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.

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 [ID:nN21235866].

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

The plan, as analysts expected, puts greater emphasis on the downstream sector as the company pushes to increase refining capacity -- a key goal for Brazil's government but seen by shareholders as less profitable.

Oil production in Brazil is slated for 3.9 million barrels per day (bpd) by 2020, nearly doubling the 2010 target of 2.1 million bpd as output begins in earnest from fields tucked deep beneath a layer of salt under the ocean floor, an area known as the subsalt.

Those production estimates do not include oil that could be pumped from fields Petrobras 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.

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). The Brazilian company has shrugged off worries about offshore drilling that came with the ecological disaster in the United States.

The company said it maintained its expected start-up date of November for its Gulf of Mexico blocks despite the six-month moratorium on U.S. deep water drilling sparked by the BP spill, considered the worst in U.S. history. It said almost all the wells in question are already in transition to production and so are not covered by the moratorium.

Petrobras' non-voting shares, the company's most widely traded class of stock, slipped 0.31 percent to 29.40 reais. The stock has shed around 18 percent this year.

REFINING BOOST

The five-year plan still directs the lion's share of investment dollars to upstream activities, but boosts the percentage going toward refining. Some analysts believe this move may reflect political pressure on the company.

Refining, transport and marketing will receive 33 percent of the investments, up from 25 percent in the previous plan, while exploration and production investments slipped to 53 percent of the total from 59 percent.

President Luiz Inacio Lula da Silva has pushed Petrobras to spur job creation with investments in infrastructure and refining that generally provide lower profit margins than the traditionally lucrative areas of exploration and production.

Brazil is building several new refineries including two 300,000 bpd facilities that are meant to help it become an exporter of premium fuels.

In 2006, Brazil became self-sufficient in oil but still imports fuel -- particularly diesel -- because of limited domestic refining capacity.

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 consultancy Eurasia Group said on Monday.

It said in a note that Lula's push to boost state control over the sector, including legislation pending Congressional approval that could make Petrobras sole operator of subsalt projects, could weigh on the company.

Petrobras will most likely face growing government pressure in coming years, making it more exposed to the risk of cost overruns, delays and accidents, Eurasia said.

(Editing by David Gregorio)

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