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1
PetrobrasBusiness Plan 2007-2011,
the Gulf of Mexico, and Renewable Fuels
José Sergio Gabrielli de AzevedoPresident and CEO
September 20th, 2006
2 2
The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments.
Cautionary Statement for US investors
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC.
Disclosure
3 3
53,6% 61,6%44,4% 40,6% 40,1% 39,8%
46,4% 18,0%25,1% 23,1% 20,7% 20,4%
10,3% 9,9% 8,0% 8,3%
31,5%10,9%9,5% 20,3% 26,4% 31,2%
Oct/1992 Jul/2000 After Aug/00offering
After Jul/01offering
Dec/2003 Aug/06
Government (1) (%) Bovespa Brazil Bovespa Foreign ADRs
(1) Includes BNDES / BNDESPAR
Foreign39,8%
Free Float 46,4 38,4 55,6 59,4 59,9 60,2
Bovespa28,7%
Diversified Shareholder Base
• More than 400,000 investors in Brazil and abroad• 60% of the economic value of Petrobras in private hands• Almost 40% of the stocks with international investors
PETROBRAS
444* Every ADR program of the company.
Source: Bloomberg
Petrobras’ ADRs in NYSE
Turnover (traded volume) in NYSE 1H06 daily average
US$
223
mill
ion
US$
247
mill
ion
US$
256
mill
ion
US$
359
mill
ion
US$
150
mill
ion
US$
128
mill
ion
US$
123
mill
ion
US$
118
mill
ion
US$
111
mill
ion
US$
101
mill
ion
-
50
100
150
200
250
300
350
400
Petrobr
as*
Cia. Vale
do Rio D
oce* BP
Nokia
América
Móvil
*Elan
Corp
.
Cemex
BHP Billi
ton Total
Tenari
sU
S$ m
illio
n
PETROBRAS
555
50
100
150
200
250
300
Jan-
05
Feb-
05
Mar
-05
Apr
-05
May
-05
Jun-
05
Jul-0
5
Aug
-05
Sep-
05
Oct
-05
Nov
-05
Dec
-05
Jan-
06
Feb-
06
Mar
-06
Apr
-06
May
-06
Jun-
06
Jul-0
6
Aug
-06
Sep-
06
PBR Amex Oil
105%
50%
Petrobras’ ADRs x Amex Oil
01/01/2005 = 100
PETROBRAS
666
309416427
593614624660
809908919945
1.2671.4481.484
SinopecRepsolStatoil
ENILukoil*Yukos*
ConocoPhillips
PetrobrasTotal
Chevron TexacoPetrochina*
ShellBP
ExxonMobil
6.3434.026
2.9982.7472.708
2.2022.1952.114
1.2231.1751.139
524296
2.275
XOMRDS
SinopecBP
TOTCOP
PetroChinaCVX
PetrobrasYukos
RepsolLukoil
ENI**Statoil8,0
9,010,1
11,512,212,212,313,114,214,615,1
19,620,8
32,7
RepsolShell
StatoilENIBP
TotalSinopec
Chevron TexacoConocoPhillips
PetrobrasExxonMobilPetrochina*
Yukos*Lukoil*
3,33,84,3
6,89,4
11,111,511,812,113,0
17,618,5
20,122,4
RepsolSinopec*
StatoilENI
ConocoPhillips
Total
ShellPetrobras
Chevron Texaco
Yukos*
BPPetrochina*
Lukoil*
ExxonMobil
Publicly traded peer comparison
Proven reserves (SEC - billion boe) – Dec. 2005 Oil and gas production (million boe) - 2005
Reserve life (years) – Dec. 2005 Refining capacity (thousand bpd) - 2005
Source: Evaluate Energy and Company Reports
7th
5th
9th
7th
7 7
Liderar o mercado de petróleo, gás natural e derivados na América Latina, atuando como empresa integrada de energia, com expansão seletiva
da petroquímica e da atividade internacional.
Growth ProfitabilityGrowth ProfitabilitySocial and Environmental Social and Environmental
ResponsibilityResponsibility
Consolidate and increase
competitive advantages in
the Brazilian and South American
oil and oil products market
Develop and lead the domestic
natural gas market and perform in an integrated manner
in the gas and power market in South America
Selectively expand
international activities in an
integrated manner with the
Company’s business
Selectively expand interest
in the petrochemicals
market
Expand participation in biofuels market, lead the domestic
biodiesel production and increase
participation in the ethanol business
Operational, management, technological and human resources excellence
Lead the Latin American oil, natural gas, oil products and biofuels market, working as an integrated energy company, with selective expansion in petrochemical, renewable energy and
international activities.
Corporate Strategy
Corporate Strategy
8 8
Energy
Industry
Imported OilProducts
ImportedOil
Imported Gas
International OilProduction
LNG
H - Bio
DomesticNatural GasProduction
Biodiesel Oil Productssold in Brazil
InternationalSales
OtherRenewables
Infrastructure
Petrochemical Plants
Brazilian OilProduction
Throughputin Brazil
InternationalRefining
Integration of the Company's Activities
Ethanol
9 9
Note: Includes International
31.0
12.41.0
1.0
49.3
23.07.5
3.32.31.8
E&P Downstream G&EPetrochemical Distribution Corporate
9%4%
3% 26%
56%
3%
Business Plan 2007-2011US$ 87.1 billion
86%
14%
Brazil International
US$ 12.1 bi
US$ 75.0 bi
Investment Plan
49,3
23,0
7,53,32,21,8
10 10
Sources
(*)86.7
12.6
2004-2010Financing
Cash Flow
(US$ 99.3 billion)
87.1
12.2
2004-2010Debt Amortization
Capex
(US$ 99.3 billion)
• Accrued Economic Profit (2006-2015): US$ 83.4 billion (US$ 53.9 until 2011).
Uses
Financial TargetsSources & Uses
11 11
54,3% 53,1% 51,5% 50,5%
43,8%40,5% 39,7%
34,3%30,0% 29,7%
25,0%20,3%
12,9%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
Petr
obras
She
ll
T
otal
CNOOC
Stat
oil
BP
Exx
onMob
il
L
ukoil
Chev
ron
Conoco
Phillips
Reps
ol-YPF
Petr
oChina
Sinop
ec
Undeveloped Reserves / Total Reserves* (2005)
• Strong investments in production will optimize the development of Petrobras’ proven reserves, aiming light oil production and a minimum reserve/production ratio of 15 years.
• Petrobras had a 55% success ratio for our exploration wells during 2005, with 38 wells classified as discovery or producing wells.
* Source: Evaluate Energy
Upstream
17
12 12
2 , 3 7 42 , 8 1 2
5 5 1
7 2 4
7 4 2
1 8 5
2 7 8
3 8 3
2 0 1 5
F o r e c a s t
1 , 6 8 4 1 , 8 8 01 , 5 4 0 1 , 4 9 3
2 5 0 2 6 5 2 7 4
2 8 9
1 3 3
1 6 1 1 6 81 6 3
8 5
1 0 1
9 49 6
2 0 0 3 2 0 0 4 2 0 0 5 T a r g e t 2 0 0 6
O i l a n d N G L - B r a z i l N a t u r a l G a s - B r a z i l
O i l a n d N G L - I n t e r n a c i o n a l N a t u r a l G a s - I n t e r n a c i o n a l
2,036 2,020 2,217 2,403
3,493
4,556Thousand boed
7.8% p.a.
7.5% p.a.
T a r g e t 2 0 1 1
UpstreamProduction targets – Oil & NGL and Natural Gas
13 13
Natural Gas and EnergyDomestic natural gas market
Mill
ion
m3 /d
ay
9,6 7,1
48,422,9 24,8
38,6
5,4 13,5
34
up to 71.0
up to 30.0
up to 20.0
0
20
40
60
80
100
120
140
2004 Consumed in2005
MaximumDemand 2011(*)
Potential Supply2011
Thermoplants Industry OtherNational Production Bolivian Imports LNG
* Considers maximal dispatch for every thermoelectric power plant
121.017.7% p.a.
121.0
45.4
Natural gas market
36.9
-26,04%Thermoplants8,30%Industry150%Others
Variation 2004 x 2005
16 16
New Refinery in the USA
• Petrobras has acquired 50% of the Pasadena Refinery System Inc. (PRSI), located in Texas, USA;
• Total Investment: US$ 370 million; Petrobras share of upgrade US$ 1 billion
• The refinery, which already has a capacity of 100,000 bbl/day, will be upgraded to handle 70,000 bbl/day of heavy oil and feedstock (including Marlim field’s production);
• The upgraded refinery will be ready in four years. After the revamp project all products will match USA highest standards;
• Possible increase in capacity to 200,000 bbl/day.
DownstreamRefining Investments
17 17
New Refinery in Pernambuco
• Investment: US$ 2,5 billion
• Throughput capacity: 200 thousand heavy oil barrels (50% Petrobras oil / 50% PDVSA oil)
• Focusing diesel and LPG production maximization, the new refinery will aim the growth of oil products demand in the Northeast.
• The Northeast Region, which responds for 19% of oil products demand and holds only one refinery in Bahia, will no longer be a fuel importer (either from refineries in Brazil or abroad).
• Costs reduction: oil products transportation are more expensive than for crude oil.
DownstreamRefining Investments
PETROBRAS
202020
The Petrochemical Chain
Exploration/Production Refining
Oleophinesand Aromatics Production
Intermediate Polymers Production
Transformation Uses
Natural Gas Liquids
EthylenePropane
Oleophines
EthanePropene
Aromatics
BenzeneP-Xylene
PoliethylenePolipropylene
Styrene/PSPTA/PETAA/SAP
MEG
Processes
ExtrusionBlow
Injection
PackagingFilms
ComponentsAutomotive
PipesWires
Home ApplianceFibersOil Refineries
(Naphta)
Non-integrated oil companies Petrochemical companies
Integrated Oil companies TranformationIndustry
Total Capex US$ 8.4 billion of which US$4.9 billion basic petrochemicals and US$ 3.5 billion downstream
PETROBRAS
212121
Oil Natural Gas Renewables
Investments of US$ 0.7 billion in renewable energy and biofuels
Total avoided GHG emissions of 3.93 (M Tons of CO2 Equivalent)
Availability of 855,000 m3/year of biodiesel
Processing 425,000 m3/year of vegetable oil (H-BIO)
240 MW installed capacity of power generation from renewable sources
3.5 million m3 ethanol exports
Carbon intensity reduction of operations and products
22 22
Fuel Ethanol Program Evolution
Brazilian Experience
Program for oil imports reduction Environmental Benefits
70’s 80´S 90´S
EthanolProgram
Implanted(BLENDS)
Gasohol and Ethanol Cars(2nd oil shock)
Program of Emission Controls
(PROCONVE)Gasohol and Flex fuel Cars
00´S
Renewablesand
Hydrogen
Future
24 24
Facts about Ethanol Market in 2005
608 x 103 KCAL
598 x 103 KCAL
512 x 103 KCAL
1718 x 103 KCAL
1 Ton Sugar Cane
SUGAR 153 KG
BAGASSE(50% UMIDADE)
276 KG
LEAVES (*)(15% HUMIDY)
165 KG
1 Ton-Field1718 x 103 KCAL
1.2 boe
1 boe1,386 x 103 KCAL
~=
• Ethanol global market is 46.5 Billion Liters (2005)
• Ethanol as a Fuel is 30.6 Billion Liters (67% of total ethanol production)
• Today the ethanol consumption is 2.6% of gasoline MKT
• 10% of ethanol in gasoline will represent 118 Billion Lt
25 25
Raw Material Comparison
8.3Sugar Cane(under Brazilian production conditions)
1.9Sugar Beet1.3 – 1.8Corn
1.2Wheat
Energy Output / Energy Input(boe)
Raw Material
1.3 – 1.84,000 liter10,000Corn
8.37,080 liter85,000Sugar Cane
Energy Output / Energy Input
(boe)
Quantity of Ethanol / ha
Production / ha(kg)Raw Material
26 26
40,84%
49,46%
9,70%
Anhydrous, Hydrous and Neutral Sugar Cachaça, Sweet and Animal Feed
Anhydrous and Hydrous Ethanol => 17 Billion liters
Sugar Cane Crop Profile 2005
PETROBRAS
292929
• Consumer wants to decide the fuel at the gas station
• Fuel price is one the most important factor
• Consumer is aware of pollution and renewable fuels
• Today cars manufacturer is producing 80% of FFV in Brazil
010,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
140,000
150,000units
Jan-
03
Feb-
03
Mar
-03
Apr
-03
May
-03
Jun-
03
Jul-0
3
Aug
-03
Sep-
03
Oct
-03
Nov
-03
Dec
-03
Jan-
04
Feb-
04
Mar
-04
Apr
-04
May
-04
Jun-
04
Jul-0
4
Aug
-04
Sep-
04
Oct
-04
Nov
-04
Dec
-04
Jan-
05
Feb-
05
Mar
-05
Apr
-05
May
-05
Jun-
05
Jul-0
5
Aug
-05
Sep-
05
Oct
-05
Nov
-05
Dec
-05
Jan-
06
Feb-
06
Mar
-06
LIGHT VEHICLES TOTAL SALES
Ethanol Gasoline FFV
Flex-Fuel Vehicles
PETROBRAS
323232
• Recently, Petrobras incorporated Brazil-Japan Ethanol Inc.• The company will import and distribute Brazilian-produced ethanol in Japan;• Development of technical and commercial solutions for the reliable and long term supply of alcohol in the Japanese market;• Petrobras will break into one of the most complex and important energy markets in the World:
• ethanol logistics distribution • fuel distribution sector in Japan.
Brazil-Japan Ethanol Inc.
Ethanol Market
PETROBRAS
333333
Agribusiness
Farming
Seeds
or
or
or
Ethanol
Methanol
Glycerin + Others
Biodiesel
B2 or B5mixture
orDiesel
Distributors
DieselRefinery
Hydrogen Diesel Fractions
Stations
ProcessedOil
Crushing
Transerestification
H-Bio
Complementary and not competitive processes
• H-Bio: refining process that utilizes vegetable oils as an input, in order to obtain diesel oil;
• Hydrogenation of a blend of diesel and vegetable oils;
PETROBRAS
353535
Core Areas:
• Refining
• Add value to Brazilian heavy oil exports
• E&P: West Africa (Nigeria and Angola) & Gulf of Mexico:
• Apply deep water and deep well drilling technology.
• Latin America:
• Leadership as an integrated energy company
• Investments in the United States: US$ 2.7 billion
70,2%
24,8%
1,7%0,8%
1,7%
0,8%
E&P
Refining andMarketing Petrochemical
Gas & Energy
Distribution
Corporate
Total CAPEX: US$ 12.1 billion
168 163
38396
185
94
2004 2005 2011 Target
Oil and NGL Natural Gas
568
262 259
Thous. boed
Targets
InternationalPresence in 21 Countries
PETROBRAS
363636
UNITED STATES
MEXICO
HoustonNew Orleans
Cascade
ChinookSt Malo
Producing FieldsDiscoveriesProspects
Coulomb NorthZion
Bryce Sedona
Das Bump
Hadrian
Deep Shelf Gas Prospects
Hadrian S
Monte BeloCottonwood
Live Oak
Aquarius
CentaurusAndromeda
Claudius
Flavian
Aurelian
Redbud
Cygnus
Crater
Aquila
Pegasus
Scorpio
The US Sector of Gulf of MexicoCurrent Portfolio
Position
• 80 shallow water blocks and 197 deepwater blocks
• 6 Producing Fields
• 3 discoveries (appraisal) and studies of the production development
• 1 field on development.
• 1 onshore prospect
• Proven reserves (SPE, 2005): 39,0 million boe
• Average production (2005): 5,0 thousand boe/d
• In the latest Western Gulf of Mexico Lease Sale (Aug/16/2006), Petrobras had the highest number of bids (34), totaling an amount of US$ 45,5 million.
PETROBRAS
373737
Main Projects in the Gulf of Mexico
• Petrobras (50%) - Operator
• Devon (50%)
• Petrobras (67%) - Operator
• Total (33%)
• Petrobras (80%) - Operator
• Mariner (20%)
Cascade(Under Evaluation)
Chinook(Under Evaluation)
Cottonwood(Development)
• EXPLORATION WELLS •Petrobras (20% to 100%)
• Various partners (Exxon, Newfield, BP,• BHPBilliton, Dominion, Carrizo, Hess,• Kerr McGee
LONG TERM COMMITMENTSTwo drilling units on long term contracts
• Petrobras (25%)
• Unocal (20%) - Operator
• Chevron (13%)
• Encana (6%)
• Devon (23%)
• Exxon (4%)
• ENI (1%)
Blackbeard, Megamata (deep gas)Andromeda (WGoM), Alsace (GBanks)
Saint Malo(Under Evaluation)
PETROBRAS
383838
Recent DevelopmentsGulf of Mexico
• Acquisition of additional participation in the Cascade and Chinook fields;
• Use of a FPSO* facility, a development concept so far never deployed in the American waters of the Gulf of Mexico;
• Aggressive exploration campaign in the Gulf of Mexico, including acquisition of additional acreage and participation in wells being drilled or planned for the near future;
* Floating Production Storage and Offloading
Cascade and Chinook Fields
Petrobras consolidating its position as one of the leading players in the ultra deep waters of the
Gulf of Mexico, benefiting from its deepwater expertise and technology developed offshore Brazil
39 39
Final CommentsVertical Integration Comparison
Majors Average *
2,735
3,176
4,793
4,329
1,630
1,579
National Oil Companies Average **
Petrobras2,296
2,114
Product Sales (thous. bpd)
Refining (thous. bpd)Production (thous. boed)
* Majors: BP, Exxon, Total, Royal Dutch Shell, Chevron, Conoco and Repsol-YPF ** NOC: PEMEX, PDVSA, Saudi Amraco, KPC, Pertamina and Sonatrach
*** 2004 figures, except for Petrobras (2005)Source: PIW Intelligence and Petrobras
2,217
3,400Year 2011
2011: New Refinery will add 200
thous. bpd capacity2010:
Pasadena Refinery revamp concluded – processing 70
thous. bpd of heavy oil
PETROBRAS
404040
Question and Answer Session