Petrobras yesterday announced its Strategic Plan for the 2017 to 2021 period, featuring two main indicators. The goal is to reduce the recordable incident rate – an industry indicator that measures all kinds of accidents and incidents – from 2.2 per million work hours of company operations in 2015 to 1.4 in 2017 and 1 in 2021. The financial target is to cut the company’s net debt to cash flow ratio from 5.3 in 2015 to 2.5 in 2018.

By establishing two top-priority metrics in Petrobras’ management, the idea is to ensure significant advances in safety indicators while accelerating the company’s financial recovery in the shortest possible time.

“Over the next two years, we will be concentrating on restoring Petrobras’ financial solidity, as an integrated energy company focused on oil and gas. Across this plan’s whole five-year horizon, our goal is to fix the company and establish unquestionable governance and ethical standards in order to sustain growing but realistic production, enabling it to invest and position itself in the transitional processes that the global energy market is going through,” said the company’s CEO, Pedro Parente.

Improving accident indicators will demand a cultural change and a focus on security measures. To this end, Petrobras will launch a new program, called “Commitment to Life,” involving its senior management, to reinforce safety in processes and guarantee the integrity of facilities and systems. It will be based on risk assessments, a system of consequences for deviations from standards, and integrated actions.

One of the main initiatives to ensure that these targets are achieved will be the adoption of new management and cost control tools, especially zero-based budgeting. Through this instrument, the company’s spending will be reviewed, maintaining expenses considered essential to the business and avoiding linear cuts that could harm operations.

In addition, performance targets for operating spending up to supervisor level will be redoubled, and there will be monthly evaluation meetings. The Strategic Plan foresees an 18% reduction in relation to the first estimate for this spending over the 2017-2021 period. These expenses will now total US$126 billion, around R$27 billion lower than the initial estimate. Compared with the 2015-2019 plan, the reduction will be approximately R$16 billion or 11%.

The new plan also maintains the intense pace of partnerships and disposals, which in the next two years are expected to amount to US$19.5 billion. This result will be achieved through growing strategic partnerships in the Exploration and Production area, as well as Refining, Transportation, Logistics, Distribution and Sales. Petrobras will also be withdrawing from biofuel production, LPG distribution, fertilizer production and petrochemicals. The strategy is to adjust the company’s participation in the natural gas segment and reorganize its equity stakes in the electricity market.

The company plans to invest US$74.1 billion between 2017 and 2021, down 25% from the previous plan. However, total estimated investment generated by Petrobras’ projects will be US$40 billion over the next 10 years, demonstrating that despite the lower volume of its own investments, the company will leverage significant investment by other companies.

The Exploration and Production segment will account for 82% of Petrobras’ own investment. The Refining and Natural Gas area will receive 17%, and the company’s other areas will represent 1%. The production target in Brazil for oil and liquid natural gas is 2.8 million barrels per day (bpd) for 2021. This will require the start up of 19 production systems between 2010 and 2021.

The sustainability of the company’s production curve has been ensured by a combination of ever greater improvements in operational performance and the application of new technologies. The average time to construct an offshore well in the Santos Basin pre-salt has fallen from approximately 152 days in 2010 to 54 days this year.

Resource savings obtained from advances of this kind have enabled an average extraction cost of less than US$8 per barrel of oil equivalent, much lower than the industry average of around US$15 per boe. Furthermore, the wells already connected to production systems installed in the pre-salt are highly productive, producing as much as 25,000 bpd per well, far above initial projections.

In 2017, Petrobras plans to start up its Tartaruga Verde and Mestiça projects, in the post-salt layer of Campos Basin, as well as Lula Norte and Lula Sul, in the pre-salt part of Santos Basin, and the Libra extended well test. The following year, Berbigão, Lula Extremo Sul and Búzios 1, 2 and 3, all in the pre-salt, will start operating.

In 2020, Petrobras plans to start up another three pre-salt operations – Búzios 5, Libra Pilot and Sépia – as well as Module 1 of its Marlim revitalization project, in the Campos Basin post-salt. Finally, in 2021, the company expects to start up Module 2 of the Marlim revitalization project and its Parque das Baleias integrated project – both in Campos Basin – as well as Itapu and Libra 2.

Seeking to ensure value creation, which is one of its operating principles, Petrobras will continue to implement its strategy of disciplined capital use and high shareholder returns in all its projects, prioritizing high reliability and predictability. It will also work to guarantee the sustainability of its oil and gas production, by incorporating volumes already discovered, maintaining its disciplined use of capital.

Within the 2017-2021 Strategic Plan’s time horizon, Petrobras will consolidate its financial recovery, guaranteeing its production growth and capacity to increase its investments. In the longer term, the company will have a prudent and sustainable trajectory, guided by business and ethical principles, and a long-term vision in the financial, environmental and social areas. It will be one of the best companies to work for, where merit is the basis for recognition and development. Petrobras will continue to be Brazil’s largest integrated oil and gas company, and it will increase its participation in alternative energy.