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25

Petrobras Cushioned from Oil Price Fluctuations

Petrobras foresees no cooling in demand for oil products in Brazil and no price cuts in the local gasoline and diesel market despite tumbling world oil prices

Petrobras foresees no cooling in demand for oil products in Brazil and no price cuts in the local gasoline and diesel market despite tumbling world oil prices.

Petrobras is partially cushioned from fluctuations in world oil prices as it gets about half its revenues from fuel sales on the domestic market.

The price of crude has dropped by more than half from its record high of $147 in July and is now around $65 a barrel.

The firm's fortunes were boosted last year with the discovery of huge oil reserves beneath a thick layer of salt below the ocean floor which analysts say could contain 50-80 billion barrels of oil.

Extracting the 7-km (4.5 mile) deep oil will require investments of hundreds of billions of dollars -- cash which will now be harder to find as banks and investors prefer to keep their cash firmly in hand.

Barbassa said he was confident in the viability of the subsalt reserves despite the capital required to access them because oil supplies would tighten in the coming years as existing wells run dry.

"Costs have risen throughout the industry which will mean a smaller supply in the future, so from that point of view, looking at subsalt, there's nothing to worry about," he said.

The director said that the company's earnings would be unaffected by the fall in oil prices because sales on the local market were in the local currency, the real.
A researcher at the governmental Energy Research Company (EPE) said last month that exploiting the subsalt oil would still be financially worthwhile with crude prices below $70 per barrel.

Author: Jo Amey