(Updates stock price in seventh paragraph.)

Sept. 17 (Bloomberg) -- Petroleo Brasileiro SA, the Brazilian state-controlled oil company, boosted the value of a planned share sale to as much as 134 billion reais ($78 billion) as it seeks to finance development of offshore oil fields.

Petrobras, which plans to sell 1.59 billion new preferred shares and 2.17 billion new voting shares in its main offer, today doubled the amount of stock that can be issued in an additional allotment to as much as 20 percent of the main sale, it said in a regulatory filing. That’s on top of an already announced supplementary over-allotment of as much as 5 percent.

The Rio de Janeiro-based company is selling shares to fund the development of fields such as Tupi, the largest discovery in the Americas in three decades, and to save its investment grade credit rating. As part of the share sale, which would be the world’s largest, Petrobras is issuing about $42.5 billion of stock to Brazil’s government in exchange for the rights to develop 5 billion barrels of oil reserves.

International investors may ensure sufficient demand for the shares after the stock dropped, according to Christopher Palmer, who oversees about $5 billion as head of global emerging markets at Gartmore Investment Management Ltd.

“In the world of buy low, sell high, the shares are down - - and if they price low, there will be more demand,” Palmer, who wouldn’t say if he will buy the shares, said by phone from London. “Petrobras wants to meet its capital requirements going forward by taking advantage of this high level of demand.”

Priority Offer

Of the planned stock sale, 80 percent of the shares will be offered to existing shareholders as of Sept. 10 on a priority basis, Petrobras said in a Sept. 3 prospectus for the sale.

The company’s preferred shares fell 1 centavo to 26.35 reais at 11:35 a.m. in Sao Paulo trading. Before today, the stock plunged 28 percent this year, compared with a 1.4 percent drop for Brazil’s benchmark Bovespa index.

The stock has declined about 9 percent since the share sale was first announced on Sept. 3.

Petrobras may be increasing the offer to meet additional demand from the BNDES state-run development bank and a sovereign wealth fund run by the Treasury, said Rogerio Freitas, a fund manager at Teorica Investimentos in Rio de Janeiro.

“The Brazilian public sector will probably increase its participation, and this is not good,” Freitas said.

First Sold Shares

Petrobras first sold shares in 2000 to raise capital to finance exploration at a time when Brazil was importing oil. Brazil broke Petrobras’s monopoly on oil exploration in 1997, allowing foreign companies to bid for exploration blocks.

Investors are concerned about the government’s increased control over Petrobras and the high price it paid for 5 billion barrels of oil reserves in the transaction, Freitas said.

Brazil’s government owns a 32 percent stake in Petrobras and controls the company through 55.6 percent of voting shares. The sale will probably lead to an increase in the government’s stake, the company said in a Sept. 3 prospectus.

High production costs in the deep waters of the Atlantic Ocean, where Brazil’s largest oil fields are located, will discourage some investors from participating in the share sale, according to Mirella Rappaport, who helps manage about $100 million at Investport in Sao Paulo.

“We don’t see overwhelming demand among our clients, some of them offered to buy less than what they had a right to, and those who own no shares have no interest at all,” said Rappaport in a telephone interview.

--Editors: Dale Crofts, Jessica Brice.

To contact the editor responsible for this story: Dale Crofts at [email protected]