Petrobras sees Brazil 2004 oil output up slightly

Brazil's state oil giant Petrobras on Thursday said it expected its domestic oil output to edge up slightly in 2004 despite a 6 percent fall in the first quarter.

Jose Luis Marcusso, Petroleo Brasileiro SA (Petrobras) general manager for strategy, told reporters the production should rise only between 1 and 3 percent from last year's 1.54 million barrels per day, while in 2005 Petrobras should return to its average annual growth of 10 percent registered in the past few years.

He said Petrobras, which accounts for nearly all oil production and refining in Brazil, should end 2005 with an output of around 1.8 million bpd. Domestic output rose only 2.7 percent in 2003 after several years of stronger growth.

Petrobras is expected to bring a range of delayed and new offshore rigs on line at the end of 2004 and early next year.

But Marcusso said growth estimates were preliminary and more precise figures would appear in Petrobras' strategic plan for 2004-10 that the board was expected to approve on Friday. The plan is due for release by the end of May.

Petrobras total output of oil and natural gas at home and abroad rose 5 percent to nearly 2 million bpd in oil equivalent in the first quarter from year-ago levels.

Petrobras Financial Director Jose Sergio Gabrielli also told reporters the company was monitoring rallying world oil prices, now at around 13-year highs, and would raise its fuel prices that have been unchanged for a year, if global energy values stabilized at high levels.

"If these high price characteristics persist, we will have to raise domestic prices," Gabrielli said.

Petrobras late Wednesday posted a 28-percent drop in first-quarter net profit due to lower prices for its fuel, the drop in domestic output and higher crude extraction costs.

Petrobras shares were flat in early afternoon trade, underperforming the broader market's 1.2 percent rise, even though analysts said the results were solid and largely in line with expectations.

Many analysts agree the stock is undervalued compared with world oil peers. They see strong upside potential, provided Petrobras' strategic plan pleases investors.

One of their concerns is that the government has de facto control over the prices of most widely used fuels such as gasoline and diesel. By keeping fuel prices low, the state-run company is helping the government to control inflation.

Petrobras last adjusted its gasoline and diesel prices a year ago, when they went down. Analysts say they lagged slightly behind world oil prices in the first quarter and are well behind now, with global energy values at 13-year highs.

Last year, however, Petrobras managed to reap a windfall toward the end of the year when world oil prices fell and its fuel prices remained unchanged.