed anyone that cares about climate change is the extent to which governments are investing time, money and political capital in trying to extract more fossil fuels rather than directing those efforts towards exploiting renewable resources. But the issue of energy, such as the hunt for oil in the South Pole, is highly political. “You cannot separate oil from politics. Everywhere around the world, oil is the centre of gravity now,” Gheit said.
Bolivia in bind with gas policy President Evo Morales "nationalized" the country's crucial natural gas industry last year by forcing foreign companies to accept new contracts and pay sharply higher taxes.
The industry has gone along without public protest, but it has made a statement with dwindling exploration budgets.
Now it appears the Bolivian government has a problem: It has orders for more natural gas than it's able to produce. At the end of August, the Bolivian energy ministry announced it curtailed supplies to two major customers so it could ship more gas to Brazil to fulfill a contract there.
"The government is in a bind," said Carlos Miranda, a former Bolivian energy secretary who now consults for private companies.
The source of this difficulty is that spending on exploration and production has sunk from $604 million in 1998, to to $198 million in 2006, according to Carlos Alberto López, also a former energy secretary who now consults for the gas industry. Now Morales is demanding that the companies reverse themselves or face expulsion.
Bolivian Vice President Alvaro García Linera said the companies have to put up more money or face the loss of their contracts.
"They want to earn extraordinary profits," García said. "That won't happen anymore in Bolivia.
"If they don't want to invest, we need to know. Other companies want to invest. The rules are clear. For the first time, we have contracts approved by Congress."
Bolivia has been banking on rising revenues from its enormous gas reserves.
Morales has begun to spend the money from higher taxes on gas production to build roads, schools and health clinics in a country that is the poorest in South America. Producing more gas would provide much-needed money to develop Bolivia, and fill the growing energy needs of neighboring countries. Several years ago, when the foreign gas companies were investing heavily in gas exploration here, it appeared that Bolivia could meet the energy needs of Brazil, Argentina, Chile, Uruguay and Paraguay. It drew international players, including Petrobras, Repsol YPF, British Gas, BP and Total to explore here.
But now, with doubts about future supplies from Bolivia, Brazil and Chile are looking into spending hundreds of millions of dollars to build LNG re-gasification plants that would allow them to import liquefied natural gas brought by tankers to meet their growing needs.
"The policies in Bolivia are starting to backfire," said Sophie Aldebert, a Brazil-based analyst with Cambridge Energy Research Associates. "Bolivia is losing potential markets."
Bolivia's production problems have also imperiled a $2.5 billion project that would more than quadruple exports to northern Argentina by 2010. Argentina is now considering whether to build an LNG import terminal near Buenos Aires with Venezuela's help.
Decline in drilling
Morales, who took office in 2006, won the presidency by tapping into the long-held suspicion of foreign companies.
His move to "nationalize" the holdings of international energy companies was a wildly popular decision.
It wasn't the traditional nationalization since he didn't take over the companies. Instead, he forced them to accept new contracts and an increase in taxes and royalties from a total of 50 percent to 82 percent.
Morales won his battle but now needs to find a way to bring back drilling.
Petroleo Brasileiro, a private-public company better known as Petrobras, announced recently that it was scrapping plans to build a $1.3 billion petrochemical plant in Bolivia that would have used locally produced natural gas.
And Petrobras has shown no interest in accepting the government's offer to drill for more gas in a partnership that would be 60 percent owned by the Bolivian state energy company, YPFB.
Officials with Petrobras have declined to talk about those decisions, as did Repsol YPF.
Investment by all of the gas companies is expected to drop again in 2007, said Miranda, the former Bolivian energy secretary. He said the companies are doing the bare minimum to keep from losing the contracts.
Growing demand
Bolivia's problems became clear when the government announced on Aug. 31 that it would halve its gas exports to Argentina and cut off deliveries to two large Brazilian power plants so that it could supply more gas to Brazil on a higher-priority contact.
It also needs more gas to meet the needs of Bolivia, where demand is rising 12 percent per year.
Looking ahead, Bolivia has two deals that would require it to expand its exports by 36 million cubic meters of gas per day by 2010.
But companies operating in Bolivia need to find the gas. As a result of the August ultimatum, Bolivian Energy Minister Carlos Villegas recently announced that over the next year, companies here plan to spend $254 million to find and produce gas. Independent analysts say that figure is exaggerated and have been unable to confirm the numbers.
"The companies will continue to put more emphasis on squeezing as much as possible out of their existing investments/fields than on new exploration in the next year," said López, who noted only three drilling rigs are active in Bolivia.
Russia and Iran?
One option for Bolivia is to bring in new companies.
Gazprom, Russia's state energy company, has been sniffing around Bolivia.
Last week Iranian President Mahmoud Ahmadinejad pledged to help Bolivia develop its natural gas reserves but offered few details.
And Petróleos de Venezuela, the state energy company better known as PDVSA, has announced it will invest heavily in Bolivia to increase production.
By the Dow to rack up a set of solid gains. Oil stocks charge to higher close. Crude spikes following OPEC's revised output guidelines
The break-out came at the end of a choppy session during which energy stocks rarely ventured more than a percentage point from their previous close, despite the Organization of Petroleum Exporting Countries' decision to boost output to ease upward pressure on oil prices.
At the close, the Amex Oil Index was up 1.4% at nearly 1,388 points. The Amex Natural Gas Index rose 1.6% to 493 and the Philadelphia Oil Service Index rose 1.5% to finish at 283 points. All three indexes had spent much of the day wallowing in negative territory, sitting out a triple-digit rally by the Dow Jones Industrial Average. The Dow made fresh headway on persistent expectations that the Federal Reserve will cut rates on Sept. 18.
OPEC, meeting in Vienna, said it agreed to raise production quotas by 500,000 barrels a day from Nov. 1. The decision raises the cartel's official output level to 27.2 million barrels per day, or roughly 40 percent of the world's oil demand. It also incorporates the 900,000 bpd OPEC was already pumping in excess of its previous 25.8 million bpd quota.
On the New York Mercantile Exchange, crude for October delivery rose 79 cents to $78.28, its highest close ever. The contract had earlier dropped as low as $76.92, offering what initially was a muted reaction to OPEC's new production targets.
Among individual stocks, the big integrated oil companies posted the strongest gains while refiners lagged. Valero Energy Corp. was the only name on the Amex Oil Index to post a decline, down 0.2% at $67.90 a share.
Top gainers in the group included the ever-volatile Hess Corp., up nearly 3% to $62.44 a share, and the biggest of the oil companies, Exxon Mobil Corp. , which added 2.5% to close at $86.94.
U.S.-traded shares of Royal Dutch Shell rose 1.5% to $81.05. The Anglo-Dutch oil giant was reportedly headed toward an agreement with authorities in Argentina that would allow it to reopen a refinery there.
According to Dow Jones Newswires, Shell agreed to spend $60 million on cleanup and investments at its Doc Sud facility after Argentina's Environmental Secretariat shut it for alleged pollution and paperwork violations. It was not yet clear when final approval to resume operations at the plant would be given.
Other big moves in the sector included a 4.8% jump by oilfield equipment maker National Oilwell Varco Inc. to a new all-time high of $136.94 a share.
El presidente de Shell Argentina, Juan José Aranguren, denunció que el Gobierno argentino le frena una millonaria exportación de combustibles y rechazó los cargos penales que pesan sobre la petrolera anglo-holandesa por desabastecimiento.
Juan José Aranguren, dijo que "tenemos pedidos de exportación desde junio que no han sido autorizados todavía, a pesar de que hemos cumplido con todas las disposiciones vigentes", aseguró en una entrevista que publicaba ayer el diario La Nación, de Buenos Aires.
"Hicimos todo, pero no nos dan permiso", aseguró Aranguren, para quien el Gobierno de Argentina que preside Néstor Kirchner pide un castigo de cuatro años de prisión por desabastecimiento deliberado de gasóleo. Aranguren apuntó que está frenada la exportación de 120.000 litros de gasolina por valor de unos US$ 70 millones, lo que pone a Shell en una situación de no poder cumplir con la Ley de Abastecimiento. "Si yo no puedo sacar la gasolina de las refinerías, tengo que bajar el nivel de proceso de crudo (...) y va a bajar la producción de gasóleo", puntualizó.
En declaraciones que publicadas por otros diarios de Buenos Aires, el empresario sostuvo que Shell es objeto de una persecución por parte de las autoridades. "En 2006, tuvimos 256 inspecciones contra 30 (hechas) a toda la competencia, 23 multas contra cero, aunque nuestra participación en el mercado es del 13%. Este año no fue diferente", aseguró al diario El Cronista. El empresario remarcó que este año "faltó gas" por el plan de racionamiento que aplicó el Gobierno para afrontar problemas energéticos, "pero nadie" del Ejecutivo "fue preso por desabastecimiento".
La relación entre Shell y el Gobierno está complicada desde 2005, cuando el presidente argentino, Néstor Kirchner, llamó a la población a boicotear los productos de la petrolera por haber aumentado los precios de sus combustibles, prácticamente congelados por las autoridades a pesar del fuerte aumento del precio internacional del crudo. El mercado argentino de venta de gasóleo, cuyo mayor consumidor es el sector agropecuario, está controlado en un 57% por la petrolera hispano-argentina Repsol YPF.
Woaw, Kirchner pensando en reactivar el negocio del Uranium. Un mercado poco mas que complejo, en el que se conforma de una cadena de negocio con distintos actores para que se cierre su operatividad.
Se supone que hoy en día, los reactores nucleares de nueva generación carecen del uso del enriquecimiento de uranium, al menos es así como se venden de cara a la sociedad para propiciar su viabilidad de instalaciones en ciertos puntos geográficos. Los tradicionales reactores nucleares, Hoy dia solo son demandados o por Irán , o lo mas curiosos por el Presidente Hugo Chávez ¿ habrá este tenido algo que ver, en motivar que los argentinos re abran el negocio? La verdad. No lo creo, ya por si mismo los argentinos son listos para hacer negocio. En cambio, podría ser esta la oportunidad para que encontraran alguna sinergia con los venezolanos y explotar sus propias reservas de uranio. Woaw, esto huele cada vez a mas azufre ¨ palabras de Hugo Chávez, en su ultima intervención en Naciones Unidas.
También es cierto que el sector se esta reorganizando, una de las principales empresas a nivel internacional son de Australia y Canadá, entre las que tenemos si recuerdan a Energy Resources , BHP Billiton y a Rio Tinto.
El negocio fuera excelente si jugaran en llave, brasileños-venezolanos-argentinos, en lo personal poco probables. Llamémosle exceso de soberbia o falta de humildad, lo que impiden los grandes proyectos de asociación, aquí solo se mueven proyectos cuando una de las partes inyecta enormes cantidades de dólares, como consecuencia secuestrado un proyecto por el que la otra parte poco empeño le pondrá al No sentirlo propio. Veremos como evoluciona este proyecto, ya que las politicas que le rodeen al relanzamiento de programas de producción de Uranium, tienden a ser algo delicadas. Sobretodo en la actualidad internacional. |by Manuel Torres Laveaga|
Argentina volverá a producir uranio en mayo 2008, tras 12 años
Argentina reactivará la extracción de uranio, luego de 12 años de inactividad en las minas, en el marco de la creciente demanda mundial y un déficit local de energía que este año golpeó duramente a su industria, dijo el miércoles el secretario de Minería.
El Gobierno está poniendo en marcha un proyecto que contempla la activación de nuevas explotaciones y la reapertura de otras. La primera será "Don Otto," en la norteña provincia de Salta.
"Mayo es una buena fecha de compromiso de extracción de mineral de uranio en la mina Don Otto en Salta," dijo a Reuters el secretario de Minería, Jorge Mayoral.
La mina, que estuvo inactiva durante 26 años, producirá alrededor de 30 toneladas anuales de mineral de uranio.
"Va a significar sustituir la importación de mineral de uranio en el orden del 25 al 30 por ciento de la demanda actual que requieren las plantas nucleo-eléctricas en Argentina (de alrededor de 120 toneladas)," precisó el funcionario.
Argentina es miembro del selecto club de naciones que dominan la tecnología del enriquecimiento de uranio y que producen combustible para alimentar reactores nucleares. Pero el país dejó de producir uranio en 1995 en medio de una caída de los precios internacionales y pasó a depender de las importaciones.
En los últimos años los precios del metal se dispararon a alrededor de 90 dólares por libra y desataron una fiebre por su explotación, y con los problemas del calentamiento global como telón de fondo, la energía atómica volvió a los primeros planos.
Argentina decidió enfrentar su crisis, que durante el invierno le redujo la producción industrial a la mitad, con un ambicioso plan que incluye la finalización de su tercera central nuclear y la construcción de una cuarta.
Actualmente, junto a Brasil es el único país de la región que tiene en marcha un programa de este tipo.
OFERTA Y DEMANDA En las últimas dos décadas, la producción mundial de uranio logró seguir el ritmo de la demanda, y las necesidades globales fueron satisfechas con inventarios de gobiernos atesorados tras el fin de la Guerra Fría.
Pero ahora, al mismo tiempo que crece la demanda, las reservas se están reduciendo, por lo que las empresas pusieron a Sudamérica en la mira. Hasta el momento, Brasil es el único productor del metal de la región.
"Argentina despierta un gran interés para el desarrollo de exploración de muchos metales, y el uranio no le va en zaga," dijo Mayoral.
Los mayores productores mundiales de uranio son Canadá y Australia. El proyecto de la mina Don Otto, que está a cargo en su totalidad de la estatal Comisión Nacional de Energía Atómica (CNEA), generaría unos 100 empleos en forma directa y unos 300 en forma indirecta en una población de unos 5.000 habitantes, según el funcionario.
El presidente de Petrobras, José Sergio Gabrielli, explicó a inversores y analistas de Wall Street la estrategia de la empresa para 2020 y el plan de negocios para los próximos cinco años, durante los que se invertirán US$ 112.400 millones.
Plan Estratégico Petrobras 2020 (.pdf)-(BajaeNergy Papers & Docs).Casi medio centenar de expertos atendieron por conferencia telefónica o en persona a la presentación que el presidente de la empresa brasileña de energía hizo en la sede de la Bolsa de Nueva York, junto al director de Relaciones con los Inversionistas, Almir Barbassa.
Gabrielli resaltó que una de las ideas principales que quería transmitir a los inversores es que Petrobras "está en condiciones de ser, en 2020, una de las cinco mayores compañías integradas en el mundo". "Esto es un gran desafío porque hoy, según diversas clasificaciones, estamos entre la décima y la décimo quinta", subrayó el ejecutivo.
Gabrielli resaltó que se prevé un incremento de la producción de petróleo y gas, desde un volumen actual equivalente a 2,3 millones de barriles diarios de crudo, a alrededor de 3,5 millones de barriles en 2012 y a 4,1 millones de barriles en 2015. También aumentará la capacidad de refinado, de un equivalente a 2 millones de barriles diarios hasta 3 millones en 2015.
Preguntado acerca de las impresiones que estaba recogiendo de los inversores después de presentarles el plan estratégico, Gabrielli señaló que están "realmente preocupados por el incremento en los costes". Agregó que "Cualquier petrolera o empresa de energía enfrenta en estos momentos un incremento de costes en el proceso de producción", subrayó.
Explicó que los inversores también se muestran preocupados por los retornos del capital invertido, "en cuanto a la calidad de la cartera de proyectos que tenemos". Para responder a esas inquietudes, Gabrielli señaló que el plan incluye una amplia inversión en exploración y en infraestructura y que, si bien desde el punto de vista financiero o contable puede percibirse una reducción en retornos de capital, "a largo plazo, estamos añadiendo valor a la compañía, porque crecemos más rápido que los costes de capital".
Gabrielli tiene previsto más contactos con la comunidad inversora en Nueva York y Boston y después viajará a Londres.
Petrobras salta al ruedo de las grandes petroleras mundiales
La brasileña Petrobras anunció inversiones por US$ 22.500 millones anuales en promedio entre 2008 y 2012. La empresa aspira a convertirse en una de las cinco mayores corporaciones de energía del mundo, con exportaciones de 762.000 barriles de hidrocarburos por día (bpd).
El ambicioso "Plan de negocios 2008-2012" de la principal empresa de Brasil asciende a US$ 112.400 millones y prevé alcanzar en 2012 una producción de 3,5 millones de bpd de petróleo y gas equivalentes. Se trata de un aumento de cerca del 50% respecto a la producción de 2006.
"Seremos una de las cinco mayores empresas integradas de energía del mundo y queremos ser los preferidos de varios públicos de interés", dijo el presidente de Petrobras, José Sergio Gabrielli, en una rueda de prensa. Ese avance será "un gran desafío", pues la petrolera brasileña se ubica hoy entre las 10 ó 15 mayores del mundo, dependiendo del criterio de análisis, agregó.
La prioridad en la estrategia internacional será la "cuenca atlántica", lo que incluye América Latina, la parte estadounidense del Golfo de México, el oeste de África y Europa. Entre los principales proyectos de exploración y producción la empresa figuran campos en Argentina, Nigeria, Angola, Venezuela, Colombia, Turquía y el Golfo de México, para extraer 436.000 bpd al 2012.
El volumen de hidrocarburos que Petrobras aspira a colocar en los mercados equivale a la mitad de lo que hoy produce Libia, un prominente socio de la Organización de Países Exportadores de Petróleo (OPEP).
De las exportaciones de 762.000 bpd proyectadas para 2012, unos 256.000 bpd serán de crudo producido en el exterior y otros 158.000 bpd serán enviados desde Brasil directamente a los clientes. Además, la empresa prevé refinar en el exterior 348.000 bpd de crudo en sus propias refinerías, como la comprada en Pasadena (EE.UU.), y otras que pretende adquirir.
Petrobras exportó en 2006 unos 386.000 bpd de petróleo en promedio, cifra superior en sólo 30.000 bpd a la cantidad de crudo liviano y productos que importó para equilibrar su mercado. Con las nuevas inversiones en refino espera reducir las compras de derivados como lo ha hecho con las de crudo.
Del aumento en las inversiones, US$ 13.300 millones se deben a nuevos proyectos y otros US$ 10.900 millones a aumentos de costos.
El 87% de las inversiones será colocado en Brasil y el 13% afuera.
En el quinquenio, Petrobras espera obtener una generación propia de flujo de caja neto (después de dividendos) de US$ 104.400 millones, suficiente para cubrir el 93% de la inversión. Además pedirá prestados 19.400 millones de dólares adicionales para completar la financiación del Plan.
Petrobras, short for Petróleo Brasileiro S.A., is a semi-public Brazilian oil company headquartered in Rio de Janeiro. The company was founded in 1953 mainly due to the efforts of the Brazilian President Getúlio Vargas. While the company ceased to be Brazil's oil monopoly in 1997, it remains a significant oil producer, with output of more than 2 million barrels of oil equivalent per day, as well as a major distributor of oil products.
The company also owns oil refineries and oil tankers. Petrobras is renowned for its leadership in development of advanced technology from deepwater and ultra-deep water oil production. 55.7% of Petrobras' Commun Shares (with vote right) is owned by the Brazilian government, however privately held portions are traded on Bovespa, where it is part of the Ibovespa index.
Petrobras (PBR) Q2 2007 Earnings Call August 15, 2007, 10:00 AM ET
Executives
Almir Guilherme Barbassa - CFO and IR Director José Sergio Gabrielli de Azevedo - President and CEO Celso Fernando Lucchesi - Business Strategy and Performance
Analysts Christian Audi - Santander Frank J. McGann - Merrill Lynch Mark McCarthy - Bear Stearns Gustavo Gattass - UBS Pactual
Presentation
Unidentified Company Representative
Ladies and gentlemen, thank you for standing by and welcome to the Petrobras Presentation and Conference Call to discuss the 2007 Strategic Plan and Business Plan and the Second Quarter 2007 Results. At this time at the conference call, all lines are in listen-only mode. Later, there will be a question and answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded.
Today with us we have José Sergio Gabrielli, CEO; Mr. Almir Guilherme Barbassa, CFO and IR Officer and Mr. Celso Lucchesi, Strategy Management Director. As always, other Petrobras representatives are here. We have a simultaneous webcast on the Internet that could be accessed at the site www.petrobras.com.br/ir/english. Additionally, on the webcast registration screen, you may download and print the presentation and download the financial market reports. Also, you can send your questions to us by Internet, click on the icon "Question to the Host" anytime during this event.
Before proceeding, let me mention that the forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Petrobras management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Petrobras and could cause results to differ materially from those expressed in such forward-looking statements.
Finally, let me mention that this conference call will discuss Petrobras' results prepared in accordance with Brazilian GAAP. At this moment, we are unable to discuss any issues related to U.S. GAAP results.
The conference call and the presentation first will be conducted by CFO and Investor Relation Officer, Mr. Almir Barbassa. He will comment on company's operating and financial highlights and the main events during the second quarter 2007. Following that, our CEO, Mr. Gabrielli will comment upon 2020 Strategic Plan. Afterwards, we will be available for answers and any questions you may have. Mr. Barbassa, may you begin please.
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
Good morning ladies and gentlemen. It's our pleasure to be here with you once more to discuss the second quarter results. To start with, we have here P-52 that shall be come on stream by October this year the first oil and we'll grow in production up to the 108,000 barrels of oil per day capacity.
I will give you one minute to read this disclaimer. And let's go for the results. The production, the domestic oil production, was pretty much stable between the first and second quarter of this year. We have some new, some platforms recently installed like P-34 and FPSO Capixaba and FPSO Rio de Janeiro that has a production increase, but at the same time we have some maintenance in a few platforms that kept the average production of the quarter, the second quarter little smaller than the first one. But what's important here is that in June we had a higher production when compared with May. So it seems that we are in a good trend. The oil prices for E&P was very positive in the second quarter and this is going to be one of the reasons to explain the good results we have in the quarter.
The refining in Brazil performed very well. We kept the utilization of the capacity we have in Brazil, we kept about the same level we have been using the domestic oil in the volume process in Brazil. What's important here is the sales volume. We have increased in this quarter very significantly when compared with the first quarter and we had the best... better quarter than last year as well. This was mainly due to the high season demand. We had a very big season crop in Brazil and lots of diesel were used, and the economy growth in Brazil is one of responsible because more fuels were demanded in the period. So this is going to be a reason why the downstream had a good performance in the quarter as well.
International price and other average of realization price in Brazil grew in the second quarter, mainly caused by two factors. First off... the two is the international oil price was higher, so we have some of the oil products sold in the Brazilian market. They are attached to the international oil price. So the average realization price in Brazil grew because of that. And the second reason was the foreign exchange. The appreciation of real as we sell in real. We had more dollars for the same amount of real.
The income statement we had because we sold more oil product in the second quarter. We had a higher net revenue as well as cost of goods sold increased. But we had lower operational costs, which lead us to a higher EBITDA. The EBITDA growth was very strong and all this led us to a very higher net income by about 65% increase. This was caused by higher price, higher volumes sold and lower operational costs and in the first quarter we had exceptional costs mainly due to the pension plan. And in the second quarter, we had also the benefit of interest on capital declared. So we had an increase on net income because of that.
Built... operational expense as I said was lower because of mainly two factors here. The exploratory costs that happened in the first quarter did not happen in the same level as in the second quarter. And the pension plan ex the costs we had in the first quarter did not happen again in the second. So this has helped to reduce the operational costs.
The E&P operating profit had a sizeable increase mainly due to the price as we saw at the beginning. The price that E&P has received during the second quarter was much higher than the first one. There were a small effect on cost of goods sold but they presented a sizeable increase on the revenue even having a slightly lower production, they downstream by taking into account the prices of international oil. The international oil price, as I said, caused to increase the domestic oil price and then we have an increase on revenue because of that and as they sold more volume of oil product this has helped to increase the total profit as well. And the cost of goods sold by volume and importing more expensive volume to be processed in Brazil caused more to the downstream but they succeed to have a larger operating profit in the second half as well. Second quarter.
The balance between export and import was positive when you take the volume but was not presented our best when taking into dollars and this is due to the fact that the product we export has lower value per barrel than the product we import.
Usually we import light oil and export heavy crude oil and we export fuel oil and import diesel, for example, as oil product. So the balance barrel per barrel is against us. Finally, the net income was better because of price, because of volume sold as we sold more we had higher cost of the goods sold but the operational expense was reduced and then increased our net income reaching 6.8 billion reals in the quarter which is about the same level of last year second quarter.
The leverage rate of Petrobras is kept on a low level and was reduced by 2 percentage points compared with first quarter, due to the fact that we have current appreciation in Brazil and deferring that in this case was reduced when measured in local currency. But that in this period you can see here we have a free cash flow as well that has helped to reduce the leverage of the company by increasing the availability. What the service to nation here is that in this first half of the year we used more than 12 billion reals to pay dividends and to pay debt. Part of the debt we paid was not matured yet; we anticipate payment. And this has caused a reduction in cash availability when compared with the beginning of the year by about 10 billion reals but we extended more than that and pay dividends and the financial debt.
Investments was very high in the first half of the year. We almost reached 20 billion reals that means about more than $10 billion at today's foreign exchange rate in Brazil and this $10 billion, 45%, was through exploration products. What means we are putting more money where we make more money. And I would, first off, that was addressed to exploration. In domestic lift in costs, we have a slightly increase when we measure it in dollars but if we take the -- weight our costs there were a slight decrease, and so because of increase in this cost in this second quarter was the real appreciation. And this, if we measure, results the government... having the government included we have an increase but this is because we paid, the government according to the international oil price. As international oil price, as you can see the range price went from $57.8 to $68.8, $11 increase. This caused us to pay more as government.
And then in the refining costs, we have the same case. We had cost increase when measured in dollars but when expressed in reals there were a decrease in cost. This can show you how this two costs. They are very important costs for the company. They are lifting costs in the refining costs are behaving when measured in Reals and most of these costs are paid and run in reals. And you have here the foreign exchange rate of... when translated into dollars; these costs are constant in reals grows in dollar.
This is a comparison with all the big oil companies that speak for itself. There's not need to explain. Petrobras performed very well when compared with the first quarter of this year.
The question-and-answer will be last before... after presentation of Mr. Gabrielli. Would you please Mr. Gabrielli?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Good morning. I am going to try to give you highlights of the new Strategic Plan that we approved in our Board decision last Monday and this strategic Board... this Strategic Plan try to define or redefine our vision for 2020 and how we vision the Petrobras at that time and how we are planning to prepare the company to face the new times in 2020
First, we think that we are going to see several different features in 2020 that must be taken into consideration by our Strategic Plan.
Questions related to environmental pressure, climate change, cleaner energies and biofuels we think there are going to be much more important in the environment that we are going to behave and the environment that we are going to make business in 2020 than today. We must be prepared and we have to be active in dealing with those types of problems; otherwise, we are going to face more problems than to use the opportunities that we can have.
A second set of problems that are going to become more important for us are the questions of governance, transparence, different stake holders affecting the company, social responsibility, corporate social responsibility and issues that are not as important in the past but are going to become more and more important in the corporate world.
A third thing that we would like to highlight in our scenario for 2020 is that we are going to face a continuous process of growth, especially driven by the growth in China, India and Brazil. In the oil sector and the gas sector, the growth of the China and India economies is going to affect in a way that they are going to become important importers of crude oil. However, given the current planned build capacity for refining, they also are going to become net exporters of diesel and gasoline.
The third thing... the fourth thing that we would like to highlight is that even though we are going to face a much cleaner and renewable energy matrix by 2020, oil and natural gas will continue to play a very important role in these energy matrix. We don't expect any decline in reserve/production ratio worldwide. We don't except any decline in production of oil and gas. We don't expect a big decline in the energy matrix of the fossil fuels sources of energy. However, in the liquid distribution fuels, we expect a much larger share of biofuels. We are expecting around 25% of the current demand for liquid for transportation is going to be supplied by biofuels by 2020.
As we are going to move ahead and move more and more in unconventional oil and more difficult areas for exploration, technologies are going to be more important in a strategic position. The ones that can command good technology with very cost efficient technology would have a better competitive position in the future. And as only 30% of the current proven reserves in the world are under concession rules, 70% are in the hands of national oil companies or with limited access to those reserves. We continue to think that geopolitical problems are going to play very important role in the oil and gas market in 2020.
In this scenario that yields more complexity and requires from the companies more and more adjustments to more difficult conditions, we have a vision for Petrobras. We want to be... we will be one of the five largest integrated energy companies in the world and the preferred choice among our stakeholders. There are some features that I would like to highlight in this vision for Petrobras. First, we want to grow. We have... we are in different rankings today between the 10th of the 15th company in different ranking. We want to move ahead. We want to move up, scale up in the rankings to go to the 5th first group of companies. We are giving signs that we want to grow, and we are going to grow and we think that we are going to grow more than the others. Second, we want to grow and be the preferred choice, which means that we are going to be growing but we want to be better and we want to be perceived as a better company. And third in this vision, we have the idea that we have different stakeholders. We have to be good and big for different stakeholders some times with different and contradictory objectives. This would require from us a balancing capacity that is going to be very hard to deal with, but this is the challenge that we are putting to ourselves and, as you know, challenge is our energy.
The main character is the features that we wanted to link to those... to this vision is we want to have a strong international presence. We are going to be more and more international company. We want to have a world scale prominence in biofuels. We want to keep and continue to be known as for our operational excellence in management, technology and human resource. We want to be a very profitable company. We want to keep the profitability as one target important for us. We want to be recognized as a benchmark in social and environmental responsibility and we are being committed to sustainable development. In the vision that we are presenting, we are increasing the demands on ourselves, but we think that those challenges are going to be important to prepare Petrobras to face the realities of 2020.
Our mission is to operate in a safe and profitable manner in Brazil and aboard with social and environmental responsibilities, providing products and services that meets clients' needs and that contributes to the development of Brazil and the countries in which we operate. We want to be good in what we are doing. We want to be the best that we can be in what we are doing.
We have some challenges, special challenge, capital discipline is one important theme. As I am going to show you later on, we have a CapEx of $112 billion for the next five years, 2008 to 2012. With this vision and this mission, $112 billion is one of the largest CapEx in the world right now, more than some companies that are much bigger than Petrobras.
We are put into ourselves some targets. We want to reduce 1%... at least 1% of our investment costs. Though we are considering in our calculations and hence we are going for $1 billion. We want to reduce this each year in 1% as a result of attrition. Reducing delays, reducing costs. 1% is not massive but 1% is $1.1 billion. We want to streamline our inventories, we want to have a better management of our inventories, we think that we can minimize inventories of products and inventories of materials that we use in our process. We want to decrease operating and administrative costs and we want to manage our portfolio in a more efficient way. We think that we can do better in the capital appraisal [ph] value. And we have been prepared to do that.
We see that one of the main constraints for the growth of the company is human resource. Not only Petrobras but several different companies are facing problems in the human resources area. And we want to emphasize and bring to the strategic level the human resources question. And we want to be recognized as an international benchmark for personnel management in the energy segment, having our employees as our most of valuable assets. We have developed policies for retaining talent that attract new talent and to move the capacity of the company to manage big projects. In this plan we have 454 big projects. We have thousands of projects in this line. And we need personnel; we need people to manage those projects.
Social responsibility: we also want to be a world-class reference for social responsibility. We think that the corporate social responsibility is one feature that's very important today for the sustainability in the long run of any private company in the world. We want to be recognized as a champion of social responsibility. On climate change we have programs, for sure we produce oil and we produce natural gas we can not minimize the carbon contents of natural gas and oil, but we can add more efficiencies in our process and in some of our products. And we want to reduce the total emissions that we can provide.
And then in the technology we want to be the world class contributors of technology that leads to the sustainable growth of the company: in the oil and natural gas, petrochemicals and biofuels industry.
Given those challenges, how's our strategy? Our strategy is, as the three pillars that we have already announced: integrated growth, profitability, social environment responsibility. Different from the previews that is planned right now we are emphasizing our business interest rather than the institutional organization of the company. Here we are defining strategies for business... national and international... that are going to be led by different parts of the company of the systems Petrobras, but are put together in the same type of business.
In the upstream business we want to grow our production in oil and gas reserves sustainably, being recognized for excellence in E&P operations, in Brazil and outside of Brazil. In the downstream and distribution and retailing, we want to expand integrated operations in refining, commercialization, logistics and distribution with focus in the Atlantic Basin. We are focusing right now our downstream activities in the Atlantic Basin. Brazil and outside of Brazil we want to develop and lead the Brazilian natural gas market and operate on an integrated basis in the gas and electric energy markets with a focus in South America. We are talking about integrated market for gas and energy in South America. We are talking in Brazil, Argentina, Paraguay, Uruguay, Bolivia, Ecuador, Peru, Venezuela... we are talking about South America. We want to expand operations in the petrochemicals in Brazil in South America on an integrated base with the Petrobras groups of business. This is a very important because what we are trying to do here is give a very clear sign that our extensions through the petrochemical sector is to get more value-added in the integration of this chain, the production chain of petrochemical products. It is movement that we see everywhere... integration of refining, first generation of petrochemical, second generation of chemical... these are very clear movements that we can see everywhere.
And finally, we want to have a very clear statement on our strategy on biofuels. We want separate and give you the idea that we have two different strategies for ethanol and for biodiesel. We want to operate on a global basis in biofuels for commercialization and logistics. Leading the domestic production of biodiesel and expanding participation in the ethanol segment.
Now, we are showing in very clear way that we have five different strategies for business, different segments that we are trying to develop.
Now projections, we have a view that the world would be growing at 4.3% a year, portions priority [ph]. Brazil... Latin America is going to grow 3.4, 3.9, a little bit less than the world, and Brazil at 4.0. Our estimation of foreign exchange is going to be 2.18. A comparison with the previous plan shows that we have pretty much kept the same type of environment that we had before. And the price as we have most of our revenues coming from the Brazilian markets, we are keeping the link, the masters link of the Brazilian prices and the national price, which means that we are going to keep the international price on average following the Brazilian prices, following the international price.
To project our revenues we are taking the same price $55 per barrel in 2008, $50 in 2009, $45 in 2010 and $35 2011 on. This means that we want to... we have a kind of marginal cost for expansion of the industry around $35 in the long run.
As I mentioned before, our CapEx is $112 billion ahead of $12.4 billion, $65 billion in E&P, 58% of the total capital. $13.8 billion in exploration, we are increasing very much our expenditures in exploration. We are saying that are our main growth driver is going to be the organic growth. We are going to be more, investing more on the exploratory rigs because we think that we can get better return in the exploratory rigs.
We have $29.6 billion in our refining, transportation, commercialization, $6.7 billion in gas and energy; $4.3 billion in petrochemicals; $2.6 billion in our retailing sector; $2.6 billion in our corporate investments, basically health, environment and safety, information technology and research and development. We have $1.5 billion in biofuels. $97.4 billion in Brazil, $15 billion outside of Brazil. 29% growth in comparison to the previous plan. 32% growth in upstream, 29% in refinery technology and commercialization, 30% increase in petrochemicals, 114% in biofuels.
These investments, $112.4 billion of investment, means on average $22.5 billion per year of investments over the next five years. We are going to invest $97.4 billion in Brazil, 65% of local contents, which means that we are going to be demanding from Brazilian producers $63.1 billion. We know that the Brazilian sector is already almost in full capacity. However, we think that they can... the investment in the downstream in the supply chain can speed up and then we can have the sector in Brazil [ph] able to respond to our demands. This is going to increase our demand in Brazil from the current $10 billion to $12.6 billion, which means that we are increasing 26% of the demand in the Brazilian supply.
What's the difference between the current plan and the previous one? $13.3 billion new project. Those new projects are mainly upstream in exploration production projects. More than $10 billion of those $13.3 billion are going to be allocated in exploration production projects. Exploration, our enhanced recovery techniques... for enhanced recovery for fuels with very high degree of exploitation, infrastructure for our production of upstream production and increasing our capacity for production of gas including infrastructure of the gas. Refining, we have faced pretty much an increasing capacity to manage condensate and produce LPG, which means to allow for the growth of the natural gas in Brazil and in petrochemicals, new units in the petrochemical complex in Rio de Janeiro.
We have $10.9 billion of cost increase. As you know, the market is very excited and very muted [ph] right now. We have delays and we have reconst... rebuilt of some of the contracts that we are trying to get right now. And we are expecting around $11 billion of cost increase in the previous plans that we have. $4.2 billion is the result of using a weak currency. Dollar is a weak currency as depreciation of the real right now. And we have... as we have some of our investment in reais, depreciation of the real yields $4.2 billion increase in our dollar denominated CapEx. And we have mainly as a result of the movement in time of some of our projects in the period between 2008 and 2012, we have a reduction in $2.4 billion of the previous project, nothing very significant in terms of strategy of our plan.
We have projects that are in different stages of definition. We have projects under the first evaluation, a conceptual design, base design implementation contract stage. As we move from one stage to another one, the more precise definition of the project sometimes increase costs. As a result of this, we are assuming an increase in $2.8 billion in our project. I am going to be very speed up [ph] in this strategy. But I'll be back in the question and answers if you want me to go in details.
Now production. We keep our 7... more than 7% growth per year until 2012. Our target for 2012 is 3.5 million barrels a day of production in Brazil and outside of Brazil oil and gas. And we think that... and we are projecting the forecast that our production for 2015 is 4.1 million barrels a day by 2015. The main difference that we have right now in relation to the past is in the international production because we have a change in the structure of the production in Venezuela from service contracts to production... partnerships in the production which means that we are going to get dividends and not production from our presence in Venezuela.
In Brazil, we keep the same level of production, 2.8 million barrels a day by 2015, 2.4 million barrels a day in 2012, around 20% above the domestic demand, which means that we are keeping the target of being self sufficient in the Brazilian production of oil until 2015.
Our lifting costs, projected lifting costs, we are projecting for 2012 of $6.13 per barrel of lifting costs without government participation in 2012, 3.5 our international lifting cost without government participation outside of Brazil. This reduction from the current 6.5, 6.6 comes from the increase in production and also in the impact of the foreign exchange variation in relation to the movement of the Brazilian... the reais denominated and U.S. denominative part of our operating cost.
Domestic product. We are projecting a growth of 2.9% a year in our domestic market for our product in Brazil. The market right now is around 1.8 million barrels a day of oil equivalent. We are projecting till 2010 2 million barrels a day, 2.3 million barrels a day by 2015, 2.7 million barrels a day by 2020. The largest rate of growth, the highest rate of growth is going to be on diesel. We think that Brazil would continue to be pretty much a diesel country and we are considering delaying [ph] this whole projection. The substitution that we have already very significant way in the gasoline by... substitution by ethanol in the Brazilian market right now. The Brazilian market is more than 45% of the Brazilian market for gasoline today if provided by ethanol.
The breakdown of the $29.6 billion investment in downstream, we have to highlight that $8 billion is going to be on fuel quality to reduce sulfur emissions. This is not going to add any new capacity. It's going to have only the impact on reduction of sulfur emissions to meet the requirements of the Brazilian market and the markets in the Atlantic Basin. $2.7 billion on conversion to improve the use of the Brazilian heavy oil, $3.9 billion in expansion of our refining capacity; this is pretty much the refinery in the Northeast of Brazil, the refinery at Abrue e Lima and the petrochemical complex in Rio de Janeiro. Now the petrochemical complex is not in here, it is here, I don't think so. It's in petrochemical. Yes.
The flow of product we are going to be producing by 2012 is 2.4 million barrels a day in Brazil, 1.8 we are going to use in Brazil, the throughput in Brazil is going to be 2 million barrels a day, we are going to be importing 2008 thousand barrels a day of imported light oil to blend with our heavy oil and produce the light products that we need in Brazil, we are going to be on oil export, net oil exporter of this country, we are going to be exporting net 5,000 barrels a day, and we are going to be selling to international market 762,000 barrels a day by 2012. Those 762,000 barrels a day would come: 256 from our international production, 296 from our export from Brazil to the markets to our refineries outside of Brazil, a 158 through our exports of crude oils to the world market and through our... throughputs of our refineries outside of Brazil, which means that we are selling 762 of crude oil plus oil products.
On refining costs, we are expecting increase in our refining cost due to the greater complexity of our refineries as we going to add new hydro treatment yields than new coker units. The throughput is going to increase from the current around 2,000 barrels a day... 2 million barrels a day to 3 million barrels a day by 2016, which means that we are going to add 1 million barrels a day of throughput in Brazil... in Brazil and outside of Brazil. We want to increase our market share in the distribution in Brazil from the current 31% to 41% in Brazil from 24% to 36% in retailing business in Brazil.
On the petrochemicals we want to expand our presence in the production, in the first and second generation process. We want to increase our presence in the petrochemical sector adding value to the product of the oil refineries. We want to maximize the use of the occurrence of oil refineries such not only the production, we want also to be important in the development of technology. Today the large majority of the petrochemical production in the world comes from the use of natural gas and/or NASA.
We are developing technology for crude catalyst correcting that may develop the production of petrochemical products from crude oil, heavy crude oil. We are going to use the heavy crude oil that we produce through in-house petrochemical complex it reduce petrochemical product. And we want to develop this technology. And also we want to be very important in the development of technology for biodegradable polymers and biopolymers.
Gas energy; we have a big challenge in the gas energy. First, the current situation of the gas energy in Brazil, the demand of gas in Brazil is 46.3 million barrels a day... million cubic meters per day. We are projecting a growth of 19.4% until 2012. We are going to reach 2012 with a 134 million cubic meters a day of demand. 48 million cubic meters per day is for thermal-electric gas fire plant. However it's important to mention that these 48 million cubic meters per day is a potential demand, it's not an actual demand. As you know Brazil is pretty much a hydroelectric country. 87% of the power generation in Brazil comes from hydroelectric plant, the thermal-electric gas fire plants are dispatched only and only when you don't have enough rain and enough water in our reservoirs which means that you don't have to dispatch the thermo-electric plant a 100% of the time, 100% of the plant.
However, we are considering here the total demand under the assumption that our thermoelectric plant... our Brazilians, not only Petrobras... are going to dispatch 100% of the time, 100% of the system.
42.1 million cubic meters per day is the demand from the industry and we have 43.9 of other users. 134 million cubic meters per day with a very persistent condition that it's a potential demand, is not the actual demand. What we should do, we have to develop a flexible supply.
As you know, the natural gas is different from the oil, require the infrastructure, the building of the infrastructure to bring the molecule from the well to the market. We are increasing the supply, the availability of natural gas from our upstream, from our exploration production. We are going to be supplying to the markets at 72.9 million cubic meters per day. We keep our contract with Bolivia. We have a contract with Bolivia until 2019, 30 million cubic meters per day. We have a 24 million cubic meters per day of take or pay allowing us to transport up to 30 million cubic meters per day. That is the shipper pay that we have with Bolivia. We have 6 million barrels a day... 6 million cubic meters per day of flexibility in the contracts with Bolivia. Plus we are adding regasification capacity in Brazil of 31.1 million cubic meters per day.
In our current plant we have a 20 million cubic meters per day of regasification units that can bring LNG to Brazil when we need it which means that we have 37.1 million cubic meters per day in our supply that continues to burn what's going to happen in our demand. Because 48 million cubic meters per day is potential demand for... that is not actual demand for Petrobras. These are the markets. What's going to be the sales of Petrobras. We think that we are going to sell 57 million cubic units per day in 2008, the 82 million cubic meters per day by 2012 is our sale to the mark.
Power generation. As you know we have several thermo-electric plants in the portfolio of Petrobras. We have the capacity of generating electricity that's greater than what we have here. We have here only the sales, the amount of power that we are selling to the Brazilian market. By 2008 we are going to sell 3.07000 megawatts in Brazil. We think that we can increase these sales to 5.400 megawatts, 3.7 from our thermoelectric plant after we closed the cycle of some of them plus additional capacity of thermoelectricity generation from biomass from bio... from a small power generation facility that we have in our distribution company.
In the biofuels, as I mentioned, we have two strategies that are different. One is for ethanol that in ethanol we want to be participating in the domestic production chain to develop the international markets and our focus is on logistics and sales.
In the biodiesel, however, our strategy is on production of biodiesel meeting the requirements of the Brazilian market and getting all the opportunities to capitalize its opportunities to the international market as well. We also will know that on the ethanol and biodiesel markets, we have a very strong investment in technology development, and the development of technology is going play a very important strategic role in the future. And as such, we want to develop these technologies ahead of our competitors in order to get for us competitive advantage in the future.
$1.5 billion is now our investment in biofuels. Those numbers are important for the Brazilian market. With biodiesel, we plan to be meeting the requirement for 2% with mandatory use of biodiesel in 2008 and 5% of mandatory use of biodiesel by 2013. Ethanol export, we are planning to export mainly to Japan, but not only to Japan, 4.7 billion... 4.7 million liters per year by 2012.
On the financials, we have a reduction on our cost of return on capital employed from 16 to 14. This reduction comes from different source. The first one, I would say, that one very important, is the increase in cost of the investments as we increase the capital. We have reduction on the return. The second one is the fact that we are increasing our investment in exploration, and the result of the exploration is not going to come on stream during the period of our Strategic Plan, come on stream after 2012, which means that we are going to have the investments without the return.
The third reason is that we have investment infrastructure mainly on the natural gas market, which give us opportunity to get the monetization of our reserves of natural gas currently discovered and the future discovers that we may have after our exploratory results. On the other hand, the reduction of the return on capital employed occurs at the same time that our cost of capital went down, which means that the result, final results to our shareholders is equivalent, almost equivalent.
Our long-term funding, we are going to need a little bit more activity on increasing our debt from $3.1 billion average per year to $3.9 billion a year in this plan. Our cash balance is going to be a little bit less. We are going to project a final year cash balance of $3.1 billion, which means that we are going to have a strict control of our cash balance. The leverage here is... the reduction on the leverage ratio from 25% to 20% is pretty much the result of depreciation of the real. In the past, we suffered a lot because our leverage ratio was going up as a result of the depreciation of the real because our assets are in reais and as we had the depreciation of reais, our assets in dollars went down and our leverage ratio went up and appears that we had a very much difficult financial situation. However, in real terms, we didn't have big change in the company. The same thing that is happening right now. As the real is appreciating, the capital in reais becomes greater in dollars and we have a reduction of the leverage ratio as our product changing effect.
The free operating cash flow is going to be around $1.4 billion per year.
The EVA, economic current value-added above the cost of capital is going to be $81.5 billion for this CapEx in the period of 2007 to 2012. $103 billion will be added to the value of the company after the cost of capital in 2015.
Cash uses and source. We are going to invest $112.4 billion plus $11.4 billion of amortizations during the period, which means that we are going to be using after the cash, the operational cash flow $123.8 billion.
We think that we can generate with the price curves that I mentioned in the beginning $104.4 billion of cash flow after payment of dividend. This is after dividend payment. And we can raise from the market $19.4 billion, which means that we are projecting a small increase of $8 billion in our total debt because we are going to be raising $19.4 billion and amortizing $11.4 billion of our debt. We have stronger and stricter targets for health-based environment targets. We have more challenging targets for socio environmental responsibility measurement. We have more strict and more demanding targets for human resources and the impact on the labor market in Brazil is going to be very weak.
We think that this CapEx would imply in the supply chain of the investors... of the companies that are going to give introducing to our demand 228,000 jobs per year on average directly related to the supply chain. The total workforce related to this direct and indirect is going to be something around 917,000 jobs per year. The value added in relation to the Brazilian GDP in Brazil is going to be somewhere around 246 billion reais per year, which is somewhere around 10% of Brazilian GDP.
This is a very challenging plan, but as we say, challenge is our energy. It is a viable plan. It is a reasonable plan and we think that we can make it. Thank you.
Question And Answer Session
Unidentified Company Representative
[Operator Instructions]. Let me check if someone has a question here in the audience. First there.
Unidentified Analyst
On the reserves, do you guys foresee it necessary to support those production targets in 2012 and 2015? Now the second one is regarding debt. You said that --
Unidentified Company Representative
Could you repeat please?
Unidentified Analyst
Sure. The question was regarding the production targets, what amount of crude reserves do you guys foresee to be necessary to support the 2012 and 2015 targets? The second one was regarding the incremental debt load about 8 billion, how much... how do you guys see that being loaded from now to 2012 what's the curve, and with that is the if you guys are looking to extend the maturity of your average life of your debt, thank you.
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
I'm going to leave the debt question to our CFO, and I would talk a little bit about production and proven reserves. Our proven reserves production ratio is around 19 years. We are going to increase our production from the current 2.3 to 3.5 in 2012 and 4.5 in 2015. Our plan is to have a internal recovery rates... how to call it... replacement rate, the replacement ratio about one, which means that we are going to increase our reserves in the minimal and the same amount that we have produced until 2015. And we are probably, this is not our target, but this is our projection that we are going to be above 15 years of the reserve production ratio by 2018.
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
Regarding the financing of the extra $8 billion of cash, we are going to leave it to finance this plan. Petrobras has a long experience to access every different market. And but as we got the investment grade rating the capital market becomes more accessible and a deeper pocket. So, these maybe the main source but would not be for sure the only source. Month long [ph], sometime is more competitive, this is... there are situation as we buy lots of large very expensive products we may get special conditions for ECA financing. DNBS in Brazil is a good source, we saw very competitive price, so we have really very many different opportunities here. Probably the capital market is going to be the one that would be... can have the chance to present the largest growth in the set of sources we have.
Unidentified Company Representative
Another question here.
Christian Audi - Santander
Gabrielli, Christian Audi with Santander. A couple of questions, going back to the point of return on capital employed, you made the point that the drop from 14 to 16 part of it was your cost of capital has gone down, part of it is we have cost going up. I was wondering because that's a recurring question among investors your ability to maintain returns. So, can you talk a little bit more, elaborate a bit more in terms of... we have seen the drop here but is the trend one that should we expect a continuing downward trend or given the nature of the projects we have that maybe we don't yet see because they go beyond 2015 should we maybe expect a turnaround, but any color... additional color that you could, because I think it would be very helpful?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
As you know, if you get production color for any type of oil and gas, we are going to have a kind of hunt, of course, we will reach a peak and then go down. If you get our investment plan, they have the same type of shape, the same shape. We have investments that goes up and then reduce. When you calculate the return on capital employed, we have a cut at the end of the day. And we have these cuts sometimes in each... in some of the products in the peak of the investment without getting any results. The average time between the first indication that you have some volume and the first oil, the average time is eight years. Eight years. Which means that we have, on average, an investment period without return for eight years for big oil prices. When you take, on top of that, cost increases, the capital and the investment during these periods of great event and their path, is going up is growing. A reduce... increasing the capital without the return. Third, when you take in some of the investment that we are making is on infrastructure for your production. The result will come in 15 years. Pipeline, big transportation systems of our production areas, drilling rigs that we are buying that is going to be operating for 10 to 15 years. They are going to have the impact on our return after 2012. And our return on capital employed is calculated as an accounting measure from '08 to '12. I think that's the main reason why we have this reduction.
Christian Audi - Santander
And so just as a follow-up, so, what's the future?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes the future. It is very hard to make an assumption about the future after 2012. As you know, we are putting targets for 2012 and forecasts for 2015. It's difficult to calculate after 2012, it is not those numbers because they are going to depend sometimes on exploratory factors, they are going to depend on the integration of the portfolio of infrastructure and production. There is some delay that we may have in the integration of the different parts of the change mainly on natural gas because natural gas necessarily you have to look at the change from the well to the market and the visibility of something after 2012, today it is not as much as we have until 2012. That's the point that we cannot have these calculations.
Christian Audi - Santander
And just a second question, cost increases continue to put pressure in oil companies, as we've seen here it is also impacting you, can you talk in general terms, do you expect this trend it has been the case in the past five years to continue non-stop, are we reaching a point that maybe plateau, not grow as much as in the past or now should we expect the continuing cost pressures to go on?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Until two to three years ago what we saw in the past was that the increase in the cost of the supply chain would follow the increase in price of oil with two years delay. We had an increase in price of oil two years later you get the impact on the supply chain. In the last three years these delay is collapsing. Right now it's almost at the same time, it is almost contemporary. The increase in price of oil will immediately go through the supply chain. However, in some of the products, we start to see some indications that the capacity is growing and we are maybe finding in some of those products reaching the peak price and we are going to stay plateau of high price during certain time until the production would increase and then we are going to see some price reductions. But we don't forecast these right now. But we think... we don't think that is going to be forever the increase in cost. That's for sure... transfer a part of all your income from the oil companies to the suppliers.
Unidentified Company Representative
And now we have a question from the telephone from conference call [ph].
Operator
Thank you. That question is coming from Frank McGann of Merrill Lynch. Please go ahead.
Frank J. McGann - Merrill Lynch
Yes, good morning. Just a question on the international side. I was wondering if you could give a little bit more color as to the drop. I assume it's because there is less coming not only from Venezuela, but perhaps an acquisition that was built into the prior numbers, but perhaps you could just give a little bit of color on that.
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
On international production, first, we change some of our policies that rather than trying to get some of our reserves through acquisition, we are relying much more now on these plans on actual productivity internationally. Second, we have a change in the structure of the business in Venezuela that right now we have a mixed company in which we are shareholder and we receive dividend from this company... those companies and not... we don't share production; we get dividend. And this affects our production. And third, we have some movement on time of some of our production no longer due. The increased investment is a result of mainly from the idea that we are renting drilling rigs, two drilling rigs for our international activity. I think two, one from Columbia is back in Columbia, the other one in Gulf of Mexico, United States of America.
Unidentified Company Representative
Okay. [Operator Instructions]. Let me check within the audience. Yes, we have another one.
Unidentified Analyst
I think you want to [indiscernible]. Just a question on given that you are increasing your investments in the natural gas segment, can you comment on your pricing policy here, given let's say for the thermoelectric since they don't have fixed volumes, will you charge higher prices here and do you maintain your view that natural gas prices should be aligned to fuel oil prices?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes, we have... we are trying to introduce in the natural gas market in Brazil several types of different types of contracts to allow for the flexibility in the Brazilian natural gas market. We are offering different prices for different contracts. We don't have a general pricing quality. We discuss contract by contract with each one of our purchaser. The idea is to have contracts that are firm commitments that we have to provide a certain amount of natural gas and these are going to have one price. The other type of contract is the one that we may supply certain quantity of natural gas or we may supply the alternative fuel. This is going to have a different price. The third type of contract is that we may supply or not the natural gas, and the third one is the spot market. That's the smaller one. Each one of those have different ID, different types of price.
Also, we are trying to put an idea that we have in the price of gas two different components. One is the return for the infrastructure, which is fixed, pipeline and so on. The other part is the price of the molecule that should be linked to the alternative fuel. That may be fuel oil, may be diesel, may be water. This is natural gas. In the electric power generation market, it's different. In the Brazilian system, you have auction for the supply of energy for the next 2, next 3, next 5 years. There is an auction that the distributors buy energy from the generators, and we had already sold in those auctions around 2000 megawatts and also we have what is called the free market for energy that is going to be when we have access to supply our excess demand, the ones, the consumers, the big consumers that don't have a contract, they can go to this market and then the price is going to be decided. We actually don't have really one pricing policy for natural gas and energy because the market is very complex.
Mark McCarthy - Bear Stearns
Hi, this is Mark McCarthy from Bear Stearns. Just following up on Frank's question, you discussed the reasons for the changes to the international targets, but they are staggering, right? They are a 30% drop from what you were working with before. I am assuming that there is an error in the table that was presented of about 230,000 barrels a day. But even with that, the drop in 2015 is 320,000 barrels a day. That's 30% or something like that. So most notably, I mean if you are now... are you not considering Venezuela? Have you pushed out the exploration success in Angola? Can you specifically address that's not... that's something material. The other question that I had is every strategic plan has some blend of cost increases and new projects. It seems to me that each new strategic plan has come with less and less detail. This strategic plan came out with no divisional breakdown of where the new projects or what really the new projects are. Can you tell us within upstream, which is 50% of the spending, what is new and can you tell us how much of the $13 billion or so of CapEx growth is attributable to that. And I know we have Celso here who is... if you are the architect, he is the engineer. If we could maybe hear from him on some of the specific numbers.
Celso Fernando Lucchesi - Business Strategy and Performance
Mark, first I think the numbers really not reach to 285, but then we... I don't know exactly number, but Angola, for example, is one very clear example. Angola, for example, is a very clear case that what I was talking about. We are increasing our investment in Angola, but we are not expecting any results in the next five years because we have in exploration here.
Unidentified Analyst
[Question Inaudible]
Celso Fernando Lucchesi - Business Strategy and Performance
No, no, no. We never had... production, we never had... 1 million, we have 500 something.
Unidentified Analyst
[Question Inaudible]
Celso Fernando Lucchesi - Business Strategy and Performance
Oil equivalent, the oil equivalent. Okay.
Unidentified Analyst
[Question Inaudible]
Celso Fernando Lucchesi - Business Strategy and Performance
Yes, that's true.
Unidentified Analyst
[Question Inaudible]
Celso Fernando Lucchesi - Business Strategy and Performance
Yes, I know I cannot give you the details of the notes, because I don't have it right now. But what I know in general trend is that we have really an increased investment in exploration international. Angola is one big example of that. Our investment in Angola are going to increase a lot, but the results are going to come on stream maybe next five years, not less than that. Our investment in Nigeria is going to... in Nigeria, you have pretty much... we are not operators. We have to follow the operators. The cost overruns [ph] are really amazing in Nigeria, much more than anywhere else.
Unidentified Analyst
[Question Inaudible].
Unidentified Company Representative
No, it's not a cost to recover, because we have participation.
Unidentified Analyst
[Question Inaudible].
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
No, no, no, Kabul is there. Kabul was 100,000 barrels a day. That's it. Linked to the refinery. There is no big deal in Kabul.
Unidentified Analyst
[Question Inaudible].
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
It's not Kabul that's the problem. The problem mainly is that we had 65% of our production in Venezuela as out of our production, because right now the consequently in Venezuela is that we have a dividend policy, not anymore the production.
The investment increased, and the productions really declined, and we have also not relied any acquisition of reserves, proven reserves. We are moving our investments in our international in exploratory rigs which means that we may have nothing. But we have to rely in our knowledge.
Unidentified Analyst
It doesn't make a whole lot of sense to me, to be honest with you. You have 200,000 barrels a day within the next five years that's out of the plan?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
We can't now to give you the numbers right now. I don't have the number in my mind... on top of my mind.
Unidentified Analyst
I don't know, Celso, if you have any thoughts about this. If you can shed some light?
Celso Fernando Lucchesi - Business Strategy and Performance
They are levitated, at this blue number.
Unidentified Analyst
The green one is wrong, right, it's 55.12... 515...
Celso Fernando Lucchesi - Business Strategy and Performance
It's 515.
Unidentified Analyst
Right. Which is down from 740 before. So that's... the drop is 30%
[Multiple Speakers].
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Certainly, there the drop is big and I think the main reason is, the delay, the changing in time and the Venezuela situation, that's what I am assuming. I don't have the numbers right; I don't have it on top of my mind. Unless, because it has... [indiscernible]
[Multiple Speakers].
Unidentified Analyst
And just following up on which new projects have been added to E&P and how much of the $13 million goes to it?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Rigs exploration. Exploration and what we call recash [ph], which is enhanced operational recovery.
Unidentified Analyst
And of the $13 billion how much is attributable to it, so you have no new projects? You have higher spending... higher exploratory spending. The additional project in exploration?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
It really the exploration is not aboard in different countries at Turkey, Angola, United States then several countries in Latin America. In Brazil there are much more aggressive campaigns to... for result and see what the digest rate has trapped the concessions we have in Brazil. That's the growth and also the cost of the exploration especially training is reflected also in these numbers. Exploration is --
Unidentified Analyst
So exploration is now defined as a new project?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes. That always was new project? New exploration... new activities in exploration.
Unidentified Analyst
Okay. Do you know which ... what... of the $13 billion how much is that?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Sorry, we call new projects, the project that were not released the last direction of the plan one year ago, but exploration, in the same concession we drilled a well, you have the result, and you can forecast that the cost for evaluation $8 million. The next well, we have to review this numbers and the planning of the concession. So, new projects could mean new wells in the old concessions that we previously hidden forecast, okay. What should you do is try to get the numbers... precise numbers and then release the... I hope that's until the end of this actions.
Unidentified Analyst
I am trying to get the numbers here?
Unidentified Company Representative
Okay I think we have a questions from Internet again... from conference call, sorry.
Operator
Thank you our next question is coming from Keil de Barros of Meresk [ph]. Please go ahead.
Unidentified Analyst
Yes. I would like to ask you about the assumptions that you made on the blend curve and could you please elaborate a bit on that?
Unidentified Company Representative
Would you repeat again please louder?
Unidentified Analyst
Yes. I would like to ask you about the assumptions made on the price of oil the blend curve that you presented?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
We actually we are taking in the long run a little bit of below what is being considered in the market as the marginal cost of expansion which is the cost for the new areas of exploration of non-conventional oil and the cost... the increasing cost in the conventional oil in areas that are more difficult to introduce, to bring to production in a commercial way. This is between $35 and $40 per barrel, and we are taking $35 in the minimum level for the long run. In the short run we are increasing the price of our projections, not projections, but the numbers that we are using for our revenue calculations because the prices of the last two years were above... much above what we had in our previous plan. And we continue to be in the lower bracket of the forecast of most of the analysis worldwide. January the 1st, I think the first quarter of the distribution if I remember the cost that we have in our strategic plan of several dozens of different type assets.
Unidentified Analyst
Okay. Thank you.
Unidentified Company Representative
Okay, you have a question here in the audience.
Christian Audi - Santander
Christian Audi, again, with Santander. Gabrielli three question, in terms of production when we look at the 2015 target there was a small drop in domestic gas production. I was wondering versus what the target was in the last plan if you could explain what changed there. And secondly, if you could give us an update as we look out 2010 and '11 any updates on 2.55, 2.57, 2.56 and the very last is when we look at discoveries. I know there is no news in terms of pre-solds you continue to do the testing. Am I correct to assume that this plan, from an infrastructure point of view, does not incorporate anything at all related to pre-sold?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes, you're right. In this plan we are not incorporating any big changes that we may have to face if we have factors and that results at that. 3.65 to 3.67 we are redesigning the process of bidding. We have already some offers in the new model and we are facing all as to very high price. We are in discussions. We're for sure we assume that they have at least one year delay for 3.65 and 3.57. We are trying to anticipate the 3.56 to get the production out of the 3.56 to cover part of the production of 3.65 and 3.67. In 2012, I don't have the specific number but I guess that is result of somewhat delays on the first gas of Santos, probably that's going to see impact in 2012. But I am not sure. I don't have the specifics but I assume. I know that we have some delays in the first gas in Santos and then this probably would affect 2012.
Christian Audi - Santander
And so just as a follow up, how concerned are you in that 2010, 2011 period of really having, from an oil production growth point of view, a pretty flattish sequential growth if we can really get 56 accelerated?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
No, because there no... P-65, P-67 would affect 2011, not 2010, end of 2011, I think. There is no impact on 2010. And if we can get P-56, then we are going to have the production of P-56 at the end of 2011. Once we head on 2010 and on the previous plan, I don't think that there is big change in the previous plan. I don't think there is any big change while the platforms are coming on stream in 2010. To have the platforms... the previous one. I don't think they are a big change for 2010. That's the best --
Unidentified Analyst
[Question Inaudible]
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
40K. The difference is 40,000. No new.
Unidentified Analyst
[Question Inaudible]
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes, 2010 we have only P-57 here, Jubarte Phase II, that's delayed, indefinite delay.
Unidentified Analyst
[Question Inaudible].
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Yes.
Unidentified Analyst
Almir, you have been the moneyman at Petrobras for a long time. You have got now more than $100 billion to spend, and in two years time, that number has gone up double. About... I can't remember... maybe a year ago for the first time you outlined a 5% buyback program by Petrobras. Buyback shares of the preferreds. The discount of the preferreds is now for some reason a staggering 15% and yet there is no mention of this $100 billion plan of an idea to buy back some stock, why?
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
Yes, we approved the $2 billion buyback, share buyback at the end of last year and it prevails for one year. So we have till the end of the year to see what to do.
Unidentified Analyst
[Question Inaudible].
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
No, no. It's not a question. It is a time of implementation we have for such a program. Reviewing this according to the new plan, we are going to have more expenditure and the reason we had to do share buyback was the availability of cash. As you saw, we are going to need an extra $8 billion of cash to support this new plan. So we have to consider altogether if we are going to implement or not. The chances are lower at this moment. Costs have increased. We are going to spend $10 billion more due to the costs. Since last year, since we released the plan of 7/11, now in the plan 8/12 is an extra $10 billion. And the project for the equity return is about the same, although the loss has reduced 2 percentage points. Our capital cost has decreased, so they pay to the equity... the return to the equity is kept and our average return has been very high. Of course, this plan is based on very conservative price. As we go to the real world selling oil price $60 or $78 a barrel, we are make much more money investing in new projects than buying back. So I believe for the average is better to keep growing and producing more.
Unidentified Analyst
Last year I asked you the funny question which came first, the oil price change or the CapEx change. I work out a little bit of math to make sure that when you make your oil price adjustments, everything balances out. So you are saying really that there is no room in the budget, right? But arguably, if you change the oil price by $1, you'd pay for the whole buyback program. And arguably, working with $35 Brent long term or even with your curve, you said it yourself, it's very conservative. So to me, if you are realizing a lower return on equity... return on capital, might not that be an opportunity to take some of the equity capital off the table?
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
Yes, there is --
Unidentified Analyst
Especially when the discount is at 16%.
Almir Guilherme Barbassa - Chief Financial Officer and Investor Relations Director
Yes, I am not saying that we are not going to buy some share back, but because we have... we still have some chance to improve the return on equity by increasing our debt. Our leverage is very... is below our target. Our target was to be between 25% and 35% in the leverage. We are below 20%. So there is room there to increase that and, in this way, we can improve even further the return on equity. So, but there is an important change here is the extra expenditure we are going to have in the next five years.
Unidentified Company Representative
In general numbers, we have around 4% of the company we are paying as dividends or payout 4%, around 4% plus between 7%, 8% of growth per year. We are saying to our shareholders that we are giving back to shareholders in terms of value 4% in dividend plus 8% growth per year plus the reduction of capital cost, which gives more return to the shareholders.
Unidentified Company Representative
Okay. The last question here.
Unidentified Analyst
Just two final questions Gabrielli. Ethanol, you made it clear that you're strategy is not to be a producer but rather to facilitate domestic producers and participate on the logistics and infrastructure. I was just curious why not pursue the production side of things where the rationale is there. And then lastly, on the distribution side, you have very aggressive targets for BR's market share really jumping a lot over a period of five years. Is there any... could you elaborate a little bit? Is there any major strategy change because that's a big jump?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
No, we are not planning acquisition in the BR side. No acquisition. There is only organic growth. We had already an acquisition on... it was only a part of the pyramid in the northeast of Brazil... northeast of Brazil. On the ethanol, the Brazilian ethanol market, producing market, is very consolidated in Brazil. There are more than 300 producers, private producers, more than 300 right now. We have probably around more double this number of producers of ethanol in Brazil. Petrobras is not a producer of ethanol. We have never produced it, never know... we haven't had one with smaller experience in production of ethanol, but we have right now mainly with the Japanese trading companies some structures that we are trying to get up to the production that we call a bio-energetic complex. There are new producers dedicated to ethanol more than to sugar that are going to produce mainly to the exports markets and not to the domestic market. And that's going to be linked to long term supply contracts. Petrobras may have, in those types of projects, a small share participation to guarantee the long-term contracts but not as a operational partner of the production. On the biodiesel it's different because biodiesel is a market that's being due right now, a very infant type of market.
Unidentified Company Representative
Okay you have another question from conference call.
Operator
Thank you. Our next question is coming from Gustavo Gattass of UBS Pactual. Please go ahead.
Gustavo Gattass - UBS Pactual
: Hi. Just wanted to follow-up on, I think it was Christian's question regarding, in fact that nothing is there. I was wondering here in the event that things go wrong disgusting, in the event that you have some sort of positive news on the exploration side on this one. I know it may be too early but can you give us an idea of how you would actually see on the strategic plan shifting to accommodate a shift towards that sort of production or is that something that's probably going to be even beyond the next CapEx plan that we are going to be seeing next year. And if you do have any updates on that field or even cash at held [ph] could you actually share them with us?
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
The presold is not in our plan because the numbers in that we have are not final. And we are not considering any of the facility that we need to develop, and any of the new technology that we have to apply. This has... will require a completely different, probably if the numbers are confirmed completely different solution and production plan. It's not in our current strategic plan.
Gustavo Gattass - UBS Pactual
Okay. No further questions.
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
I cannot say things going to affect, because we don't know, we don't know.
Gustavo Gattass - UBS Pactual
Okay. Thank you.
Operator
Okay no further questions in the audience as well. Okay, I request to Mr. Gabrielli for closing remarks.
José Sergio Gabrielli de Azevedo - President and Chief Executive Officer
Well, I will plans... I am trying to get the numbers that Mark McCarthy asked and they could not get us numbers but I'll send to you... to anybody that wants to know.
I would thank you for your attention. I hope that we can respond all your questions and I know that we are going to have more and more questions which is very good. But we are now open to continue release of all the information that we may have for your enlightenment. Thank you.
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Petrobras salta al ruedo de las grandes petroleras mundiales
El 87% de las inversiones será colocado en Brasil y el 13% afuera.