(In paragraph 8, Petrobras corrects projected subsalt production to 241,000 barrels per day instead of 152,000; in paragraph 9, Petrobras corrects planned investment to $33 billion, up 18 percent from previous figure instead of $30.9 billion, up 10 percent; in paragraph 10, corrects subsalt production projection to 1.08 million bpd instead of 1.18 million; in paragraph 15, corrects percent of investment in transport and marketing to 33 percent instead of 30 percent.)

RIO DE JANEIRO/SAO PAULO - Brazil's state oil company Petrobras announced on Monday a 29 percent investment hike over five years as it stepped up its campaign to tap some of the world's largest deposits of deep sea oil.

The $224 billion investment program for 2010-2014, currently the largest for the oil industry globally, increases refining outlays while still dedicating the bulk of spending to deep water oil exploration. Brazil sees deep water exploration as key to economic development despite concern over offshore drilling sparked by BP's Gulf of Mexico accident.

It also sets the stage for Tuesday's shareholders' meeting to approve a capital injection in which Petrobras could raise $25 billion in cash from the sale of shares to minority shareholders and issue about $60 billion worth of stock in exchange for oil.

No other company in the industry has a program to boost oil and gas output like the one Petrobras has, Chief Executive Jose Sergio Gabrielli said at a news conference.

The investment plan, which increases spending from the $174.4 billion earmarked in the 2009-2013 plan it replaces, boosts downstream activities while dedicating a smaller percentage of total outlays to upstream activities.

This announcement is mostly aligned with our estimates, Citigroup analyst Tereza Mello said in a note to clients.

Petrobras' non-voting shares, the company's most widely traded class of stock, gained 0.3 percent to 29.59 reais. The stock has shed 18 percent this year.

Petrobras expects oil production in Brazil in 2014 to reach 2.98 million barrels per day. Output from fields tucked deep beneath a layer of salt under the ocean floor, an area known as the subsalt, is slated to reach 241,000 bpd that year.

The plan calls for investments in the subsalt region of $33 billion, an increase of 18 percent from the previous figure.

Oil production in Brazil, slated for 2.1 million bpd in 2010, will reach 3.95 million bpd by 2020, with 1.08 million coming from the subsalt region.

Those production estimates do not include oil that could be pumped from fields it is slated to receive in the oil-for-shares capitalization plan.

That transaction is expected to give Petrobras access to the 4.5 billion barrel Franco prospect, one of the world's largest crude discoveries in the last decade.

The company confirmed a prior deadline for the start-up of its Gulf of Mexico blocks by November of this year, Jorge Zelada, head of international operations at the company, said on Monday.

Petrobras is seeking to push offshore drilling into water even deeper than BP's ill-fated Macondo well and to total depths of as much as 7,000 meters (23,000 feet), shrugging off skepticism about offshore drilling despite the ecological disaster unfolding in the United States.

REFINING

Refining, transport and marketing will receive 33 percent of the investments, compared to 25 percent in the 2009-2013 plan, while exploration and production will account for 53 percent of the total, versus 59 percent in the previous plan.

Downstream outlays are focused on several major refining projects expected to add 800,000 barrels per day of total capacity by as early as 2015, including two 300,000-bpd refineries allowing Brazil to become an exporter of premium fuels.

In 2006, Brazil became self-sufficient in oil but still imports fuel, including around 80,000 bpd of diesel and distillate fuels, because of limited domestic refining capacity.

Downstream investment, gauged as less profitable by most analysts, has increased in part because the government has pushed Petrobras to invest in new refineries ... as it pursues more active industrial policies for the sector, analysts at New York-based political risk advisors Eurasia said on Monday.

This year Petrobras imported several cargoes of gasoline following problems with sugar-cane ethanol production. Ethanol, is blended with gasoline in Brazil and also used as a stand-alone fuel.

Shareholders on Tuesday will vote on a plan for Petrobras to boost capital through a stock offering that will give the government shares in exchange for rights to develop up to 5 billion barrels of offshore oil.

The plan is part of a broad oil reform pushed by the government of President Luiz Inacio Lula da Silva. Eurasia analysts said it ...means Petrobras will most likely face growing government pressure in coming years, making it more exposed to the risk of cost overruns, delays and accidents.

(Editing by Sofina Mirza-Reid)

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