* 2014-2018 spending plan down 6.8 pct from previous to $221 bln
* New strategic plan sees output peaking in 2020 at 5.2 mln bpd
* Q4 profit drops to 6.28 bln reais, but beats analyst estimates (Adds additional results and background)
By Jeb Blount
RIO DE JANEIRO, Feb 25 (Reuters) - Brazil's state-run oil company Petrobras moved to check years of missed targets, soaring costs and rising debt by scaling back near-term investments and setting a limit on long-term growth.
Petroleo Brasileiro SA, as Petrobras is formally known, cut its five-year investment outlook for the 2014-2018 period to $221 billion, 6.8 percent less than its previous 2013-2017 plan, after reporting a 19 percent drop in fourth-quarter profit late on Tuesday.
The company said production would still more than double to 5.2 million barrels of oil and natural gas a day (bpd) in 2020, and then plateau at that level for the next decade, according to a new strategic plan ending in 2030.
Of the 2020-2030 production, Petrobras expects to own 4 million bpd of the output, the rest will belong to partners and the Brazilian government. The 2030 outlook is a sign that Petrobras considers its days of major production increases based on recent offshore discoveries to be numbered.
After two years of stagnant output, Petrobras needs rising production to justify what was the world's largest corporate spending program as well as to pay large debts that will have to rise more to meet new offshore oil exploration commitments.
The new output strategy supplants a 2020 plan that has become untenable as the government imposes new offshore exploration and development responsibilities on Petrobras. Development of new sources of oil and gas in North America has also upended the global energy outlook and shrunk the need for imports from the world's top oil consumer, the United States.
"The phenomenon of shale gas and tight oil in the United States have been changing the world geopolitics of oil," Petrobras said in a statement.
"It's in this context that Petrobras has made the big choices that guide its 2030 strategic plan."
The new goals help the company conform to a 2010 overhaul of Brazil's oil legislation that gives Petrobras the lead in developing giant new offshore resources discovered south of Rio de Janeiro in 2007. Other government policy, though, has stripped Petrobras of financial power that could have been used to help it meet earlier, more ambitious goals.
Strategic planning announced in 2008 said Petrobras would produce 5.7 million bpd by 2020 and 3.66 million bpd by 2014, 44 percent more than the 2.54 million bpd it produced last year.
After stagnating for two years, Petrobras now expects output to grow 7.5 percent in 2014, the company said in a statement.
Capital that might have earlier paid for higher production has gone instead to subsidize gasoline and diesel fuel in the domestic market. While the government allowed several price increases in 2013, Petrobras fuel prices at home still lag world prices forcing it to lose money on imports.
Petrobras' refining division lost more than 37 million reais ($16 million) in the last two years.
This has drained cash from Petrobras, and forced it to borrow instead. In 2013, what was already the world's most indebted oil company saw its debt rise 38 percent to 268 billion reais ($114 billion).
Petrobras long-term bonds were downgraded by Moody's Investors Service in November.
The new, smaller $221 billion 2014-2018 plan replaces the $237 billion, 2013-2017 plan, which was the world's largest corporate spending program.
Under the company's new plans, refining capacity will peak at about 3.9 million bpd in the 2020-2030 period, nearly double the 2 million bpd the company has today and nearly a third more than it plans to have by 2020.
The rise in oil processing capability should also allow the company to end its dependence on fuel imports.
While Petrobras profit dropped in the quarter to 6.28 billion reais ($2.68 billion) from 7.75 billion reais a year earlier, the result beat the average 5.41 billion reais estimate of five analysts surveyed by Reuters.
Net sales, or total sales minus sales taxes, rose 10 percent to 81.03 billion reais in the three months ended Dec. 31, from 73.41 billion reais a year earlier, in line with analysts' estimates.
Higher sales and some of the first major successes in controlling costs in recent years helped boost the operating results.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 30 percent to 15.55 billion reais from 11.94 billion reais in the fourth quarter of 2012.
Results were also bolstered by asset sales.
While operational results were better than expected, tax, currency exchange and other financial expenses limited their impact. Brazil's real was on average about 10 percent weaker in the fourth quarter of 2013 compared with a year earlier, forcing the company to take non-cash financial losses. It also drove up the local currency cost of fuel imports.
Those losses would have been far higher and profit lower had Petrobras not decided to defer 4.6 billion reais of currency-related losses to a later date under generally accepted accounting rules.
Petrobras reported a full-year profit of 23.57 billion reais in 2013, 11 percent more than in 2012. It would have been much lower had it not deferred 13.38 billion of currency losses to a later date.
$1 = 2.3372 Brazilian reais Reporting by Jeb Blount and Walter Brandimarte and Paulo Prada; Editing by Lisa Shumaker and Tom Hogue