Petrobras, the Brazilian state-controlled oil company, has reported a 42 per cent increase in net profit for the first quarter compared with a year earlier, helped by soaring petrol prices.
The bumper net profit of R$10.99bn ($6.7bn) for the three months that ended on March 31 comes as the company is clashing with the government over the price of fuel, which policymakers worry will drive up Brazil’s inflation rate.
“An increase in the price of Brent crude, which reached an average of $104.97 per barrel during the first quarter compared with $76.24 a year earlier, increased revenues from exports and production,” the company said.
The rise in profits comes as Petrobras embarks on one of the largest investment programmes in the global oil exploration and production industry, as it seeks to capitalise on new discoveries off the southeastern coast of Brazil.
The company plans to invest $224bn by 2014, aiming to double domestic oil production to more than 4m barrels per day by 2020.
In the first quarter, Petrobras had invested nearly R$16bn in exploration, production and refining, the company said.
But while the government wholeheartedly supports Petrobras’ investment programme, it is also struggling to contain inflation.
This led it this week to declare that it would force Petrobras to cut fuel prices by up to 10 per cent.
Petrobras said production of oil and gas had risen in the first quarter of 2011 to about 2.6m barrels a day, up 3 per cent on the same period last year. Revenue was up 9 per cent to R$54.8bn.
However, Petrobras was also forced to import about 17 per cent more petroleum in the first quarter of 2011 than in the same period last year.
Domestic demand for petrol has risen as drivers in Brazil have switched from using ethanol, a popular biofuel whose price has surged this year because of a poor sugarcane harvest.
As a result, Petrobras has had to increase imports to cover its limited refining capacity.
Petrobras’ planned huge investments have left some nervous amid questions about whether the company has the capacity to oversee such a large programme.