Just a few years ago Brazil's Petrobras had ambitions to overtake Exxon Mobile as the world's largest listed oil company.

But missed production targets, spiralling debt and a downgrade to junk status all caused by a toxic mix of corruption, corporate mismanagement, reckless government interference and the collapse in the price of oil price mean the company is reduced to attempting the oil sector’s largest ever downsizing in a bid to restore itself to financial health.

The new management team installed in February has been forced into taking a series of drastic measures that together signal the abandonment of Petrobras’s grand plans, as it undertakes a massive fire sale of assets in a bid to start paying down the corporate world’s largest debt pile.

The company is hoping to raise $15.1 billion (€13.7 billion) from asset sales this year and next and is targeting a further $42.6 billion from divestments and restructuring in 2017 and 2018.

Petrobras has given few details about the assets included but the sale could include all or part of its holding in petrochemical giant Braskem, its BR fuel distribution business, gas pipeline operations, a network of power stations and its operation in Argentina.

The company has also invited rivals to bid for stakes in some of its most promising offshore oil finds.

Offering outsiders larger stakes in the so-called subsalt reserves will be particularly embarrassing for Brazil's president Dilma Rousseff. She redesigned the country's oil legislation so Petrobras could keep the lion's share of the responsibility for developing the subsalt, a move the oil industry said would unduly burden the company operationally and financially.

The cumulative goal of raising $57.7 billion by the end of 2018 dwarfs the oil sector’s previous largest downsizing: BP’s $30 billion one after the Deepwater Horizon disaster.

Distressed market

Its task is made more difficult by the fact it is trying to sell assets into a distressed market caused by the global collapse in the oil price which has led to the shelving of $200 billion worth of energy projects as companies retrench.

"It's a challenge but it's a realistic challenge. This plan is quite feasible," said chief executive Aldemir Bendine.

But markets remain sceptical about Petrobras’s ability to execute it.

Despite the goal of raising $57.7 billion and having some of the world’s largest oil finds of recent decades in its portfolio, Petrobras’s market value is just $44 billion, a seventh of the $310 billion it was worth in 2010 and less than what it hopes to raise from the sell-off.

Proceeds raised by Petrobras will go towards paying off the company’s $125 billion debt, which looks increasingly unstable in light of a string of missed production goals. This led Moody’s to downgrade the company’s credit rating to junk earlier this year.

Reduced spend

Concerns over the debt burden and the difficulty accessing financing have forced the company to slash capital expenditure in a bid to hoard cash. Spending through to 2019 is now projected to be $130.3 billion, 37 per cent less than the previously projected figure of $206.8 billion.

The reduced spend means acknowledging the abandonment of the company’s chief goal. Its new production goal for 2020 is now down to just 2.8 million barrels a day, a little more than half the 5.4 million barrels a day it once said it would be producing by the end of the decade.

Unless Brazil's government grants foreign companies greater access to the subsalt reserves, the reduced production goal throws into doubt the hopes that Brazil would become a major oil exporter.

"This is the cost of corruption, mismanagement and political interference," says Adriano Pires, a former director of Brazil's energy regulator and president of the Brazilian Infrastructure Centre. "Bendine's plan is a good one but it will be difficult to carry out and even then it will be a long time before Petrobras recovers."

But analysts warn that, for that to happen, the government will also have to stop using its controlling stake in the company to promote its own economic agenda.