Conversao de Unidades

Confidential Information Memorandum

Refinaria Abreu e Lima

USD 2,100,000,000

Guarantee Facility

and

USD 450,000,000

Loan Facility

August, 2011

STRICTLY PRIVATE AND CONFIDENTIAL

JOINT LEAD ARRANGER JOINT LEAD ARRANGER JOINT LEAD ARRANGER

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Table of Contents

Administrative

Confidentiality Agreement

Notice to and Undertaking by Recipients

Letter of Authorization

Form of Commitment Advice

Contact List

Transaction Timetable

Definitions

1. Executive Summary ................................................................................................................ 1

1.1. Project Overview............................................................................................................. 1

1.2. The Agreement between Petrobras and PDVSA ............................................................. 2

1.3. BNDES Loan Requirement ............................................................................................. 2

1.4. The Transaction .............................................................................................................. 3

1.4.1. Summary of Terms and Conditions ......................................................................... 4

1.4.1.1. Loan Facility ........................................................................................................ 4

1.4.1.2. Guarantee Facility ............................................................................................... 5

1.4.1.3. Collateral ............................................................................................................. 5

1.4.1.4. The Petrobras Direct Agreement ......................................................................... 5

1.4.1.5. Transaction Structure .......................................................................................... 6

2. The Project ............................................................................................................................. 6

2.1. Project Location .............................................................................................................. 6

2.2. Project Design and Operation ......................................................................................... 7

2.3. Refinery‟s Construction and Projected Investments ....................................................... 10

2.4. Sponsors Experience .................................................................................................... 13

2.4.1. Petrobras .............................................................................................................. 13

2.4.2. PDVSA ................................................................................................................. 15

2.5. Oil Supply Contracts ..................................................................................................... 17

2.6. BNDES Loan ................................................................................................................ 18

3. Petrobras .............................................................................................................................. 19

3.1. General Overview ......................................................................................................... 19

3.2. Shareholder Structure ................................................................................................... 19

3.3. Business Segments ...................................................................................................... 20

3.4. Financials ..................................................................................................................... 21

4. PDVSA ................................................................................................................................. 22

4.1. General Overview ......................................................................................................... 22

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4.2. Shareholder Structure ................................................................................................... 23

4.3. Business Segments ...................................................................................................... 23

4.4. Financials ..................................................................................................................... 24

4.5. PDVSA‟s Investment Plan ............................................................................................. 24

5. Financial Projections ............................................................................................................. 25

5.1. RAL Financial Plan ....................................................................................................... 25

5.1.1. Investments .......................................................................................................... 25

5.1.2. Revenues assumptions ......................................................................................... 25

5.1.3. Operating Costs .................................................................................................... 26

5.1.3.1. Fixed Costs ....................................................................................................... 26

5.1.3.2. Planned Maintenance ........................................................................................ 27

5.1.3.3. Logistic Costs .................................................................................................... 27

5.1.3.4. Crude Oil ........................................................................................................... 27

5.1.4. Projected Financial Statements ............................................................................. 29

5.2. Revised Financial Plan ................................................................................................. 30

5.2.1. Foreign Exchange Rate ......................................................................................... 30

5.2.2. Capex ................................................................................................................... 31

5.2.3. Commercial Operation Date .................................................................................. 31

5.2.4. Estimated Equity Contribution ............................................................................... 31

6. Market Overview ................................................................................................................... 33

6.1. Brazilian Oil Reserves and Production .......................................................................... 33

6.2. Brazilian Refining Market .............................................................................................. 35

6.3. Brazilian Diesel Market ................................................................................................. 36

7. Risks and Mitigants ............................................................................................................... 38

7.1. Construction ................................................................................................................. 38

7.2. Equity Contribution ....................................................................................................... 38

7.3. Operations .................................................................................................................... 39

7.4. Demand ........................................................................................................................ 39

7.5. Repayment ................................................................................................................... 39

8. Term Sheet ........................................................................................................................... 40

Appendix...................................................................................................................................... 71

Appendix A – Draft Shareholders Agreement

Appendix B – RAL x BNDES Loan Agreement

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Figures

Figure 1: Envisaged Partnership Structure and the Transaction Facilities ....................................... 4 Figure 2: Transaction Facilities Guarantee Structure ...................................................................... 6 Figure 3: Project Location .............................................................................................................. 7 Figure 4: Strategic Location ............................................................................................................ 7 Figure 5: RAL‟s Differential............................................................................................................. 9 Figure 6: Project Timeline ............................................................................................................ 11 Figure 7: Actual and Projected Refinery‟s Physical Construction Progress .................................... 12 Figure 8: Actual and Projected Investments (BRL million) ............................................................. 12 Figure 9: Refining Capacity (million bbls/d) ................................................................................... 13 Figure 10: Petrobras investments breakdown ............................................................................... 14 Figure 11: Petrobras‟ historic and projected investments (annual average USD million) ................ 15 Figure 12: PDVSA‟s Refineries..................................................................................................... 16 Figure 13: PDVSA‟s Projected Investments in the Refining Segment (USD billion) ....................... 17 Figure 14: Petrobras‟ Operating Income Composition (LTM July 2010) ......................................... 20 Figure 15: Global and Venezuelan Oil and Gas Proved Reserves ................................................ 22 Figure 16: PDVSA‟s Sales Composition (1H 2010) ....................................................................... 23 Figure 17: Brazilian Oil Proved Reserves and Oil Production ........................................................ 33 Figure 18: Pre-Salt map ............................................................................................................... 33 Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves ....... 34 Figure 20: Brazilian GDP and Global Oil Consumption ................................................................. 35 Figure 21: Brazilian Oil Production, Refining and Demand („000 bbls/d) ........................................ 36 Figure 22: Brazilian Energy Consumption and Diesel Consumption .............................................. 37 Figure 23: Diesel Production, Sales and Imports .......................................................................... 37

Tables

Table 1: Project‟s Estimated Sources and Uses (BRL million – from 2006 to 2016)* ....................... 2 Table 2: Loan Facility Terms & Conditions ...................................................................................... 4 Table 3: Guarantee Facility Terms & Conditions ............................................................................. 5 Table 4: Refinery‟s Environmental Permits Status .......................................................................... 8 Table 5: Refinery‟s Projected Output (m3 / year) ............................................................................ 9 Table 6: Refinery‟s Main Construction Contracts .......................................................................... 10 Table 7: Equipments and Investments .......................................................................................... 13 Table 8: Petrobras Refineries (2009) ............................................................................................ 14 Table 9: BNDES Loan Terms & Conditions .................................................................................. 18 Table 10: Petrobras‟ Capital Stock ............................................................................................... 19 Table 11: Petrobras‟ Financials (USD million) ............................................................................... 21 Table 12: PDVSA‟s Financials (USD million) ................................................................................ 24 Table 13: Financial Plan‟s Investments (USD million – real terms) ................................................ 25 Table 14: Refinery‟s Projected Output (m3 / year) ........................................................................ 26 Table 15: Oil Products Commercialization .................................................................................... 26 Table 16: Projected Sales Prices (USD/m3) ................................................................................. 26 Table 17: Projected Fixed Costs (BRL‟000 /year) ......................................................................... 27 Table 18: Projected Planned Maintenances (BRL‟000/year) ......................................................... 27 Table 19: Projected Logistic Costs ............................................................................................... 27 Table 20: Projected Crude Oil Prices (USD/m3) ........................................................................... 28 Table 21: Projected Income Statement ......................................................................................... 29

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Table 22: Projected Debt Service Coverage Ratio ........................................................................ 30 Table 23: Foreign Exchange Rates .............................................................................................. 30 Table 24: Projected Investments .................................................................................................. 31 Table 25: Sources and Uses (BRL million) ................................................................................... 31 Table 26: Equity Injection (BRL million) ........................................................................................ 32 Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009) ................................................. 35

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Confidentiality Agreement

This confidential material (the “Confidential Information Memorandum”) is being provided to you by

Banco Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead

Arrangers”) in connection with an actual or potential transaction and must not be used or relied

upon for any purpose other than to evaluate your intention to participate in the transaction. In

addition, this Confidential Information Memorandum must not be disclosed, in whole or in part to

any third party, summarized or otherwise referred to except as agreed upon in advance in writing by

the Lead Arrangers.

The Confidential Information Memorandum is being made available only to parties who have signed

and returned a non-disclosure agreement (the “Confidentiality Agreement”) and recipients are

therefore bound by the Confidentiality Agreement in respect of all information contained herein.

The information used in preparing the Confidential Information Memorandum was obtained from or

through Petróleos de Venezuela S.A. (“PDVSA”) and PDVSA do Brasil Ltda (the “Borrower”), their

representatives or from public sources. The Lead Arrangers assume no responsibility for

independent verification of such information and have relied on such information being complete

and accurate. To the extent such information includes estimates and forecasts, the Lead Arrangers

have assumed that such estimates and forecasts have been reasonably prepared based on

assumptions reflecting the best currently available estimates and reasonable judgments. The Lead

Arrangers expressly disclaim any and all liability for any direct or indirect loss that may be based on

or may arise in connection with any information contained herein, including any errors therein or

omissions therefrom.

The Confidential Information Memorandum is intended solely for your information and the Lead

Arrangers assume no obligation to update or otherwise revise the Confidential Information

Memorandum. The information and analysis contained herein constitute the Lead Arrangers´

present understanding which is subject to change at any time without notice. Nothing contained

herein should be construed as advice of any kind including investment, tax, accounting or legal

advice.

The Confidential Information Memorandum has been prepared solely for informative purposes to

assist you in making your own evaluation of a potential transaction and with the express

understanding that it will be used for only such purpose. In all cases, you should conduct your own

investigation and analysis of a potential transaction, and you should consider the advice of your

own legal, accounting, tax and other advisors and such other factors that you consider appropriate.

The Confidential Information Memorandum is not a recommendation, offer or solicitation to

purchase or sell any security, commodity, currency or other instrument.

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Notice to and Undertaking by Recipients

This confidential material (“Confidential Information Memorandum”) provided herein refers to the

proposed USD 2.1 billion Guarantee Facility and USD 450 million Loan Facility (together, the

“Transaction Facilities”), that will support PDVSA do Brasil Ltda‟s (the “Borrower”) capital

participation in the Refinaria Abreu e Lima S.A. (the “Project”), and have been obtained by Banco

Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead Arrangers”)

from, or are based upon information supplied to the Lead Arrangers by Petróleos de Venezuela

S.A. (“PDVSA”) and the Borrower, and other sources, and should not be construed as Lead

Arrangers‟ representation. It is further understood that PDVSA and the Borrower make no

representations or warranties concerning any projections or forward-looking statements included in

the Confidential Information Memorandum, except that such projections and forward looking

statements have been prepared in good faith based upon assumptions and estimates management

believes to be reasonable as of the date of the Confidential Information Memorandum. Whether or

not such projections or forward-looking statements are in fact achieved will depend upon future

events, some of which are not within the control of PDVSA and/or the Borrower. Accordingly, actual

results may vary from the projections and such variations may be material. As a potential lender,

you agree to conduct an independent investigation of the financial condition, creditworthiness,

affairs and status of the Project and of all parties involved in the Transaction Facilities, and to base

your decision whether or not to participate in the Transaction Facilities solely on such investigation.

Accordingly, you hereby confirm that, in connection with your consideration of the proposed

Transaction Facilities you will not rely on the Lead Arrangers with respect to the adequacy,

accuracy or completeness of any information provided herewith. In addition, you hereby agree to

continue to independently assess and keep under review the financial condition, creditworthiness,

affairs and status of the Project and of all the parties involved in the Transaction Facilities from the

date hereof until the earlier of your decision not to participate in the Transaction Facilities or your

execution and delivery of an assignment agreement or your signing definitive documentation for the

Transaction Facilities.

A brief description of the terms and conditions of the Transaction Facilities is included in this

Confidential Information Memorandum. Such description does not purport to be comprehensive and

all references to agreements are qualified in their entirety by reference to the same.

This notice and the enclosed confidential information are delivered to you subject to your

agreement to the Confidentiality Agreement and specifically in connection with your consideration of

committing in the Transaction Facilities, and neither they nor their substance shall be disclosed or

used for any other purpose other than to evaluate your decision whether or not to participate in the


Your receipt of this Confidential Information Memorandum constitutes your agreement to the

foregoing and the further obligation to return the material as provided in the Confidentiality

Agreement, together with all copies that you may have made thereof, should you decide not to

pursue this matter and to participate in the Transaction Facilities; provided, however that you shall

be permitted to retain such copies of the material as you shall be required to retain (a) pursuant to

applicable record retention regulations of any governmental authority having jurisdiction over you,

or (b) pursuant to your internal record retention policy, provided that upon expiration of such

requirements, if any, the other provisions of this paragraph concerning return or destruction of

material shall apply. In addition, nothing herein shall be construed as an obligation to remove or

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erase any material contained in an automated back-up system not accessible in the ordinary course

of business.

BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6° andar São Paulo, SP 04358-905 Brazil

Banco do Brasil S.A. Av. Paulista, 2163 6° andar São Paulo, SP 01311-933 Brazil

Banco Espírito Santo S.A. Rua Braamcamp, 2 5° andar 1250-050 Lisboa Portugal

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Form of Commitment Advice

[Lender's Letterhead] [Date]

BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6° andar São Paulo, SP 04358-905 Brazil

Banco do Brasil S.A. Av. Paulista, 2163 6° andar São Paulo, SP 01311-933 Brazil

Banco Espírito Santo S.A. Rua Braamcamp, 2 5° andar 1250-050 Lisboa Portugal

Attn.: [•] We are in receipt of your Confidential Information Memorandum (“CIM”), dated July 2011, prepared in connection with the proposed USD 2,100 million Guarantee Facility and USD 450 million Loan Facility

(together, the “Transaction Facilities”), that will support PDVSA do Brasil Ltda‟s (the “Borrower”) capital participation in the Refinaria Abreu e Lima S.A. (“Project”) as described in the CIM. __________(“Lender”) hereby provides for the Transaction Facilities its commitment in the amount of USD________ million under the USD 2,550 million Transaction Facilities, allocated as follows:

USD______ toward the USD 2,100 billion in the Guarantee Facility; and USD______ toward the USD 450 million in the Loan Facility.

The Lender acknowledges that it has, independently and without reliance on the Lead Arrangers or any other bank, and based on documents and information about the Project and the parties involved in the Transaction Facilities as it has deemed appropriate, made its own credit analysis and decision to enter into this commitment. Our commitment is subject only to our favorable review of the credit documentation, which shall be based on the terms and conditions set forth in the CIM. The Lead Arrangers shall have no liability or responsibility to the Lender if such financing is not entered into. The Lender understands and agrees that its proposed commitment amount is subject to acceptance and allocation at the discretion of Petróleos de Venezuela S.A. and the Lead Arrangers. Sincerely, Name of Authorized Officer Title Lender Telephone Number

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Contact List

BES Investimento do Brasil

Alan Fernandes

Head of Project Finance, Brazil

+55 11 3074-7494 [email protected]

Rogério Graziottin

Vice President - Project Finance, Brazil


Carlos Pacheco

Vice President – Client Coverage, Brazil


Guilherme Galego

Associate - Project Finance, Brazil


Banco Espírito Santo

Paulo Nacif

Director – International Corporate Banking Americas

+351 21 883 4579 [email protected]

Banco do Brasil

Sandro Kohler Marcondes

Commercial Director, Brazil


Renato Proença Lopes

Executive Manager, Brazil


Nildo Ribeiro do Rosario Neto

Manager, Brazil


Leny Marcia Ferreira da Silva

Senior Analyst, Brazil


Tito Santos Tavares da Silva

Senior Analyst, Brazil


PDVSA

Abraham Ortega

Chief Financial Officer


Renny Bolívar

Financing Manager +58 212 708-1438 [email protected]

PDVSA do Brasil Ltda

Sérgio A. Tovar Amaro

Executive Director


mailto:[email protected]












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Transaction Timetable

M T W T F S S M T W T F S S M T W T F S S

1 2 3 4 1 2 1 2 3 4 5 6

5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13

12 13 14 15 16 17 18 10 11 12 13 14 15 16 14 15 16 17 18 19 20

19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27

26 27 28 29 30 24 25 26 27 28 29 30 28 29 30

31

Syndication Timetable

September 9th, 2011 · Commitments due from Lenders

September 13th, 2011 · Determine allocation amounts

September 27th, 2011 · Legal documentation distributed to Lenders

October 10th, 2011 · Lender comments due on legal documentation

November 10th, 2011 · Sign documentation

November 18th, 2011 · Financial Close and funding

September 2011 October 2011

Key Date

Holiday

November 2011

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Definitions

ANP: Brazilian Petroleum National Agency

API: the American Petroleum Institute gravity, or API, is a measure of how heavy or light a

petroleum liquid is compared to water. If its API gravity is > 10, it is lighter and floats on water; if

<10, it is heavier and sinks.

bbls: Barrels of Oil

bbls/d: Barrels of Oil per Day

boe: Barrels of Oil Equivalent

boe/d: Barrels of Oil Equivalent per Day

CAGR: Compounded Annual Growth Rate

E&P: Exploration and Production

FPSO: Floating Production Storage and Offloading Unit

GDP: Gross Domestic Product

HCGO: Heavy Coker Gas Oil

LNG: Liquefied Netroleum Gas

LPG: Liquefied Petroleum Gas

PAC: Brazilian Government‟s Growth Acceleration Program

PSA: Production Sharing Agreement

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1. Executive Summary

1.1. Project Overview

In March 2008, Petróleo Brasileiro S.A. (“Petrobras”) and Petróleos de Venezuela S.A. (“PDVSA”)

(together, the “Sponsors”) entered into an association agreement (the “Association Agreement”) to

construct and operate a 230,000 barrels of oil per day (bbls/d) capacity oil refinery called Refinaria

Abreu e Lima (the “Project”, “Refinery” or “RAL”) in Recife, Brazil. The Refinery is one of the

primary endeavors under the Brazilian Government‟s Growth Acceleration Program (“PAC”) aimed

at improving Brazilian refining capacity, especially for diesel. The Project will be located in the

Ipojuca municipality near Recife, the capital of Pernambuco, a state in the northeast region of

Brazil. Petrobras, which currently owns 100% of the Refinery, is managing the construction process

and has engaged, through RAL, several contracts with renowned Brazilian construction companies

for the engineering, procurement, and construction of the Project. As of June 2011, 37% of the

Project‟s physical construction had been completed.

The Refinery will be comprised of two uniformly sized refining units. Unit 1 is expected to

commence operations in January 2013, while Unit 2 is scheduled to commence operations in

August 2013. The two units‟ combined total refining capacity of 230,000 bbls/d is equivalent to 11%

of the current Brazilian installed refining capacity.

The Project will enter into oil supply contracts with each of the Sponsors, whereby the Project will

source 50% of its crude oil input from Brazil and 50% from Venezuela. Approximately 70% of the

Refinery‟s total output will be in the form of diesel, which amounts to 9.04 million m3/ of diesel

production and represents approximately 20% of Brazil´s current diesel consumption. The Project

intends to sell all of its output to the domestic market at market rates. Additionally, the Project is

expected to generate more than USD 2 billion per year in federal and state tax revenue and will

contribute more than 20% of Pernambuco‟s total GDP.

According to the review carried out by PDVSA (see section 5.2), total construction costs are

expected to amount to BRL 28.5 billion (USD 16.3 billion) during an investment schedule that

commenced in 2006 and will conclude in 2016, approximately three years after the Project‟s

commercial operation date. As per the table below, the construction costs and associated financial

costs, will be financed via BRL 17.6 billion (USD 10.1 billion) of equity contributions, a BRL 9.9

billion (USD 5.2 billion) loan (the “BNDES Loan”) from Banco Nacional de Desenvolvimento

Econômico e Social (“BNDES”), the Brazilian Development Bank, and BRL 6.3 billion (USD 3.6

billion) from operational cash flows.

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Table 1: Project’s Estimated Sources and Uses (BRL million – from 2006 to 2016)*

Source: PDVSA

* Preliminary figures. Updated Sources and Uses, which is under development, will be supplied by

the Refinery's revised Economic and Financial Feasibility Study (see more details in section 5).

The BNDES Loan was signed and disbursed to RAL in full in August 2009. The BNDES Loan has

a 20 year tenor, due in March 2029, and will be repaid via semi-annual equal amortization

payments following a seven year grace period. Additionally, the BNDES Loan is fully guaranteed by

a Petrobras Corporate Guarantee.

1.2. The Agreement between Petrobras and PDVSA

Petrobras and PDVSA signed the Association Agreement in March 2008, which states that PDVSA

will participate in RAL‟s capital structure through subscription of new shares equivalent to 40% of

the Refinery‟s capital. The subscription will be materialized through PDVSA‟s wholly owned

subsidiary PDVSA do Brasil Ltda., established in Rio de Janeiro. Furthermore, the Association

Agreement established the conditions for PDVSA‟s participation in RAL‟s capital structure,

including:

PDVSA commitment to:

o Immediate equity injection of BRL 854 million (USD 510 million) - this amount is

based on August 2009 numbers subject to inflation, and will be updated by

Petrobras and certified by an independent consultant - to achieve 40% ownership

of the Refinery‟s capital (the “Initial Equity Contribution”); and,

o Future equity injections of BRL 6.2 billion (USD 3.6 billion), which is equivalent to

40% of the remaining BRL 15.5 billion required equity contribution.

The terms and conditions of RAL‟s governing documents upon PDVSA‟s equity

participation in the Project:

o Shareholder Agreement and Bylaws;

o Project‟s Midterm Business Plan; and,

o Oil Supply Contracts.

The Brazilian Economic Defense Administrative Counsel (“CADE”) has already approved the

association between Petrobras and PDVSA.

1.3. BNDES Loan Requirement

As previously mentioned, in August 2009, BNDES signed and fully disbursed the USD 5.2 billion

BNDES Loan to RAL to finance a portion of the Project costs. The BNDES Loan is secured by a

corporate guarantee from Petrobras for the full amount of the loan.

Uses So urces

Capex 28,500 84% BNDES Loan 9,890 29%

Debt Service (BNDES Loan) 5,330 16% Equity 17,586 52%

Petrobras 10,551 31%

PDVSA 7,034 21%

Operational Cash Flow 6,354 19%

T o tal 33,830 100% T o tal 33,830 100%

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Also, as a condition for PDVSA‟s capital participation in RAL, Petrobras will require PDVSA to

assume 40% of the existing guarantee issued in favor of BNDES. Therefore, PDVSA will be

obligated to guarantee the BRL equivalent of USD 2.1 billion of the BNDES Loan.

For that reason, and in order to comply with Association Agreement and BNDES Loan requirement,

PDVSA is approaching commercial banks with sufficient credit limits with BNDES, to provide

guarantees to BNDES on PDVSA‟s behalf in the amount of USD 2.1 billion.

1.4. The Transaction

Considering the above mentioned, PDVSA is seeking:

Equity Financing: An up to USD 450 million senior secured bank loan to finance 80% of

the Initial Equity Contribution (the “Loan Facility”);

Bank Guarantee: USD 2.1 billion in bank guarantees to secure 40% of the BNDES Loan

(the “Guarantee Facility”).

Banco Espírito Santo, BES Investimento do Brasil and Banco do Brasil (together, the “Lead

Arrangers”) were mandated by PDVSA to structure the Loan Facility and the Guarantee Facility

(together, the “Transaction Facilities”) and arrange the appropriate bank syndicate. The banks that

will join the syndicate (the “Lenders”) are expected to commit pro-rata to the Transaction Facilities.

The Lead Arrangers are committed to hold up to 50% of the Transaction Facilities as follows:

Banco Espírito Santo and BES Investimento do Brasil: 25%

Banco do Brasil: 25%

The structure of the Project‟s organizational structure and the related Transaction Facilities are

illustrated in the figure below.

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Figure 1: Envisaged Partnership Structure and the Transaction Facilities

1.4.1. Summary of Terms and Conditions

The summary of the terms and conditions of the Transaction Facilities are presented below. A more

detailed description of the terms and conditions of the Transaction Facilities can be found in the

Term Sheet section.

1.4.1.1. Loan Facility

The Loan Facility will have the following characteristics:

Table 2: Loan Facility Terms & Conditions

Amount Up to USD 450 million

Borrower PDVSA Brasil Ltda

Lenders Lead Arrangers plus other banks to be selected by PDVSA and Lead Arrangers

Tenor 5 years (2.5 year average life)

Repayment Semi-annual equal principal payments

Floating Rate 6 month Libor

Margin 550 bps per annum

Up-Front Fee 100 bps

Commitment Fee 200 bps per annum payable at Financial Close and accrued from Commitment Letter Acceptance Date

Petrobras

Abreu e Lima

RefineryBNDES

BNDES Loan

(BRL 9.9 bi – USD 5.2 billion)

PDVSA Brasil

40% 60%

PDVSA

Petrobras Corporate Guarantee

(60% of the BNDES Loan)

Initial Equity Contribution

(~ BRL 854 million)

Lenders

Guarantee Facility

100%

Bank Guarantee

(40% of the BNDES Loan)

Funds from the Loan Facility

(up to 80% of the Initial

Equity Contribution)

Loan Facility

Equity Injection

(minimum of 20% the

Initial Equity Contribution)

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1.4.1.2. Guarantee Facility

The Guarantee Facility will have the following characteristics:

Table 3: Guarantee Facility Terms & Conditions

Amount Up to USD 2,100 million

Applicant PDVSA Brasil Ltda

Guarantors Lead Arrangers plus other banks to be selected by PDVSA and Lead

Arrangers

Underlying

Contract

BNDES Loan

Beneficiary BNDES

Tenor 5 years; Renewable for consecutive 5-year tenors until the maturity of the BNDES Loan (March 2029)

Commission First 5 years: 400 bps per annum paid semi-annually in advance

Thereafter: 600 bps per annum paid semi-annually in advance

Up-Front Fee 20 bps

Commitment Fee 200 bps per annum payable at Financial Close and accrued from

Commitment Letter Acceptance Date

1.4.1.3. Collateral

The Transaction Facilities will benefit pari-passu from the following security package:

Corporate Guarantee issued by PDVSA for the total amount of the Transaction Facilities;

Pledge over 40% of the Refinery‟s shares;

Pledge over 100% of the Borrower‟s shares;

Standby Letter of Credit (“SBLC”) issued by Banco de Desarrollo Económico y Social de

Venezuela (“BANDES”) in the amount of USD 235 million;

o The SBLC will be 100% cash collateralized by a time deposit in BES; and

Pledge over the dividends payable by the Project to the Borrower. The dividends shall be

retained as collateral, in an amount up to USD 10 million dollars, until the liquidation of the


1.4.1.4. The Petrobras Direct Agreement

The Direct Agreement to be entered into between Petrobras, the Borrower, and the Lenders (the

“Petrobras Direct Agreement”) will include the following conditions:

If Borrower‟s equity interest in the Project falls below 40%, then Petrobras shall:

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o Provide replacement security and cause BNDES to release collateral provided by

the Borrower in an amount corresponding to the Borrower‟s equity shortfall.

o Indemnify the Lenders from any failure to accomplish the undertaking above.

A call mechanism whereby, in the event of default, Petrobras will have the option to

purchase and the Lenders will be obliged to sell the pledged Refinery‟s shares.

1.4.1.5. Transaction Structure

The structure of the Transaction Facilities and related collateral package is exhibited in the figure

below.

Figure 2: Transaction Facilities Guarantee Structure

2. The Project

2.1. Project Location

The Project is located in the Ipojuca municipality of the Recife metropolitan area in the state of

Pernambuco, in the northeast region of Brazil (the “Northeast”). The Refinery is located in a 630

hectare area in the Suape Industrial and Port Complex (“Suape”).

Petrobras

Abreu e Lima

Refinery

BANDES

Pledge over 40%

of the Refinery‟s

shares

PDVSA Brasil

40% 60%

PDVSA

Lenders

Parent Company

Guarantee

USD 235 million

SBLC, 100%

collateralized by

Time Deposit

Pledge over

dividends up to the

amount of USD 10

million dollars

Pledge over 100%

of shares in

PDVSA Brasil

Petrobras

Direct

Agreement

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Figure 3: Project Location

Source: RAL Business Plan

Suape is a strategic location in the center of the Northeast, acting as a hub for the cargo

transportation in the region. The complex is very well connected to the primary consumption points

in the Northeast region via a sophisticated network of roads and highways.

Figure 4: Strategic Location


2.2. Project Design and Operation

The Refinery will be comprised of petrochemical units capable of performing the following

processes: Atmospheric Distillation, Delayed Coking, Diesel and Naphtha Hydrotreating, Hydrogen

Generation, Treatment of Amine, Caustic Regeneration Treatment, Sulfur Recovery, and Tail Gas

SNOX (Emissions Abatement Unit) and ancillary units (utilities and offsite). The Refinery will also

rely on conventional production units, but with the incorporation of advanced technology to process

heavy crude oil, which produced high value-added products.

The Project was designed following the concepts of high performance units which determines

technical specifications and requirements for the achievement of the following characteristics:

High reliability level

RefinariaAbreu e Lima

Aracajú

São Luís

Teresina

Fortaleza

Recife

Suape

Salvador

João Pessoa

Maceió

Natal

7 capitals7 international airports8 international ports1 river port30 million people90% of the GDP of the Northeast Region

800 km

4 capitals4 international airports5 international ports12 million peopleMore than 35% of the GDP of the Northeast Region

300 km

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Low maintenance cost

Automation, optimization and advanced control

Ecological balance

Safety

Low intervention requirement

High quality products

Production flexibility

Low energetic consumption

Optimized water usage

Operational efficiency

The Project was designed to match quality and safety management system (“QSMS”) norms which

establish minimum safety, environmental and health quality specifications. The Refinery‟s chimney

will have gas sampling points, complying with the Brazilian National Environmental Council‟s

(CONAMA) established criteria.

The Refinery has already received the necessary environmental permits to start construction from

the appropriate regulatory authority, and consequently, construction has commenced.

Table 4: Refinery’s Environmental Permits Status

Source: RAL

Permit # Issuing Date Valid Until

Preliminary Permit 0096/2007 July 26th, 2007 July 26

th, 2008

Installation Permit 00880/2007 August 27th, 2007 August 26

th, 2009

Installation Permit (renewal) 08.09.08.007732-8 August 26th, 2009 August 26

th, 2011

The Project is in the process of obtaining a new operating permit from the Brazilian Petroleum

National Agency (“ANP”). The need for the new operating permit arises from increasing the

Project‟s refining capacity to 230,000 bbls/d, from the originally projected capacity of 200,000

bbls/d. This permit is not necessary during the construction period and is expected to be obtained

well before commercial operations.

The Refinery will have the capacity to process heavy crude oil with low API gravity, high acidity and

an elevated content of sulfur and nitrogen into high quantities of diesel. RAL will have the highest

diesel conversion capacity among all Petrobras‟ units.

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Figure 5: RAL’s Differential

Source: Petrobras

The Project includes two distillation units with total nominal capacity of 35.770 m³/d or 230,000

bbls/d. Each unit will have a refining capacity of 115,000 bbls/d. Unit 1 will process the Brazilian

crude oil BC-16 or equivalent and Unit 2 will process the Venezuelan crude oil Carabobo 16 or

equivalent.

The Refinery‟s projected capacity is equivalent to 11% of Brazil‟s total installed refining capacity.

Additionally, the Project‟s diesel production, which is equivalent to approximately 70% of the

Refinery‟s total output, will amount to 9.04 million m3/year which represents approximately 20% of

the Brazilian current consumption of the product.

According to the Brazilian Energy Balance, which is developed by the Brazilian Ministry of Mining

and Energy, diesel was the country‟s primary source of energy in 2009, accounting for 18% of the

Brazilian Energy Matrix. Diesel represented 47% of the consumption of oil products in the country.

The transportation sector is the main diesel consumer representing 82% of the total consumption.

The Northeast was responsible for 16% of the Brazilian diesel consumption in 2009.

Given that domestic diesel production does not currently satisfy demand, approximately 10% of

Brazilian diesel consumption is imported. Therefore, the Refinery´s production will play a significant

role in making Brazil a self-sufficient diesel country in the short term, and eventual net diesel

exporter in the medium to long term.

In addition to diesel, the Project will produce petrochemicals and other related products such as,

coke, naphtha, LPG, HCGO, Sulfuric Acid and Sulfur. Assuming a 96% utilization factor, which is

management‟s current forecast, the Project‟s annual output will be as follows:

Table 5: Refinery’s Projected Output (m3 / year)


1 – Processed Oil API Index 2 – Refineries Solomon Index 3 – Refineries’sDiesel Output

26

16

Petrobras Average - 2010 RAL

7,7

9,6


39%

70%


P ro duct Unit 1 Unit 2 T o tal

Diesel 4,580,547 4,465,232 9,045,779

Naphta 339,537 429,226 768,763

Coke 787,982 1,127,519 1,915,501

LPG 307,505 243,442 550,947

HCGO 358,756 83,283 442,039

Sulfuric acid 70,470 140,940 211,410

Sulfur 19,219 102,502 121,721

T o tal 6,464,017 6,592,144 13,056,160

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The Project is expected to commence operations in two phases, with Unit 1 becoming operational

in January 2013 and Unit 2 becoming operational in August 2013.

The crude oil to be processed by the Refinery will be brought to Suape Port through high capacity

ships (90.000 to 170.000 tons) and will be received by a new pier (PGL3) that is being constructed

by Pernambuco Government. The pier will be connected to the Refinery by underground pipelines

which will take the crude oil to the Refinery and oil products to the port (The Refinery is located 6

km from the Port). Underground pipelines will also connect the Refinery to distribution companies

which supply the local market.

In addition to the underground pipelines, the Refinery‟s output may be distributed to local and

regional markets via Suape‟s highway network, which consists of 41 kilometers of road connecting

the industrial complex to the main federal and state roads in the region, and rail system, which

connects to the national rail network.

2.3. Refinery’s Construction and Projected Investments

The Refinery is one of the largest and most imperative endeavors under PAC, with a total projected

investment of USD 16.3 billion. As of June 2011, 37% of the Project‟s physical construction had

been completed.

The Project will create approximately 20,000 direct and 150,000 indirect jobs during the

construction period. As of December 2010, there were close to 20,000 people working on the

Project‟s management and execution plan.

The construction process is being managed by Petrobras. Following PDVSA‟s capital participation

in the Project, the construction team will be managed by representatives from both Sponsors in

direct portion to their ownership interest in the Project.

To date, Petrobras has contracted, through RAL, several renowned Brazilian construction

companies with extensive experience in the sector to execute the supply, construction and

assembling of the main units of the Refinery. Below is a list of the Project‟s primary subcontracts:

Table 6: Refinery’s Main Construction Contracts

Source: RAL

Object Scope Contractor

Delayed Coking Unit and Caustic

Regeneration Treatment Sections

Supply, construction, assembling, tests, pre

operation and assisted operation Camargo Corrêa / CNEC

Hydrotreating Units and Hydrogen

Generation

Supply, construction, assembling, tests, pre

operation and assisted operation Odebrecht / OAS

Pipelines, Torch and Pump House Design, supply, construction, assembling,

tests, pre operation and assisted operation Queiroz Galvão / IESA

Atmospheric Distillation Unit Supply, construction, assembling, tests, pre

operation and assisted operation Odebrecht / OAS

Power House and Compressed Air Unit Design, supply, construction, assembling,

tests, pre operation and assisted operation Alusa Engenharia

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The Project is currently in the third and final phase of its three distinct construction phases:

1. Conceptual Design: This phase occurred during September 2005 to December 2006;

2. Basic Design: This phase occurred during December 2006 to November 2009; and

3. Execution: This phase commenced in the second semester of 2007 and is expected to end

in August 2014.

The figure below illustrates the chronological order of the three phases and their respective tasks.

Figure 6: Project Timeline

Source: RAL Implementation Report

Phase 1 Approval

Phase 2 Approval

Hiring of earthmoving

Hiring the implementation of the Power House

Hiring the implementation of Storage Tanks

Hiring the implementation of administrative buildings

Phase 3 Approval

Hiring the implementation of the producing units

Construction and Assembly concentration

Beginning of the operations of Atmospheric Distillation Unit

Beginning of the operations of the Unit - 1

Beginning of the operations of the Unit - 2

End of the assisted operation

1) Conceptual Design

2) Basic Design

3) Execution

Sep

, 2005

Dec, 2

006

Au

g, 2

007

Jan

, 2009

Mar,

2009

Mai, 2

009

No

v, 2

009

Dec, 2

009

Dec, 2

012

Jan

, 2013

Au

g, 2

013

Au

g, 2

014

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Figure 7: Actual and Projected Refinery’s Physical Construction Progress


As the figure above demonstrates, as of June 2011, approximately 37% of construction has been

completed. At this point BRL 6.9 billion (equal to 24% of expected BRL 28.5 billion construction

capex) had been invested in the Refinery‟s construction.

Figure 8: Actual and Projected Investments (BRL million)

Source: RAL

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

100,00%

jan

/05

jun

/05

no

v/0

5

abr/

06

set/

06

fev/

07

jul/

07

de

z/0

7

mai

/08

ou

t/0

8

mar

/09

ago

/09

jan

/10

jun

/10

no

v/1

0

abr/

11

set/

11

fev/

12

jul/

12

de

z/1

2

mai

/13

ou

t/1

3

mar

/14

ago

/14

jan

/15

jun

/15

no

v/1

5

5 99 523 814

3.075

8.802 8.783

5.288

740 314 57

-

5.000

10.000

15.000

20.000

25.000

30.000

2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P

Investments Accumulated Investments

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13

As of June 2011, 34% of the Refinery‟s equipment has been delivered on-site and an additional

48% has been contracted and ordered, while the remaining 18% are expected to be bided in the

upcoming months. By the same date, 26% of the Project‟s total investment has been executed and

65% of the Project‟s construction and equipment procurement sub-contracts have been executed.

Table 7: Equipments and Investments


2.4. Sponsors Experience

Both Sponsors have extensive experience in the construction and operation of refineries. Petrobras

has a refining capacity of 2.2 million bbls/d and is responsible for 98% of the total Brazilian refining

capacity. PDVSA is one of the main players in the global refining market, operating 21 refineries

around the world with a total refining capacity of 3.0 million bbls/d.

As seen in the graph below, together PDVSA and Petrobras have a refining capacity of 5.3 million

bbls/d and rank among the largest oil refiners in the world.

Figure 9: Refining Capacity (million bbls/d)

Source: PFC Energy WRMS, Petrobras and PDVSA

2.4.1. Petrobras

As mentioned above, Petrobras controls 98% of the total refining capacity in Brazil and, as of 2009,

owns the following refineries:

Delivered 176 34%

Ordered 253 48%

Hiring Process 94 18%

T o tal 523 105%

Equipments (units - Jun/ 2011)

6,3

5,3

3,63,0 2,9 2,7 2,6

2,2 2,2

0,70,3

CONFIDENTIAL

14

Table 8: Petrobras Refineries (2009)

Source: Petrobras

Most of the Brazilian refining industry was constructed during the 1960s and 1970s. During this

period, Petrobras invested approximately 50% of its total capex in the downstream segment.

However, in the last three decades, Petrobras has focused its investments on the upstream

segment, primarily in exploration and production of hydrocarbons (“E&P”). Petrobras invested only

USD 30 billion in the downstream segment in the last decade, representing an average annual

investment of only slightly more than USD 2.9 million. Consequently, much of the refining assets in

Brazil are relatively outdated and in need of investment. The figure below illustrates Petrobras‟

historical investments by segment.

Figure 10: Petrobras investments breakdown

Source: Petrobras

R efineries C apacity ( '000 bbls/ d) T hro ughput ( '000 bbls/ d)

Paulínia - Replan (SP) 365 324

Landulpho Alves - Rlam (BA) 279 254

Duque de Caxias -Reduc (RJ) 242 256

Henrique Lage - Revap (SP) 251 205

Alberto Pasqualini - Refap (RS) 189 142

Pres. Getúlio Vargas - Repar (PR) 189 183

Pres. Bernardes - RPBC (SP) 170 168

Gabriel Passos - Regap (M G) 151 143

M anaus - Reman (AM ) 46 39

Capuava - Recap (SP) 53 45

Fortaleza - Lubnor (CE) 7 6

Pasadena - Estados Unidos 100 98

Ricardo Eliçabe - Argentina 31 24

San Lorenzo - Argentina 50 30

Okinawa 100 45

T o tal 2,223 1,962

46% 42%

84%

55% 49%

43% 52%

15%

23%21%

4%10%

11% 13%2% 2%11% 5%

1%6% 5%

60-69 70-79 80-89 90-99 00-09

E&P Downstream Gas & Energy International Distribution Others

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15

After three decades of investments focused on E&P, Brazilian oil production and demand vastly

exceeds its refining capacity. In order to satisfy the growing domestic demand for oil products and

to eventually develop Brazil as a net oil exporter, Petrobras has recently presented a revised

investment plan to increase its refining capacity and complexity. The plan will permit Brazil to

produce high value-added products by refining heavy crude oil and producing diesel and gasoline of

high quality to match international standards.

Figure 11: Petrobras’ historic and projected investments (annual average USD million)

Source: Petrobras

Petrobras‟ projected investments in the downstream segment from 2010 to 2014 amounts to USD

73.6 billion, a substantial increase from previous years and evidence of Petrobras‟ renewed focus

on the segment. Refinaria Abreu e Lima is one the biggest Petrobras‟ projects in the downstream

segment and will account for approximately 7% of all investment in the segment.

2.4.2. PDVSA

PDVSA has interests in 21 refineries around the world, comprised of five in Venezuela, five in US,

eight in Europe and three in the Caribbean. In aggregate, PDVSA has a refining capacity of 3.0

million bbls/d.

23.760

14.720

6.320

154 1.041 2.277 3.159

14.204

44.800

60-69 70-79 80-89 90-99 00-09 10-14 P

E&P Downstream Others

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Figure 12: PDVSA’s Refineries

Source: PDVSA

PDVSA is the fourth largest supplier of crude oil and refined oil products in the United States of

America (“US”). Three of PDVSA‟s US based refineries are held by Citgo which is wholly owned by

PDVSA. Citgo is a leading energy company engaged in refining, transportation and marketing of

petroleum in the US market. Citgo is considered to be one of the largest and most complex

(weighted nelson complexity index of 12.38) independent refineries in US and the sixth largest

marketer of gasoline in the country (6,500 branded independent stations).

PDVSA has consistently invested in the downstream segment to increase its refining capacity and

its capability to process heavy crude oil and produce high value-added products. Including the

Project, PDVSA plans to invest more than USD 39 billion in the refining segment during the next

five years.

• 100% PDVSA

• Lake Charles

• Corpus Christi

• Lemont

• Saint Croix 50% PDVSA

• Chalmette 50% PDVSA

Kingston 49% PDVSA6 Ref ineries 100% PDVSA

Camilo Cienfuegos

49% PDVSA

Nynashamn 50% PDVSA

Gothenburg 50% PDVSA

Dundee 50% PDVSA

Eastham 25% PDVSA

Gelsenkirchen 50% PDVSA

Karlsruhe 12% PDVSA

Schwedt 19% PDVSA

Newstadt 13% PDVSA

Ref inery rented to Curacao Government – 100% PDVSA

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Figure 13: PDVSA’s Projected Investments in the Refining Segment (USD billion)

Source: PDVSA

2.5. Oil Supply Contracts

The Refinery has established the primary terms and conditions of the oil supply contracts with each

of the Sponsors (the “Oil Supply Contracts”) which will be signed by the parties upon PDVSA‟s

capital participation in RAL. The Oil Supply Contracts assure that the Refinery will have the

necessary oil supply to operate at its full capacity of 230,000 bbls/d. The main terms and conditions

of the Oil Supply Contracts are as follows:

Oil Specification:

o Oil from Petrobras must be BC 16 or equivalent;

o Oil from PDVSA must be CARABOBO 16, MEREY 16, DECON 16 or equivalent;

Quantity:

o Minimum 115,000 bbls/d to be supplied individually by both Petrobras and PDVSA

o If the Refinery is operating below full capacity, the 50:50 ratio will continue to apply

(i.e., neither party will be obligated to supply more oil than the other).

Term:

o The contract is valid from the Refinery‟s commercial operation date to September

30th, 2036;

Crude Oil Delivery Location:

o Oil will be delivered to Suape from where it will be transported to the Refinery by

underground pipelines;

Price:

o Price will be determined according to formulas mutually agreed by both Sponsors.

These formulas have been developed based on International Crude Market

Indicators, referential crudes and consider price adjustments due to crude gravity

and quality;

2

7

16

25

32

41

0

5

10

15

20

25

30

35

40

45

2010 2011 2012 2013 2014 2015

Local refining Foreign refining Accumulated Investments

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2.6. BNDES Loan

BNDES signed and fully disbursed the BRL 9.9 billion (USD 5.2 billion) BNDES Loan in August

2009 to finance a portion of the Project costs. The BNDES Loan has the following characteristics:

Table 9: BNDES Loan Terms & Conditions

Amount BRL 9.9 billion (USD 5.2 billion)

Borrower Refinaria Abreu e Lima S.A.

Repayment Semi-annual equal principal payments following a 7-year grace period

Interest Rate Fixed rate of 7.43% per annum

Interest Payment

Semi-annual; No grace period

Currency BRL

Index USD

Guarantee Petrobras Corporate Guarantee

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19

3. Petrobras

3.1. General Overview

Petrobras, Brazil‟s largest company in terms of revenue, is an integrated international oil and gas

company engaged in the exploration, development and production of hydrocarbons and in the

refining, marketing, transportation, and distribution of oil and a wide range of petroleum products,

petroleum derivatives, petrochemicals and liquid petroleum gas.

Petrobras was founded in 1953 as the Brazilian national oil company. It began operations with 15

million barrels of oil equivalent (“boe”) of reserves and two refineries which were transferred from

the former National Council of Petroleum. The company carried out oil and gas operations on behalf

of the Brazilian government until 1997 when Brazil enacted the Oil Law which opened Brazilian oil

and gas markets to private competitors.

Petrobras is currently one of largest companies in the world by market capitalization, with a market

value of USD 237 billion as of December 2010.

At the end of 2009, Petrobras had proven reserves of 12.2 billion boe. During the same year the

company produced 2.2 million boe/d and refined 1.9 million boe/d. Petrobras has a dominant

position in the Brazilian oil and gas market, the 10th largest oil-consuming nation. The company

owns 98% of Brazil‟s refining capacity, more than 7,000 retail stations, several pipelines, all or part

of 23 gas-fired power plants, and is developing capacity in petrochemicals, ethanol, and LNG.

3.2. Shareholder Structure

The Brazilian Government owns directly and indirectly 64% of Petrobras‟ common stock and 28% of

Petrobras‟ preferred stock. Brazilian law mandates that the government own at least 50% of the

voting stock and has the right to appoint majority of the directors on the Board.

Table 10: Petrobras’ Capital Stock

Source: Petrobras

Shares %

Federal Government 4,057,432,419 31.10%

BNDESPAR 1,514,749,158 11.61%

BNDES 218,845,426 1.68%

Fundo de Participação Social - FPS 8,433,460 0.06%

FFIE (Fundo Soberano) 505,652,285 3.88%

American Depositary Receipts (Common Shares) 1,521,989,590 11.67%

American Depositary Receipts (Preferred Shares) 1,477,085,956 11.32%

FM P - FGTS Petrobras 183,772,748 1.41%

Foreigners (RES. No 2689 C.M .N) 1,190,957,444 9.13%

Bovespa and Others 2,365,578,444 18.13%

T o tal 13,044,496,930 100.00%

CONFIDENTIAL

20

3.3. Business Segments

Petrobras is structured along five primary business lines: E&P; Refining, Transportation and

Marketing; Gas and Power; Distribution and International.

Figure 14: Petrobras’ Operating Income Composition (LTM July 2010)

Source: Petrobras

E&P: Petrobras is engaged in oil and gas exploration and production in Brazil. Brazilian

production represents approximately 90% of Petrobras‟ total production and Petrobras‟

production makes up an estimated 99% of total Brazilian production. Petrobras holds

concessions all over Brazil, but over 84% of proven reserves are concentrated in the

offshore Campos basin.

Refining, Transportation & Marketing: The refining, transportation & marketing segment is

primarily engaged in refining crude oil, but it also produces petrochemicals and fertilizer.

Petrobras has 2.2 million bbls/d of refining capacity in Brazil, which is equivalent to 98% of

Brazil‟s total capacity. Petrobras operates 15 refineries, 11 of which are in Brazil, located

primarily in the southeastern region of the country. Petrobras‟ refineries are typically smaller

and less complex when compared to its international peers. It plans to spend USD 74 billion

from 2010 to 2014 to increase its refining capacity and its ability to handle lower quality

crude oil while achieving higher environmental standards. Petrobras also owns a significant

stake in Braskem S.A., Brazil‟s largest petrochemical company.

Distribution: Through its distribution segment, Petrobras owns more than 7,000 retail

petroleum stations under the BR brand. Most of stations are operated by franchisees and

ones that are owned by Petrobras are operated by third-party contractors, as required by

Brazilian law.

Gas and Power: The gas and power segment is engaged in the transportation and

distribution of natural gas, and gas-fired electricity generation. As a source of Brazil‟s

energy needs, natural gas has grown from 4% in 1998 to 7% in 2009. Domestic production

has been supplemented with imports from Bolivia and will be increasingly supplemented

with LNG via its two import terminals. Petrobras owns all or part of 20 local gas distribution

companies throughout Brazil. Additionally, Petrobras maintains interests in 23

thermoelectric power plants.

E&P65%

Refining and Marketing

27%

Distribution4%

Gas and Power4%

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21

International: Petrobras operates in 24 countries outside of Brazil. It has assets around the

world, but it is particularly active in South America, the Gulf of Mexico, and offshore West

Africa. The company‟s international operations are focused on oil and gas exploration and

production, but also include refining and petrochemical assets located in Argentina, US,

and Japan. Petrobras‟ international operations produced 225,000 boe/d and had proven

reserves of 529 million boe at the end of 2009. The company aims to leverage its

experience in exploring and developing deepwater assets by assembling a global portfolio

of E&P assets. However, following the discovery of its pre-salt resources in Brazil,

Petrobras will reduce investment in its international assets to focus on pre-salt

development.

3.4. Financials

Table 11: Petrobras’ Financials (USD million)

Source: Petrobras

2005 2006 2007 2008 2009 2010

Net Revenues 56,324 72,347 87,735 118,257 91,869 120,052

EBITDA 17,638 22,923 25,333 31,083 28,982 32,665

EBITDA margin 31% 32% 29% 26% 32% 27%

Net Income 10,344 12,826 13,138 18,879 15,504 19,184

Capex 10,365 14,643 20,978 29,874 35,134 45,078

Cash & Equivalents 9,871 12,688 6,987 6,499 16,169 17,633

Total Debt 21,177 21,338 21,895 27,123 57,132 69,431

Net Debt / Ebitda 0.6x 0.4x 0.6x 0.7x 1.4x 1.6x

CONFIDENTIAL

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4. PDVSA

4.1. General Overview

PDVSA is Venezuela‟s largest company and ranks as one of the world‟s largest vertically integrated

oil and gas companies. According to Petroleum Intelligence, PDVSA is the fourth largest oil

company in the world. The company is wholly owned by the Republic of Venezuela and is

responsible for the country‟s development and exploration of oil and gas reserves.

PDVSA plays a strategic role in Venezuela‟s economy. In 2010, it was estimated that PDVSA

accounted for 16% of Venezuela‟s GDP, 90% of Venezuela‟s exports and 55% of the country‟s

fiscal revenues.

Venezuela‟s crude oil reserves are the largest in the world, estimated at 297 billion boe which

equates to more than 170 years of production at current levels. However, approximately 80% of its

reserves consist of extra-heavy crude oil which requires special processing.

According to US Geological Survey, the undiscovered Orinoco Basin reserves in Venezuela have

the potential to reach 512 billion boe. If these reserves are proven, Venezuela will own the largest

oil reserve in the world.

Figure 15: Global and Venezuelan Oil and Gas Proved Reserves

Source: OPEC Annual Statistical Bulletin

PDVSA currently produces approximately 3.0 million bbls/d of crude oil and 633 thousands boe/d of

natural gas. PDVSA has interests in 21 refineries around the totaling a refining capacity of 3.0

million bbls/d. The Company currently refines around 2.7 million bbls/d.

PDVSA has an extensive distribution network in the US through Citgo. In fact, PDVSA is the fourth

largest supplier of crude oil and refined petroleum products in the US after Canada, Mexico and

Saudi Arabia.

Over 95% of PDVSA‟s revenues in 2009 came from the international market, including both, exports

and foreign sales.

Venezuela’s oil and gas proved reserves (billion boe) Global oil proved reserves (billion boe)

2005 2006 2007 2008 2009

Saudi Arabia 264 264 264 264 265

Venezuela 80 87 99 172 211

Iran 136 138 136 138 137

Iraq 115 115 115 115 115

Kuwait 102 102 102 102 102

United Arab Emirates 98 98 98 98 98

Russia 78 79 79 79 79

Libya 41 41 44 44 46

Kazakhstan 40 40 40 40 40

Nigeria 36 37 37 37 37

80 87 99

172 211

26 29 29

30

31

106 116

129

203

242

2005 2006 2007 2008 2009

Oil Gas

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23

4.2. Shareholder Structure

PDVSA is 100% owned by the Venezuelan Government.

4.3. Business Segments

PDVSA is structured along four primary segments: E&P, Gas, Refining, Trade and Supply and

Other activities.

Figure 16: PDVSA’s Sales Composition (1H 2010)

Source: PDVSA

E&P: PDVSA has exploration activities in Venezuela and other countries such as Bolivia,

Ecuador, Cuba, Argentina and Uruguay. Production activities remain located strictly in the

Venezuelan territory. The E&P activities include the search for oil and gas reserves,

production of oil and gas, and the transportation of oil and natural gas to refineries and

fractionation plants.

Refining, Trade and Supply: PDVSA‟s activities in Venezuela include the administration of

refineries, marketing and transportation of crude oil and refined products, under the brand

name PDV. The refining, trade and supply activities in the US consist of the administration

of refineries and gasoline and by-products marketing, mainly on the East Coast and the

Midwest regions of the country, under the brand name CITGO. PDVSA also has refining

activities in the Caribbean and Europe.

Gas: PDVSA‟s activity includes the management of gas processing plants, upgrading and

commercialization of natural and liquid gas, both for industrial and household appliance, as

well as its transportation, distribution, storage and sale.

E&P42%

Refining Trade and Supply

56%

Gas1%

Other1%

CONFIDENTIAL

24

4.4. Financials

Table 12: PDVSA’s Financials (USD million)

Source: PDVSA

4.5. PDVSA’s Investment Plan

PDVSA‟s investment program is currently being undertaken via the 2010-2015 business plan called

Plan Siembra Petrolera (Oil Sowing Plan). The plan outlines USD 252 billion in projects in

Venezuela, the Caribbean and Latin America.

Some of the key projects and goals under the plan are the following:

Increase crude oil production to 4,460 million bbls/d by 2015;

Expand refining capacity from 3 million bbls/d to 3.2 million bbls/d by 2015;

Develop the gas sector and double production by 2015;

Increase tanker capacity to add new markets for crude oil; and,

Reduce domestic gasoline demand by increasing natural gas dispatch facilities for dual-fuel

vehicles.

2005 2006 2007 2008 2009 2010

Revenues 82.915 99.252 96.242 125.465 73.683 94.929

EBITDA 22.559 27.174 28.563 32.837 11.734 28.402

EBITDA margin 27% 27% 30% 26% 16% 30%

Net Income 6.483 5.452 6.273 9.413 4.498 3.202

Capex 3.939 1.748 13.187 15.848 15.313 13.307

Cash & Equivalents 1.800 2.282 3.325 4.483 6.981 6.017

Total Debt 3.433 2.914 16.611 15.095 21.419 24.950

Net Debt / Ebitda 0,1x 0,0x 0,5x 0,3x 1,2x 0,7x

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25

5. Financial Projections

RAL engaged Ernst & Young to produce an economic and financial study (the “Financial Plan”)

regarding the feasibility of the Project. The Financial Plan, dated as of April 2010, was delivered to

Petrobras and PDVSA, and considers several assumptions that were considered valid and

reasonable at that time.

In an effort to provide an updated equity contribution forecast, PDVSA carried out a limited review

of the Financial Plan in the 2011 first quarter (the “Revised Financial Plan”). The Revised Financial

Plan (see section 5.2) was limited to updates related to foreign exchange rates, capital

expenditures, and commercial operation dates.

Despite the limited review carried out by PDVSA, it is important to highlight that, as a condition

precedent to signing legal documentation, the Lenders will receive an updated Revised Financial

Plan that considers updated projections regarding capital expenditures, crude oil and oil product

prices, macroeconomic indicators, and any other assumptions that may impact the financial

projections of the Refinery.

5.1. RAL Financial Plan

All financial projections contained in the Financial Plan were developed in USD in real terms (i.e.

does not consider inflation). The USD/BRL rate is kept constant at 2.34 for the entire projection.

The main assumptions and outputs of the Financial Plan are presented below.

5.1.1. Investments

The Financial Plan considers investments of USD 13.36 billion, itemized as follows:

Table 13: Financial Plan’s Investments (USD million – real terms)

Source: Financial Plan

5.1.2. Revenues assumptions

The Financial Plan considers that Unit 1 and Unit 2 will commence operations in October 2012 and

July 2013, respectively.

2006 2007 2008 2009 2010 2011 2012 2013 2014 T o tal

Engineering 0 2 10 26 118 139 117 86 10 508

Equipments 1 20 99 249 1,112 1,314 1,103 811 90 4,797

M aterials 0 6 31 78 347 410 344 253 28 1,497

Civil Work 0 11 57 143 638 754 633 465 52 2,753

Assembling 0 11 55 139 623 735 617 454 50 2,686

Others 0 0 2 5 22 26 22 16 2 94

M anagement 0 4 21 53 239 282 237 174 19 1,029

T o tal 2 55 276 693 3,098 3,659 3,072 2,258 250 13,363

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26

The Financial Plan assumes a 96% utilization factor for the Project and assumes that 50% of the oil

to be refined comes from Brazil (BC 16) and 50% comes from Venezuela (Carabobo 16 or

equivalent). These assumptions result in the following annual output:

Table 14: Refinery’s Projected Output (m3 / year)


The Financial Plan considers that the Project will sell its entire output in the domestic market, with a

substantial portion being sold in Pernambuco state.

Table 15: Oil Products Commercialization


The price of oil and related products were based on the Plano Decenal de Energia 2008-2017,

produced by the Brazilian Energetic Research Company (Empresa de Pesquisa Energética). The

prices illustrated in the table below include taxes.

Table 16: Projected Sales Prices (USD/m3)


5.1.3. Operating Costs

5.1.3.1. Fixed Costs

The table below exhibits the projected fixed costs, including materials, workforce, utilities and

regular maintenance that are assumed in the Financial Plan.

P ro duct Unit 1 Unit 2 T o tal

Diesel 4,580,547 4,465,232 9,045,779

Naphta 339,537 429,226 768,763

Coke 787,982 1,127,519 1,915,501

LPG 307,505 243,442 550,947

HCGO 358,756 83,283 442,039

Sulfuric acid 70,470 140,940 211,410

Sulfur 19,219 102,502 121,721

T o tal 6,464,017 6,592,144 13,056,160

Diesel 10% 90%

Naphta 0% 100%

Coke 100% 0%

LPG 100% 0%

HCGO 100% 0%

Sulfuric acid 0% 100%

Sulfur 100% 0%

Inside P ernambuco

State

Outside

P ernambuco State

2012 2013 2014 2015 2016 2017 ...

Diesel 911 883 857 836 820 808 808

Naphta 556 539 524 511 502 494 494

Coke 210 139 99 99 99 99 99

LPG 1536 1495 1457 1426 1401 1383 1383

HCGO 490 478 467 457 450 444 444

Sulfuric acid 99 99 99 99 99 99 99

Sulfur 121 121 121 121 121 121 121

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27

Table 17: Projected Fixed Costs (BRL’000 /year)


5.1.3.2. Planned Maintenance

The table below exhibits the estimated annual projected maintenance cost:

Table 18: Projected Planned Maintenances (BRL’000/year)


5.1.3.3. Logistic Costs

The Financial Plan‟s projected logistic costs are presented in the following table:

Table 19: Projected Logistic Costs


5.1.3.4. Crude Oil

Crude oil price projections were also based on the Plano Decenal de Energia 2008-2017 and are

held constant from 2017 onward. The values in the following table are net of taxes.

M aterials 9,494

Workforce 149,400

Utilities 34,777

Regular M aintenance 45,000

Total 238,671

F ixed C o sts

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Planned M aintenance 0 6,000 61,000 30,000 336,840 6,000 6,000 85,000 6,000 336,840 6,000

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Planned M aintenance 30,000 61,000 6,000 336,840 30,000 6,000 61,000 6,000 360,840 6,000 85,568

Oil Products (output) Cost Unit Crude Oil (raw material) Cost Unit

Diesel - Inside Pernambuco state BC 16 or equivalent (Domestic Oil)

Pipelines 0.4 BRL/ m3 Pipelines and freight 11.0 BRL/ m3

Diesel - Outside Pernambuco state Suape Terminal 2.5 BRL/ ton

Pipelines 0.4 BRL/ m3 Port Fees 2.7 BRL/ ton

Suape Terminal 2.5 BRL/ ton

Port Fees 2.7 BRL/ ton Carabobo 16 or equivalente (Foreign Oil)

Naphta - Outside Pernambuco State Pipelines and freight 18.1 BRL/ m3

Pipelines 0.4 BRL/ m3 Suape Terminal 2.5 BRL/ ton

Suape Terminal 2.5 BRL/ ton Port Fees 2.7 BRL/ ton

Port Fees 2.7 BRL/ ton

LPG - Inside Pernambuco state

Pipelines 0.4 BRL/ m3

HCGO - Inside Pernambuco state

Pipelines 0.4 BRL/ m3

CONFIDENTIAL

28

Table 20: Projected Crude Oil Prices (USD/m3)


2012 2013 2014 2015 2016 2017 ...

Crude Oil 430 417 405 395 388 382 382

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29

5.1.4. Projected Financial Statements

Table 21: Projected Income Statement


USD millio n (real terms) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Gro ss R evenues

Diesel 1,043 6,018 7,755 7,564 7,414 7,305 7,305 7,305 7,305 7,305 7,305

Naphta 47 299 403 393 386 380 380 380 380 380 380

Coke 41 188 189 189 189 189 189 189 189 189 189

LPG 118 642 803 785 772 762 762 762 762 762 762

HCGO 44 191 206 202 199 196 196 196 196 196 196

Sulfuric acid 2 14 21 21 21 21 21 21 21 21 21

Sulfur 1 9 15 15 15 15 15 15 15 15 15

Gro ss R evenues 1,296 7,361 9,391 9,170 8,995 8,868 8,868 8,868 8,868 8,868 8,868

Sales D educt io ns (34) (1,444) (2,059) (2,025) (1,992) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967)

PIS and COFINS - (1,240) (1,788) (1,754) (1,721) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696)

ICM S - - - - - - - - - - -

CIDE (34) (204) (271) (271) (271) (271) (271) (271) (271) (271) (271)

N et R evenues 1,262 5,917 7,332 7,145 7,004 6,901 6,901 6,901 6,901 6,901 6,901

C o sts and Expenses (785) (4,755) (6,303) (6,143) (6,160) (5,935) (5,935) (5,969) (5,935) (6,076) (5,936)

M aterials (1) (3) (4) (4) (4) (4) (4) (4) (4) (4) (4)

Workforce (8) (48) (64) (64) (64) (64) (64) (64) (64) (64) (64)

Utilities (2) (11) (15) (15) (15) (15) (15) (15) (15) (15) (15)

Regular M aintenance (1) (6) (9) (9) (9) (9) (9) (9) (9) (9) (9)

Planned M aintenance - (3) (26) (13) (144) (3) (3) (36) (3) (144) (3)

Other Operational Costs (1) (8) (11) (11) (11) (11) (11) (11) (11) (11) (11)

Crude Oil (759) (4,587) (6,049) (5,903) (5,788) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704)

Logistic Costs (13) (89) (126) (126) (126) (126) (126) (126) (126) (126) (126)

EB IT D A 477 1,161 1,029 1,001 844 966 966 932 966 824 965

EBITDA M argin 38% 20% 14% 14% 12% 14% 14% 14% 14% 12% 14%

Depreciation (271) (1,311) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,336) (1,065)

EB IT 206 (150) (307) (335) (492) (370) (370) (404) (370) (512) (100)

Financial Result (149) (149) (149) (149) (149) (143) (131) (120) (109) (97) (86)

EB T 57 (298) (456) (484) (641) (513) (502) (524) (479) (609) (186)

Income Tax and Social Contribution (6) - - - - - - - - - -

N et Inco me 50.95 (298.36) (455.58) (483.51) (641.01) (513.25) (501.82) (524.21) (478.97) (609.16) (186.09)

Net M argin 4% -5% -6% -7% -9% -7% -7% -8% -7% -9% -3%


Gro ss R evenues

Diesel 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305 7,305

Naphta 380 380 380 380 380 380 380 380 380 380 380

Coke 189 189 189 189 189 189 189 189 189 189 189

LPG 762 762 762 762 762 762 762 762 762 762 762

HCGO 196 196 196 196 196 196 196 196 196 196 196

Sulfuric acid 21 21 21 21 21 21 21 21 21 21 21

Sulfur 15 15 15 15 15 15 15 15 15 15 15

Gro ss R evenues 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868 8,868

Sales D educt io ns (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967) (1,967)

PIS and COFINS (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696) (1,696)

ICM S - - - - - - - - - - -

CIDE (271) (271) (271) (271) (271) (271) (271) (271) (271) (271) (271)

N et R evenues 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901 6,901

C o sts and Expenses (5,946) (5,960) (5,936) (6,078) (5,946) (5,936) (5,960) (5,936) (6,088) (5,936) (5,970)

M aterials (4) (4) (4) (4) (4) (4) (4) (4) (4) (4) (4)

Workforce (64) (64) (64) (64) (64) (64) (64) (64) (64) (64) (64)

Utilities (15) (15) (15) (15) (15) (15) (15) (15) (15) (15) (15)

Regular M aintenance (9) (9) (9) (9) (9) (9) (9) (9) (9) (9) (9)

Planned M aintenance (13) (26) (3) (144) (13) (3) (26) (3) (154) (3) (37)

Other Operational Costs (11) (11) (11) (11) (11) (11) (11) (11) (11) (11) (11)

Crude Oil (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704) (5,704)

Logistic Costs (126) (126) (126) (126) (126) (126) (126) (126) (126) (126) (126)

EB IT D A 954 941 965 823 954 965 941 965 813 965 930

EBITDA M argin 14% 14% 14% 12% 14% 14% 14% 14% 12% 14% 13%

Depreciation (25) - - - - - - - - - -

EB IT 929 941 965 823 954 965 941 965 813 965 930

Financial Result (74) (63) (51) (40) (29) (17) (3) - - - -

EB T 855 878 913 783 926 947 938 965 813 965 930

Income Tax and Social Contribution (203) (209) (217) (186) (220) (225) (223) (230) (193) (230) (221)

N et Inco me 651.51 669.16 695.81 596.61 705.40 721.93 714.88 734.98 619.24 734.98 709.03

Net M argin 9% 10% 10% 9% 10% 10% 10% 11% 9% 11% 10%

CONFIDENTIAL

30

Table 22: Projected Debt Service Coverage Ratio


5.2. Revised Financial Plan

In order to estimate the amount of equity that will have to be injected in the Refinery, PDVSA

updated some of the Financial Plan‟s assumptions. The assumptions that were updated include

foreign exchange rates, capital expenditures, and commercial operation dates.

It is important to highlight that these are preliminary figures and, although PDVSA does not expect

significant variations, a further updated Revised Financial Plan shall be submitted to Lenders as a

condition precedent to signing of legal documentation.

5.2.1. Foreign Exchange Rate

The projections for the USD/BRL exchange rate were based on figures from the Focus Report as of

March 2011. The Focus Report is released weekly by the Brazilian Central Bank.

The EUR/BRL exchange rate was based on projections from BES Investimento do Brasil‟s

Economic Department.

Table 23: Foreign Exchange Rates

Source: Brazilian Central Bank and BES Investimento do Brasil


D SC R 3.17x 8.55x 7.31x 6.72x 2.41x 1.77x 1.81x 1.79x 1.90x 1.66x 1.98x

C ash Generat io n 471 1,270 1,086 998 841 964 966 932 966 824 965

EBITDA 477 1,161 1,029 1,001 844 966 966 932 966 824 965

Income Tax and Social Contribution (6) - - - - - - - - - -

Changes in working capital 0 109 57 (3) (3) (2) - - - - -

D ebt Service 149 149 149 149 350 544 532 521 509 498 486

Principal Amortization - - - - 201 401 401 401 401 401 401

Interest Payment 149 149 149 149 149 143 131 120 109 97 86


D SC R 1.69x 1.58x 1.66x 1.43x 1.73x 1.77x 3.54x N / A N / A N / A N / A

C ash Generat io n 801 733 749 629 742 740 717 737 610 744 707

EBITDA 954 941 965 823 954 965 941 965 813 965 930

Income Tax and Social Contribution (203) (209) (217) (186) (220) (225) (223) (230) (193) (230) (221)

Changes in working capital 50 1 2 (8) 8 1 (1) 2 (9) 9 (2)

D ebt Service 475 464 452 441 429 418 203 - - - -

Principal Amortization 401 401 401 401 401 401 200 - - - -

Interest Payment 74 63 51 40 29 17 3 - - - -

2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P

USD/BRL (year average) 2.18 1.95 1.84 1.99 1.76 1.68 1.74 1.79 1.84 1.87 1.87

EUR/BRL (year average) 2.74 2.67 2.70 2.78 2.33 2.28 2.20 2.17 2.19 2.25 2.25

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31

5.2.2. Capex

Capex assumptions were updated considering the progress of the Refinery‟s construction as of

December 2010, as well as, the estimated schedule for remaining investments based on contracts

that have been executed or that are under negotiation.

Table 24: Projected Investments

Source: PDVSA

5.2.3. Commercial Operation Date

The commercial operation dates for Unit 1 and Unit 2 were updated to January 2013 and August

2013, respectively.

5.2.4. Estimated Equity Contribution

Considering the updates mentioned above, the total amount of equity injection in the Refinery is the

forecast at BRL 17.6 billion (USD 10.1 billion).

Table 25: Sources and Uses (BRL million)

Source: PDVSA

Considering that PDVSA will be responsible for 40% of total equity, PDVSA commits to contribute

BRL 7.0 billion (USD 4.1 billion), with BRL 854 million (USD 510 million) as Initial Equity

Contribution and BRL 6.2 billion (USD 3.6 billion) from 2011 to 2013.

2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal

USD/BRL (year average) 2.18 1.95 1.84 1.99 1.76 1.68 1.74 1.79 1.84 1.87 1.87

EUR/BRL (year average) 2.74 2.67 2.70 2.78 2.33 2.28 2.20 2.17 2.19 2.25 2.25

Actual Investments (BRL million) 5 99 523 814 3,075 - - - - - - 4,516

Projected Investments (by currency)

BRL (million) - - - - - 8,403 8,319 5,009 701 297 54 22,783

USD (million) - - - - - 50 60 36 5 2 0 154

EUR (million) - - - - - 139 163 98 14 6 1 420

Projected Investments (BRL million) - - - - - 8,802 8,783 5,288 740 314 57 23,984

T o tal Investments (B R L millio n) 5 99 523 814 3,075 8,802 8,783 5,288 740 314 57 28,500

T o tal Investments (USD millio n) 2 51 284 408 1,748 5,240 5,048 2,954 402 168 31 16,336

So urces 2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal

Cash Flow from Operating Activities - - - - - - - 2,707 1,953 1,768 1,406 7,835

BNDES Loan - - - 9,890 - - - - - - - 9,890

Equity Injection 5 99 523 654 - 3,575 9,456 3,273 - - - 17,586

T o tal So urces 5 99 523 10,544 - 3,575 9,456 5,980 1,953 1,768 1,406 35,311

Uses 2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P T o tal

Capex 5 99 523 814 3,075 8,802 8,783 5,288 740 314 57 28,500

Debt Service - - - 96 681 650 673 693 712 724 1,100 5,330

Interest Payment - - - 96 681 650 673 693 712 724 725 4,954

Principal Amortization - - - - - - - - - - 376 376

T o tal Uses 5 99 523 911 3,756 9,453 9,456 5,980 1,452 1,038 1,158 33,830

Cash Flow - - - 9,634 (3,756) (5,878) - - 501 731 249 1,481

C ash B alance - - - 9,634 5,878 - - - 501 1,232 1,481 1,481

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Table 26: Equity Injection (BRL million)

Source: PDVSA

2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P T o tal

Total Equity Injection 5 99 523 654 - 3,575 9,456 3,273 17,586

P D VSA Equity Injectio n - - - - - 1,942 3,783 1,309 7,034

Initial Equity Contribution - - - - - 854 - - 854

Remaining Projected Equity Injection - - - - - 1,088 3,783 1,309 6,180

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6. Market Overview

6.1. Brazilian Oil Reserves and Production

Brazil has the 16th largest proven oil reserve in the world with 12.9 billion bbls by the end of 2009.

Brazilian reserves have been consistently increasing in the last ten years, presenting a

compounded annual growth rate (CAGR) of 4.7% from 1999 to 2009. In the same period, global

reserves grew at an annual average of 2.1%. Brazilian oil production has been growing even more

than oil reserves, presenting a CAGR of 6.6% in the last ten years.

Figure 17: Brazilian Oil Proved Reserves and Oil Production

Source: ANP

In 2006, Petrobras discovered the first signs of oil in the pre-salt section. In 2007, a consortium

formed by Petrobras, BG Group, and Petrogal discovered the Tupi field. Tupi contains substantial

reserves in a pre-salt zone, 18,000 feet below the ocean‟s surface, under a thick layer of salt.

Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as

Iracema, Carioca, Iara, Libra, Franco and Guara. Additional pre-salt discoveries were also

announced in the Campos and Espirito Santo Basins. The total pre-salt resources are difficult to

define, but specialists estimates the oil reserves at more than 36 billion bbls.

Figure 18: Pre-Salt map

Source: Petrobras

8,2 8,5 8,5 9,8

10,6 11,2 11,8 12,2 12,6 12,8 12,9

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Onshore Offshore

401 451 472

531 546 541 596 629 638 663

712

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Onshore Offshore

Oil Proved Reserves (billion bbls) Oil Production (million bbls)

CAGR: 4.7% CAGR: 6.6%

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Brazil‟s pre-salt announcements immediately transformed the nature and focus of Brazil‟s oil sector.

Moreover, the potential impact of the discoveries on the global oil market cannot be over-

emphasized. The scale of the potential expansion in production will test Petrobras‟ exploration and

production resources and Brazil‟s infrastructure.

Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves

Source: OPEC and Análise Energia Annual Report 2010

In its 2010-2014 business plan, Petrobras plans to invest USD 33 billion in pre-salt and USD 75.2

billion in post-salt production E&P activities to achieve a domestic oil production of 4 million bbls/d

by 2020. More than a quarter of this production is expected to come from pre-salt oil.

The Brazilian government released the proposed regulatory framework for the pre-salt reserves in

August 2009. The framework consists of four acts of legislation.

The first two bills were signed into law in July of 2010. The first law creates a new agency,

Petrosal, to manage new pre-salt production. The second law allows the government to

capitalize Petrobras by granting the company 5 billion bbls of unlicensed pre-salt oil

reserves in exchange for a larger ownership share.

The other two bills were approved by Congress in December 2010, but have not yet been

signed into law. The first bill establishes a new development fund to manage government

revenues from pre-salt oil, and the second bill lays out a new production sharing agreement

(“PSA”) system for pre-salt reserves.

In contrast to the earlier concession-based framework, Petrobras will be the sole operator of each

PSA and would hold a minimum 30% stake in all pre-salt projects.

Once a final agreement is in place, Brazil is expected to hold an auction round for exploration

blocks.

13

18

19

25

37

40

44

49

79

98

102

115

137

211

265

14th- Brazil

13th- China

12th- United States

11th -Qatar

10th- Nigeria

9th- Kazakhstan

8th- SP Libyan AJ

8th- Brazil with Pre-Salt

7th- Russia

6th- United Arab Emirates

5th- Kuwait

4th- Iraq

3rd- IR Iran

2nd- Venezuela

1st -Saudi Arabia

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6.2. Brazilian Refining Market

According to ANP, as of 2009 Brazilian refining capacity amounted to 332,703 m3/day. Petrobras

currently operates 11 of the 16 refineries in Brazil, most of which are located near the major

demand and production centers. The largest refinery in Brazil is located in Paulínia, São Paulo with

a refining capacity of 66,000 / m3 / day.

Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009)

Source: ANP

Despite being the 10th largest oil consumer in the world, Brazil is expected to experience sharp

growth in demand for oil products in the coming years, primarily a result of the economy‟s strong

growth projections.

Figure 20: Brazilian GDP and Global Oil Consumption

Source: IPEA and Petrobras

The growth of Brazil‟s refining capacity has not kept pace with domestic demand. While Brazil‟s oil

production and demand have been growing fast in recent years, Brazil‟s refining capacity has hardly

R efineries (States) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Replan (SP) 56,000 56,000 56,000 58,000 58,000 58,000 58,000 58,000 61,000 66,000

RLAM (BA) 47,000 47,000 47,000 51,350 51,350 51,350 51,350 51,350 46,950 44,500

Revap (SP) 36,000 36,000 36,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000

Reduc (RJ) 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500 38,500

Repar (PR) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 32,000 35,000 35,000

Refap (RS) 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000

RPBC (SP) 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000 27,000

Regap (M G) 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000

Recap (SP) 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500

Reman (AM ) 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300 7,300

Polo de Guamaré (RN) 1,728 1,728 1,728 1,728 1,728 4,328 4,328 4,328 4,328 4,328

Riograndense (RS) 2,000 2,000 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700

M anguinhos (RJ) 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200

Lubnor (CE) 1,000 1,000 1,000 1,000 1,000 1,100 1,100 1,100 1,300 1,300

Univen (SP) - - - - - - - 1,100 1,100 1,100

Dax Oil (BA) - - - - - - - - 275 275

T o tal 311,228 311,228 311,928 322,278 322,278 324,978 324,978 328,078 330,153 332,703

Brazilian GDP (BRL trillion) Global Oil Consumption (million boe/d)

2,7 2,8 3,0

3,1 3,1 3,4

3,5 3,7

3,9 4,0

2005 2006 2007 2008 2009 2010 E

2011 P

2012 P

2013 P

2014 P

18,7

8,6

4,43,2 2,8 2,7 2,6 2,4 2,4 2,3 2,2 1,9 1,9 1,8 1,7 1,6 1,6

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increased in the last decade, presenting a CAGR of less than 1.0%. Brazil‟s oil production and

demand has overtaken refining capacity, resulting in Brazil being a net importer of refined oil

products.

In order to satisfy growing domestic demand for oil products, Petrobras has recently presented an

aggressive plan to increase its refining capacity in order to make Brazil self-sufficient in oil products

in the short term, and eventual net exporter of high value-added oil products in the medium to long

term. Petrobras plans to increase the volume of oil processed domestically by 470,000 bbls/d by

2014 and by an additional 936,000 bbls/d by 2020. The company‟s projected investment in the

refining and supply segment from 2010 to 2014 amounts to USD 73.6 billion.

Figure 21: Brazilian Oil Production, Refining and Demand (‘000 bbls/d)

Source: Petrobras

6.3. Brazilian Diesel Market

Diesel is the main source of energy in Brazil. According to the Brazilian Energy Balance, diesel

accounted for 18% of the Brazilian energy consumption in 2009 and represented 47% of the

consumption of energy oil products in the country. The transportation sector is the main consumer

of diesel representing 82% of the total domestic consumption.

181

1.971

2.980

3.950

1.3931.791

2.260

3.196

1.036

1.9332.356

2.794

134%

93% 96%114%

-150%

-100%

-50%

0%

50%

100%

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

1980 2009 2014E 2020E

A) Oil Production B) Processed Oil C) Demand for Oil Products (B) / (C)

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Figure 22: Brazilian Energy Consumption and Diesel Consumption

Source: Brazilian Energy Balance

Nowadays, Brazil‟s diesel production is not enough to meet domestic demand thus the product is

imported in large quantities. In the last five years Brazil has imported on average 10% of its

domestic diesel consumption. Approximately 95% of imported diesel comes from Asia and the US.

Figure 23: Diesel Production, Sales and Imports

Source: ANP

Brazilian Energy Consumption Brazilian Diesel Consumption

Diesel18%

Electricity18%

Sugar cane bagasse

14%Firewood

8%

Gasoline7%

Natural Gas7%

Others28%

Transportation

82%

Agriculture and

Livestock15%

Industrial2%

Others1%

Domestic Diesel Production and Sales (million m3) Diesel Imports (million m3)

38,739,1

39,6

41,1

42,9

39,2 39,0

41,6

44,844,3

2005 2006 2007 2008 2009

Diesel Production Diesel Sales

2,4

3,5

5,1

5,8

3,5

6%

9%

12% 13%

8%

-10%

-5%

0%

5%

10%

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

2005 2006 2007 2008 2009

Diesel Imports

Diesel Imports / Diesel Domestic Sales

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7. Risks and Mitigants

The main risks associated with the Transaction Facilities are listed below, along with the

corresponding mitigants:

7.1. Construction

Risk:

Delays and/or cost-overruns.

Mitigants

The Sponsors have a proven track-record and possess significant construction

management credentials, having constructed several refineries in the past decades.

The Sponsors are two of the main players in the global refining market with 36 refineries

worldwide and a combined refining capacity of 5.3 million bbls/d, equivalent to the second

largest refining capacity in the world;

The Refinery will consist of conventional production units and incorporate proven

technologies familiar to the Sponsors;

The Project has contracted several of the most renowned construction companies in Brazil,

with extensive experience in the sector, to undertake certain construction and equipment

procurement activities;

The Refinery has all the necessary permits for its construction; and,

Construction is well underway. As of December 2010, 31% of construction was complete,

20% of equipment had been delivered on site, and another 46% of equipment had been

already ordered.

7.2. Equity Contribution

Risk:

Delay or failure by the Sponsors to contribute equity, resulting commercial operation delay;

Mitigants

Both Sponsors rank among the largest oil companies in the world;

Both Sponsors maintain favorable leverage ratios and have the ability to raise funds in the

capital markets;

o PDVSA and Petrobras have Net Debt / EBITDA ratios of 0.6x and 1.6X,

respectively.

The Project is of strategic importance to both Sponsors; and,

o The Refinery enables Petrobras to process large volumes of oil expected to be

produced in the pre-salt area and reduce Brazil‟s diesel imports; and,

o The Refinery represents PDVSA‟s first significant investment in the Brazilian oil

market and allows the company to process its enormous reserves of heavy crude

oil.

As of financial close, both Sponsors will have jointly injected more than BRL 2.1 billion in

equity in the Project.

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7.3. Operations

Risk:

Unsatisfactory operation due to technical problems, lack of crude oil supply (raw material)

or logistic problems.

Mitigants

As previously mentioned, the Sponsors have extensive experience in the refining market,

being responsible for the operation of 36 refineries globally;

The Project has entered into Oil Supply Contracts assuring crude oil supply until 2036; and,

The Refinery is located in Suape, which provides the necessary infrastructure network to

receive crude oil and distribute diesel and other refined oil products.

7.4. Demand

Risk:

Low demand or low prices for oil products.

Mitigants:

The Refinery‟s main output will be diesel, which was the main Brazilian source of energy in

2009, accounting for 18% of the Brazilian Energy Matrix, and represented 47% of the

consumption of energetic oil products in the country; and,

Furthermore, current domestic diesel production does not satisfy demand, and

consequently, Brazil is importing 10% of diesel consumption.

7.5. Repayment

Risk:

The Project and Borrower are unable to repay the BNDES Loan and the Transaction

Facilities, respectively, due to lack of cash flows from the sale of oil products.

Mitigants:

The Project‟s Minimum and Average DSCR are 1.43x and 2.91x, respectively;

The Sponsors are strongly committed to the Project and will inject a significant amount of

equity. Furthermore, the BNDES Loan Agreement is also guaranteed by Petrobras;

The Transaction Facilities are guaranteed in full by a Corporate Guarantee issued by

PDVSA;

Additionally, the Transaction Facilities are also guaranteed by a pledge over 40% of the

Refinery‟s shares and a USD 235 million cash collateralized SBLC issued by BANDES.

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8. Term Sheet

SUMMARY OF INDICATIVE TERMS AND CONDITIONS

This Summary of Indicative Terms and Conditions does not constitute a binding offer by Banco

Espírito Santo (“BES”), BES Investimento do Brasil S/A – Banco de Investimento (“BESI”) and

Banco do Brasil S.A. (“BB”), or any of them (the “Mandated Lead Arrangers”) to provide financing or

to issue first demand guarantees or fianças on the terms set forth herein and, if the debt facility

described herein is entered into, will be replaced by definitive Finance Documents (as defined

below) and the terms set forth herein shall thereafter be without force or effect. In addition, this

Summary of Indicative Terms and Conditions is subject to (i) credit committee approvals by the

Lenders, (ii) satisfactory due diligence, including financial, environmental and legal, by the Lenders

and their advisors (including Venezuelan counsel) and (iii) there being, in the reasonable opinion of

the Mandated Lead Arrangers, no material adverse change occurring in the syndicated loan

markets or in the business or financial condition of any Credit Party or the group taken as a whole

or in financial, economic or political conditions generally in Venezuela or Brazil prior to the signing

of the Loan Facility based upon the terms set forth herein.

A. Key Parties and Transaction

Borrower

PDVSA do Brasil Ltda., a sociedade limitada formed under the laws of

the Federative Republic of Brazil and owned, directly or indirectly, by

the Quotaholders (“PDVSA Brasil”).

Quotaholders

PDV Sur S.A., a sociedad anónima formed under the laws of the

Bolivarian Republic of Venezuela (“PDV Sur”) and Deltaven S.A. a sociedad anónima formed under the laws of the Bolivarian Republic of

Venezuela (“Deltaven”), each of which is, directly or indirectly, wholly-

owned by the Guarantor.

Guarantor

Petróleos de Venezuela S.A., a sociedad anónima formed under the

laws of the Bolivarian Republic of Venezuela (“PDVSA” and,

collectively with the Borrower, the “Credit Parties”).

PDVSA Group

PDVSA and those entities in which PDSVA directly or indirectly owns

a majority of the issued and outstanding equity interests.

Project Company

Refinaria Abreu e Lima S.A., a sociedade anônima formed under the

laws of the Federative Republic of Brazil (“RAL”).

Project

The two unit, 230,000 bpd capacity petroleum refinery under

construction in the Ipojuca municipality of the Recife metropolitan area

of the state of Pernambuco, Brazil and to be owned by the Project

Company.

Sponsors

Petróleo Brasileiro S.A., a sociedade anônima formed under the laws

of the Federative Republic of Brazil (“Petrobras”) and PDVSA Brasil.

Currently, the Project Company is wholly-owned by Petrobras.

Transaction

The Borrower will (a) make an initial equity contribution to the Project

in the approximate amount of USD550 million through the subscription

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of new shares equivalent, after issuance, to 40% of the Project

Company‟s total share capital (the “Initial Equity Contribution”) and will

finance up to 80% of such equity contribution (approximately USD450

million) with the proceeds of the Loan Facility described below and

(b) request the Lenders (as defined below) to issue a bank guarantee or fiança acceptable to Banco Nacional de Desenvolvimento

Econômico e Social (“BNDES”) (with each Lender‟s participation

therein to be in an amount of USD (or its equivalent) that is

proportionate to such Lender‟s participation in the Loan Facility), to

guarantee 40% of the obligations of the Project Company under the

BNDES Loan Agreement, which guaranteed amount shall in no event

exceed in the aggregate the equivalent of USD2.1 billion (the

“Guarantee Facility”).

Transaction

Facilities

The Loan Facility and the Guarantee Facility.

Transaction

Documents

The Finance Documents and the Equity Documents.

Finance Documents

The Loan Facility, the Guarantee Facility, the Promissory Note, the

ECSRA, and each Security Document (such instruments and

agreements being, together with the Intercreditor Agreement, the

“Finance Documents”).

Security

Documents

The RAL Fiduciary Transfer Agreement, [the PDVSA Brasil Fiduciary

Transfer Agreement,] the Onshore Dividend Account Fiduciary

Transfer Agreement, the Petrobras Direct Agreement, the BANDES

SBLC, the BANDES Time-Deposit Account Control and Pledge

Agreement and the PDVSA Guarantee.

Project Company

Shareholders

Agreement

The shareholders agreement to be entered into between PDVSA Brasil, Petrobras and the Project Company (as interveniente) in

relation to the Project Company.

Investment

Agreement

Either (a) an investment agreement to be entered into between

PDVSA, Petrobras and the Project Company (as interveniente) or (b)

an amendment to the ACN (as defined below), in either case (x)

attaching forms (in form and substance satisfactory to the Lenders) of (i) the Estatuto Social to be adopted by the Project Company, (ii) the

Project Company Shareholders Agreement, (iii) the Business Plan,

(iv) the sales contract to be entered into between PDVSA and the

Project Company (the "PDVSA Sales Contract") and (v) the sales

contract to be entered into between Petrobras and the Project Company (the "Petrobras Sales Contract") and (y) regarding, inter

alia, PDVSA Brasil's initial equity contribution to the Project.

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Petrobras Direct

Agreement

The direct agreement to be entered into between Petrobras, the

Borrower and the Lenders providing, inter alia, (a) that if the

Borrower's equity interest in the Project Company falls below 40% (a

"Reduction"), Petrobras shall (i) provide all replacement security

required by BNDES as collateral security for the Project Company's

obligations under the BNDES Loan Agreement (and in particular, that

portion of the Project Company's obligations under the BNDES Loan

Agreement that corresponds to the Reduction), (ii) cause BNDES to

release a portion of the collateral security provided by the Borrower for

the Project Company's obligations under the BNDES Loan Agreement

corresponding to the Reduction, (iii) indemnify the Lenders for any

loss they may suffer arising from any failure by Petrobras to

accomplish the undertaking described in subsection (ii) above and (iv)

assume the obligation to pay a guarantee commission (to be defined)

if Petrobras has failed to accomplish the undertaking described in

subsection (ii) within [●] days, (b) a call mechanism in respect of

shares of the Project Company whereby upon an Event of Default or

Guarantee Event of Default Petrobras will have the option to purchase

(and the Lenders will be obliged to sell) such shares for a set period of

time at a price to be determined and (c) for the giving of notice of any

failure by the Borrower to make equity contributions or shareholder

loans following a call by the Project Company to do so.

Equity Documents

The Project Company Shareholders Agreement, the Investment

Agreement, the Contrato de Associação dated March 26, 2008

between Petrobras and PDVSA and the Acordo de Conclusão das

Negociações dated October 31, 2009 between Petrobras and PDVSA

(the "ACN").

BNDES Loan

Agreement

The agreement dated as of July 30, 2009 between BNDES, the

Project Company and Petrobras pursuant to which BNDES has

disbursed a loan in the principal amount of the Brazilian Reais ("BRL")

equivalent of approximately USD5.2 billion to the Project Company to

finance the construction and commissioning of the Project. Currently,

the BNDES loan is fully guaranteed by Petrobras, together with any

amendment(s) thereto made in connection with the Transaction.

Mandated Lead

Arrangers

BES, BESI and BB.

The Mandated Lead Arrangers will structure the Transaction Facilities

and arrange, on a "best efforts" basis, a syndicate of commercial

banks acceptable to the Borrower (acting reasonably) to participate in

both facilities.

Mandated Lead

Arrangers

[Maximum Final

Hold]

BES and BESI USD[637.5] million

BB USD[637.5] million

The Lenders

The Mandated Lead Arrangers and other financial institutions to be

selected by the Mandated Lead Arrangers with the consent of the

Borrower, such consent not to be unreasonably withheld.

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Commitment

Letters

Letters issued by each Lender, in form and substance satisfactory to

it, to the Borrower describing the terms and conditions of any

commitment of such Lender to participate in the Transaction Facilities.

Onshore Account

Agent

TBD

Offshore Account

Bank

BES Madeira Branch, Portugal

Offshore Collateral

Agent

BES Madeira Branch, Portugal

Onshore Collateral

Agent

TBD

Onshore Account

Bank

TBD

Administrative

Agent

BES Madeira Branch, Portugal and, together with each other agent

and Account Bank set forth above, the “Agents”).

Secured Parties

Each Lender, each Agent and the Offshore Account Bank.

Lenders' Advisors

Technical Advisor

to Lenders

[●]

Legal Advisors to

Lenders

Allen & Overy LLP (New York law)

Machado, Meyer, Sendacz e Opice Advogados (Brazilian law)

[●] (Venezuelan law)

Credit Parties'

Advisors

Legal Advisors to

each Credit Party

Shearman & Sterling LLP (New York law)

Bastos-Tigre, Coelho da Rocha e Lopes Advogados (Brazilian law)

[●] (Venezuelan law)

B. Loan Overview1

Loan Facility

A senior, single-tranche, syndicated debt facility structured as a foreign loan (“empréstimo externo” or "Loan") secured by the

Collateral Security described below on a pari passu basis with the

Guarantee Facility.

1 Loan Facility provisions are subject to Venezuelan counsel input with respect to Venezuela-specific regulatory issues.

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Loan Facility

Amount

An amount equal to 80% of the Initial Equity Contribution, as

calculated [15] days prior to the projected Financial Closing Date, but

not to exceed the BRL equivalent of USD[450] million.

Currency

United States Dollars (“USD”)

Purpose

The proceeds of the Loan Facility will be used by the Borrower on the

Financial Closing Date (as defined below) to fund its equity

contribution to the Project Company as described under “Transaction”

and to pay associated costs, fees and expenses.

Financial Closing

Date

The date on which the disbursement under the Loan Facility occurs.

Availability Period

The Availability Period shall commence on the date on which each of

the conditions precedent to the Financial Closing Date have been

satisfied or waived. The full amount of the Loan Facility must be

drawn in a single drawing no later than August 31, 2011, which date

may be extended to October 31, 2011 upon an agreement to that

effect between PDVSA and Petrobras. Amounts borrowed under the

Loan Facility that are repaid or prepaid shall not be reborrowed.

Amortization

Semi-annual equal payments, with the first payment of principal to

occur on the [date that is six months after the Financial Closing Date]

and subsequent payments of principal to be made on the last day of

each succeeding six-month period (each such date, a “Payment

Date”).

Final Maturity Date

5 years from the Financial Closing Date.

Commitment Fee

To each Lender for its own account, a fee equal to its pro rata portion

of an amount equal to 2.0% of the Loan Facility Amount, such fee to

(a) accrue during the period from and including the date all Lenders

have received a copy of their Commitment Letters duly executed by

the Borrower (such date, the "Commitment Letter Acceptance Date")

to but excluding the earlier to occur of (i) the Financial Closing Date or

(ii) the date on which PDVSA has officially notified each Lender that

the Transaction has been cancelled and (b) be non-refundable and

earned, due and payable in full upon the Financial Closing Date out of

the proceeds of the first disbursement, all as set forth in each Lender's

Commitment Letter.

Upfront Fee

To each Lender for its own account, a fee equal to its pro rata portion

of an amount equal to 1.0% of the Loan Facility Amount, such fee to

be non-refundable and earned, due and payable in full upon the

Financial Closing Date out of the proceeds of the first disbursement,

all as set forth in a fee letter to be executed by the parties.

Interest Rate and

Interest Periods

The outstanding principal of the Loan Facility will bear interest at a

rate equal to the 6 month London Interbank Offered Rate (“LIBOR”)

for the relevant interest period plus the Applicable Margin. Interest

accrued shall be paid on each Payment Date starting with the first

Payment Date.

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Upon the occurrence and continuance of an Event of Default relating

to a payment obligation, the Interest Rate shall increase by 200 basis

points per annum.

IFRS

International accounting standards within the meaning of the IAS

Regulation 1606/2002 to the extent applicable.

Applicable Margin

The margin over LIBOR for the term of the Loan Facility shall be 5.5%

per annum.

Voluntary

Prepayments /

Cancellations

The Borrower shall have the option to prepay the Loan Facility, in

whole or in part, at any time on 3 business days‟ irrevocable notice

without premium or penalty subject to reimbursement of any

applicable breakage costs.

Partial prepayments shall be in multiples of USD10 million.

The Borrower shall have the option to cancel the Loan Facility, in

whole but not in part, at any time during the Availability Period on 3

business days‟ irrevocable notice.

With respect to any prepayment or cancellation, whether voluntary or

mandatory:

1. amounts prepaid or cancelled shall not be re-borrowed, and

2. amounts prepaid shall be applied pro rata across the remaining

principal installments.

Mandatory

Prepayments

To be agreed in the definitive documentation.

There will be no prepayment penalties (except LIBOR breakage costs)

for mandatory prepayments.

As a condition to, and effective upon, any prepayment, mandatory or

voluntary, of a non-pro rata portion of a Lender‟s interest in the Loan

Facility, such prepaid Lender shall transfer and assign to the other

Lenders with remaining interests in the Loan Facility (and each such Lender shall assume) a pro rata portion of such prepaid Lender‟s

obligations under the Guarantee Facility.

Conditions

Precedent to

Signing

Such conditions precedent as are customary for a facility of this nature

including, but not limited to each of the following in form and

substance satisfactory to the Lenders:

1. entry into force of the Investment Agreement;

2. entry into force of the Project Company Shareholders

Agreement providing, inter alia, for the authorization of the

pledge by the Borrower in favor of the Lenders of the

Borrower's present and future shares of the Project Company,

and otherwise in form and substance satisfactory to the

Lenders; and

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46

3. delivery of a revised financial model reflecting the current capex

curve and macroeconomic conditions.

Conditions

Precedent to

Financial Closing

Date

Such conditions precedent as are customary for a facility of this nature

including, but not limited to each of the following in form and

substance satisfactory to the Lenders:

1. entry into force of the Finance Documents;

2. receipt of corporate documents and officer certificates of the

Credit Parties that, inter alia, demonstrate due authorization of

the transactions contemplated by and due execution of, the

Finance Documents;

3. receipt of certified copies of all necessary approvals, consents

and authorizations required by applicable law in connection with

the transactions contemplated by the Finance Documents and

the Project;

4. receipt of legal opinions from New York, Brazilian and

Venezuelan legal counsel to the Credit Parties and the

Quotaholders;

5. confirmation that the Agents and Lenders (and their advisors)

have received (or, in the case of the Commitment Fee, the

Initial Bank Guarantee Commitment Fee and the Upfront Fee,

will receive out of the proceeds of the Loan Facility

disbursement pursuant to irrevocable instructions of the

Borrower) all fees and other amounts due and payable on or

prior to the Financial Closing Date, including, to the extent

invoiced at least 3 business days prior to the Financial Closing

Date, reimbursement or payment of all out-of-pocket expenses

required to be reimbursed or paid by the Borrower;

6. confirmation that all accounts contemplated herein have been

established in accordance with the relevant Finance

Documents;

7. receipt of the Borrower's, the Guarantor's, each Quotaholder's

and the Project Company‟s most recent consolidated, audited

financial statements; and, with respect to the Project Company,

the current calendar year's, and each subsequent year's,

Project budget (showing a sources and uses of funds for all

Project costs through the Project's commissioning and reaching

of commercial operations, including a separate line item for

equity infusions as well as a construction chronogram showing

milestones in reasonable detail and anticipated Project cost

expenditure as at each such milestone and to be annexed to

the Loan Facility, the Guarantee Facility and the ECSRA)

(collectively, the "Project Budget")2;

2 The Project Budget will set forth, in reasonable detail, the construction schedule for the Project including the expected

commercial operation date as well as a timetable for equity infusions to fund such works from each of the Sponsors.

Note that the Project Budget contemplated here is static.

CONFIDENTIAL

47

8. receipt of documentation and information required under

applicable “know your customer” and anti-money laundering

rules and regulations including, without limitation, the U.S.

Patriot Act;

9. accuracy in all material respects of all representations and

warranties in the Finance Documents;

10. no defaults or events of default under the Transaction

Documents shall have occurred and are continuing or would

result from the disbursement;

11. creation and perfection of the liens over the Collateral

contemplated in the Security Documents;

12. the deposit by the Borrower, into an account designated by the

Lenders, of an amount equal to the difference between the

Initial Equity Contribution and the Loan Facility Amount, and

such amount shall be standing to the credit of such account on

the Financial Closing Date;3

13. entry into force of an amendment to the BNDES Loan

Agreement providing, inter alia, for (a) the authorization that the

guarantees or fianças arising under the Guarantee Facility will

be for the benefit of BNDES to guarantee repayment of a

maximum amount of the BRL equivalent of USD2.1 billion in

principal outstanding (and interest accrued thereon) under the

BNDES Loan Agreement, replacing an existing Petrobras

financial guarantee covering such amount and (b) the

authorization of the pledge by the Borrower in favor of the

Lenders of the Borrower's present and future shares of the

Project Company, in form and substance satisfactory to the

Lenders; and

14. subscription by the Borrower of new shares equivalent, after

issuance, to 40% of the Project Company's total share capital.

3 To the extent that there is any shortfall in the amount contributed and the price of the new shares, the Borrower will be

required to cover such shortfall.

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Representations

and Warranties

The Borrower will make such representations and warranties as are

customary for a facility of this nature including, but not limited to:4

1. each of the Borrower and the Project Company is duly

organized and validly existing and has the full power and

authority to enter into the Transaction Documents to which it is

a party, and the Project Company is duly organized and validly

existing and has the full power and authority to enter into the

BNDES Loan Agreement and the material project documents to

which it is a party or is intended to become a party to effect the

construction, testing and commissioning and operations of the

Project in accordance with the Business Plan (such other

documents, the "Material Project Documents");

2. the Transaction Documents, the BNDES Loan Agreement and

the Material Project Documents have been duly registered (to

the extent required by law) and are in proper legal form,

effective and enforceable in the relevant jurisdiction and each

Finance Document to which the Borrower is a party and the

BNDES Loan Agreement, the Project Company Shareholders

Agreement, the Investment Agreement and each Material

Project Document to which the Borrower or the Project

Company, as applicable, is a party constitute a legal, valid and

binding obligation of the Borrower or the Project Company, as

applicable, enforceable against the Borrower or the Project

Company, as applicable, in accordance with its terms;

3. neither (a) the Borrower‟s nor (b) the Project Company's

entering into and performance of the Finance Documents (in

the case of the Borrower), the BNDES Loan Agreement and

each Material Project Document (in the case of the Project

Company) and the Project Company Shareholders Agreement

(in the case of both the Borrower and the Project Company)

conflicts with applicable law, the Borrower‟s or the Project

Company's constitutive documents or other material

agreements to which it is a party, and the Borrower and the

Project Company, as applicable, have obtained all necessary

approvals, consents and authorizations as required by

applicable law in connection with the Transaction Documents,

the BNDES Loan Agreement, each Material Project Document

and the Project, as applicable;

4 Lenders will include all required representations and warranties relating to (a) the Guarantor in the PDVSA Guarantee

and (b) the Quotaholders in the ECSRA and/or the PDVSA Brasil Fiduciary Transfer Agreement, with cross-default

provisions related thereto in the Transaction Facilities.

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4. (a) the Borrower and (b) the Project Company are subject to

civil and commercial law with respect to their obligations under

the Transaction Documents (in the case of the Borrower) and

the BNDES Loan Agreement, the Project Company

Shareholders Agreement, the Investment Agreement and each

Material Project Document (in the case of the Project Company)

and the execution and delivery of the documents and

agreements to which each is a party constitute, private and

commercial activities rather than public or governmental acts;

5. the most recent consolidated, audited financial statements of

(a) the Borrower and (b) the Project Company have been

prepared in good faith, are based on reasonable assumptions

and present fairly such party‟s financial position in all material

respects;

6. each of (a) the Borrower and (b) the Project Company has good

title to all the real and personal property it purports to own and

lease;

7. there is no legal, administrative or other action current, pending

or threatened that has had, or is reasonably likely to have, a

Material Adverse Effect (as defined in Annex A, Part 2) on the

Borrower or on the Project Company;

8. with respect to (a) each Transaction Document to which the

Borrower is party and (b) the BNDES Loan Agreement, the

Project Company Shareholders Agreement, the Investment

Agreement and each Material Project Document to which the

Project Company is a party, there is no default or event of

default outstanding (or solely with respect to the Material

Project Documents, of which the Borrower is aware);

9. each of (a) the Borrower and (b) the Project Company is solvent

under applicable bankruptcy or insolvency law;

10. all of the (a) taxes of the Borrower and (b) the material taxes of

the Project Company have been timely filed and paid except for

those being contested in good faith and for which adequate

reserves have been made in accordance with applicable law

and accounting principles;

11. the Borrower is not subject to any withholding or documentary

(stamp) taxes on or by virtue of the execution of the Transaction

Documents other than as specified therein;

12. the share capital of each of the Project Company and the

Borrower is fully issued as described in a Schedule and not

subject to any liens other than those created under the Security

Documents, and neither the Project Company nor the Borrower

has any subsidiaries other than as set forth in such Schedule;

no party other than the Borrower and Petrobras holds any

equity rights in the Project Company;

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13. the Borrower has the ability to lawfully pay in US Dollars the

total amount which is, or may become payable by it to the

Lenders under each Finance Document to which it is a party;

14. the Security Documents confer and create in favor of the

Secured Parties a valid and perfected first priority security

interest in the Collateral, subject only to liens preferred by

operation of law or any judicial order (provided that such judicial

orders are in respect of immaterial amounts and/or properties);

15. the Borrower‟s obligations and liabilities under the Finance

Documents are its unconditional and general obligations and

rank at least pari passu with all of its other present or future

unsecured and unsubordinated indebtedness (both actual and

contingent);

16. all information provided in writing by or on behalf of the

Borrower or any of its affiliates was on its date of issue true,

complete and accurate in all material respects and does not

contain any misstatements or omissions that would make it

misleading;

17. in any proceedings in New York, Brazil or Venezuela to enforce

the Finance Documents, the choice of the laws of the State of

New York, Brazil or Venezuela (as applicable) as the governing

law of any Finance Documents will be recognized and applied,

the Borrower‟s irrevocable submission to jurisdiction under such

Finance Documents shall be legal, valid, binding and

enforceable and any judgment obtained in New York, Brazil or

Venezuela will be recognized and enforceable against the

Borrower and its assets in Brazil or Venezuela (as applicable)

without reexamination of the merits of the underlying cause of

action, subject to the limitations set forth in applicable law;

18. the Borrower has no outstanding debt (contingent or otherwise)

other than Borrower Permitted Financial Indebtedness (as

defined in Annex A, Part 3), and the Project Company has no

outstanding debt (contingent or otherwise) other than Project

Company Permitted Financial Indebtedness (as defined in

Annex A, Part 3);

19. each of the Borrower‟s and the Project Company's waiver of

immunity is valid and neither it nor its assets benefit from any

immunity from final suit or judgment with respect to its

obligations under the Finance Documents in the case of the

Borrower, under the BNDES Loan Agreement, the Project

Company Shareholders Agreement, the Investment Agreement

or any Material Project Document, in the case of the Borrower

or the Project Company, as applicable, subject to any

limitations set forth in any such waiver;

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20. the Borrower is not required to be registered as an “investment

company”, or a company “controlled” by a company that is

required to be registered as an “investment company”, within

the meaning of the U.S. Investment Company Act of 1940, as

amended;

21. the Borrower is not engaged principally, or as one of its

important activities, in the business of extending credit for the

purpose of buying or carrying margin stock;

22. usual and customary provisions regarding the Employee

Retirement Income Security Act of the United States of America

(ERISA); and

23. none of the activities of the Borrower have, and none of the

borrowing of the Loan by the Borrower or the Borrower's use of

the proceeds thereof will, violate any of the following: (a) the

regulations of the Office of Foreign Assets Control of the United

States of America Department of Treasury; (b) the U.S.A.

Patriot Act of the United States of America; and (c) the Foreign

Corrupt Practices Act of the United States of America.

Affirmative

Covenants

The Borrower shall, and to the extent possible based upon its

ownership interests in the Project Company and its exercise of all

rights associated thereunder, shall cause the Project Company to,

comply with such affirmative covenants (with "baskets" to be

negotiated in the definitive documentation) as are customary for a

facility of this nature including, but not limited to, covenants regarding:

1. delivery of certain information (and making customary

representations and undertakings regarding the same),

including, without limitation, in respect of the Borrower and the

Project Company, notice of any call by the Project Company for

equity contributions or shareholder loans and any failure by the

Borrower and/or Petrobras to make such equity contributions or

shareholder loans, financial statements, material changes in

accounting or financial reporting practices, regulatory filings, no

outstanding default certificates, compliance certificates and

notices in respect of the following: default, material litigation,

force majeure events, material governmental proceedings or

investigations and, in respect of the Project Company and the

Project, annual budgets, reports relating to insurance coverage,

construction reports, material Project Budget variations and

overruns in each case containing comparisons against the

original Business Plan, and notices in respect of environmental

proceedings and claims;

2. performance of all material obligations arising under the

Transaction Documents and performance of all obligations

arising under the BNDES Loan Agreement and each Material

Project Document;

3. preservation of existence;

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4. maintenance of good title to all real and personal property

material to its business;

5. compliance in all material respects with all applicable laws and

insurance requirements and maintenance of all necessary

approvals, consents and authorizations as required by

applicable law and compliance in all respects with all

environmental laws, in all cases in connection with the

Transaction and, in the case of the Project Company, the

Project;

6. maintenance of books and records;

7. compliance with all reporting obligations of any relevant

governmental authority;

8. consultation and inspection rights upon reasonable request and

notice and maintenance of an independent accountant;

9. timely payment and filing of all taxes, except for those being

contested in good faith and for which adequate reserves have

been made in accordance with applicable law;

10. in respect of the Borrower, the use of proceeds of the Loan

Facility;

11. in respect of the Project Company, completion of the Project in

accordance with the business plan (to be annexed to the Loan

Facility, the Guarantee Facility, the Project Company

Shareholders Agreement, the Investment Agreement and the

ECSRA and in form and substance satisfactory to the Lenders)

(the “Business Plan”);

12. in the event of any cost overrun (whether actual or anticipated)

of any line item in the Project Budget, prompt (and in any event

no later than 15 days after the Borrower or the Project

Company becomes aware of such cost overrun) notification by

the Borrower thereof, and if any such cost overrun, when

aggregated with any other cost overrun of the Project existing at

such time, exceeds the amount of available and uncommitted

contingency set forth in the Project Budget, delivery by the

Borrower of a plan for the financing of such cost overrun in form

and substance satisfactory to the Lenders and acknowledged

and agreed by the Guarantor no later than 60 days prior to the

date on which any required expenditures in respect of such cost

overrun must be made;

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13. (a) the pledge and creation of a valid and perfected security

interest over any note or instrument evidencing subordinated

indebtedness of the Project Company to the Borrower or of the

Borrower to any Quotaholder or the Guarantor and (b) the

assignment and creation of a valid and perfected security

interest over the Borrower's rights under any agreement

contemplating subordinated indebtedness of the Project

Company to the Borrower, and of any Quotaholder‟s rights

under any agreement contemplating indebtedness of the

Borrower to any Quotaholder, in each case within 10 days of

the date on which such indebtedness has occurred;

14. from the Financial Closing Date until the second anniversary of

the date on which commencement of operation of the Project

occurs (as such date is defined in the definitive documentation),

the Borrower (a) shall provide to the Lenders and their

Technical Advisor all monthly Project construction reports

produced by the Project Company and/or Petrobras on a

current basis and (b) shall provide all information and shall

render such assistance (including facilitating Project site access

and access to Project Company management) as is reasonably

required to allow the Lenders' Technical Advisor to render

industry-standard semi-annual Project reports;

15. the obligations of the Borrower under the Finance Documents

shall at all times be secured by a valid and perfected first

priority security interest in and over the Collateral subject only

to liens preferred by operation of law; and

16. the obligations and liabilities under the Finance Documents

shall be the Borrower's unconditional and general obligations

and shall rank at all times at least pari passu with all of its other

present or future unsecured and unsubordinated indebtedness

(both actual and contingent).

Negative Covenants

The Borrower shall, and to the extent possible based upon its

ownership interests in the Project Company and its exercise of all

rights associated thereunder, shall cause the Project Company and,

where expressly mentioned below, the Quotaholders, as applicable, to

comply with such negative covenants (with exceptions, materiality and

"baskets" to be negotiated in the definitive documentation) as are

customary for a facility of this nature including, but not limited to,

negative covenants regarding:

1. in respect of the Borrower, no further Financial Indebtedness

(as defined in Annex A, Part 1) other than Borrower Permitted

Financial Indebtedness;

2. restrictions on transactions with affiliates except on arms‟ length

terms;

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3. restrictions on the creation of security interests on the assets

and shares of the Borrower and Project Company (other than

permitted liens to be agreed and, with respect to the Project

Company, as permitted by the BNDES Loan Agreement as in

effect on the date of the Loan Facility);

4. restrictions on material amendments under the Borrower's and

Project Company‟s constitutive documents;

5. in respect of the Borrower, restrictions on material amendments

of any of the Transaction Documents without the prior approval

of the Lenders, and in respect of the Project Company,

restrictions on material amendments to the Business Plan, the

Project Budget, the BNDES Loan Agreement, the Project

Company Shareholders Agreement, the Investment Agreement

or any Material Project Document without the prior approval of

the Lenders, acting reasonably in consultation with their

Technical Advisor;

6. restrictions on the Borrower‟s and Project Company‟s making of

any distributions or dividends except as in accordance with the

Finance Documents and, in the case of the Project Company,

the BNDES Loan Agreement and the Project Company

Shareholders Agreement as in effect on the date of the Loan

Facility;

7. restrictions on mergers, consolidations or other fundamental

changes to the Borrower or Project Company and restrictions

on the sales or other dispositions of any of such parties‟

Material Property or Material Assets (as such terms will be

defined in the definitive documentation);

8. in respect of the Borrower and the Project Company,

restrictions on its business activity other than in the case of

(a) the Borrower, owning the Project Company shares, entering

into, and performing its obligations in accordance with, the

Transaction Documents and undertaking activities as are strictly

related to acting as a representative office for the Guarantor,

provided that such activities shall not involve the Borrower's

incurring any liability (whether contingent or otherwise), or

entering into any contract or agreement, or series of contracts

or agreements, with an aggregate value in excess of USD50

million or its equivalent in any other currency, or that would

result in liabilities or undertakings of the Borrower at any one

time outstanding of USD50 million or its equivalent in any other

currency and (b) the Project Company, development,

construction and operation of the Project in accordance with the

Business Plan; and

9. in respect of the Project Company, no further financial

indebtedness, other than Project Company Permitted Financial

Indebtedness.

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Events of Default

Such events of default (with cure periods to be negotiated in the

definitive documentation) as are customary for a facility of this nature

including, but not limited to:

1. (i) any Credit Party or any Quotaholder fails to pay when due

any amount payable pursuant to a Transaction Document at the

place and in the currency in which it is expressed to be payable,

or the Project Company fails to pay when due any amount

payable pursuant to the BNDES Loan Agreement and (ii) such

amount remains unpaid for a period of 3 business days;

2. (a) any representation or warranty of any Credit Party set forth

in any Transaction Document proves to have been materially

incorrect or misleading when made or confirmed or (b) any

representation or warranty of any Quotaholder set forth in any

Transaction Document proves to have been materially incorrect

or misleading when made or confirmed and has or would be

reasonably likely to result in a Material Adverse Effect, if such

circumstances that rendered such representation or warranty of

such Credit Party or such Quotaholder to be materially incorrect

or misleading shall be continuing for more than 30 days after an

officer of such Credit Party or such Quotaholder has actual

knowledge thereof or receives notice thereof from the

Administrative Agent or any Lender;

3. (a) any applicable Credit Party fails to perform or observe any

covenant or other obligation (other than an obligation to make

payment referred to in item 1 above) as set forth in, or any

default occurs under, the BNDES Loan Agreement, in each

case after the expiry of any applicable cure period set forth

therein, (b) any Credit Party or any Quotaholder fails to perform

or observe any covenant or other obligation (other than an

obligation to make payment referred to in item 1 above) as set

forth in, or any default occurs under, the Transaction

Documents, after the expiry of any cure period to be agreed or

(c) any Credit Party fails to perform or observe any covenant or

other obligation (other than an obligation to make payment

referred to in item 1 above) as set forth in, or any default in

respect of such party occurs under, the Project Company

Shareholders Agreement or the Investment Agreement after the

expiry of any cure set forth therein;

4. the bankruptcy or insolvency of, or the commencement of

bankruptcy or insolvency proceedings in respect of, any Credit

Party, any Quotaholder or the Project Company (with grace

periods applicable for involuntary proceedings) or the

appointment of a receiver, liquidator, or similar official for all or

any substantial part of the property of any such party;

5. the rendering of monetary judgments against (a) the Guarantor

in an aggregate amount exceeding USD250 million (or its

equivalent in any other currency), (b) the Borrower in an

aggregate amount exceeding USD 20 million (or its equivalent

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in any other currency) or (c) the Project Company in an

aggregate amount exceeding USD 20 million (or its equivalent

in any other currency), except, in each case, to the extent that

such judgments are being diligently contested by the relevant

party in good faith by appropriate proceedings and for which the

relevant party has set aside adequate reserves in accordance

with IFRS;

6. any Transaction Document, the BNDES Loan Agreement, the

Project Company Shareholders Agreement, the Investment

Agreement or any Material Project Document ceases to be in

full force and effect or ceases to be a valid and binding

obligation of any party thereto;

7. any obligations of the Borrower or any Quotaholder under the

Finance Documents cease to be secured by a first priority

(except for any liens preferred by application of law) perfected

lien and security interest in and over all of the Collateral;

8. any of the Credit Parties or the Project Company defaults in the

payment when due (after giving effect to any applicable grace

period) of the principal of or the interest on, or other monetary

amount is owing in respect of, any of such parties‟ Financial

Indebtedness not incurred under the Finance Documents, in an

amount individually or in the aggregate exceeding (a) in the

case of the Guarantor, USD250 million (or its equivalent in any

other currency), (b) in the case of the Borrower, USD 20 million

(or its equivalent in any other currency), or (c) in the case of the

Project Company, USD 20 million (or its equivalent in any other

currency);

9. (a) the Borrower ceases to be the record and beneficial owner

of at least 40% of the total share capital (together with all

related economic and voting rights) of the Project Company or

(b) the ratio of the total amount of capital contributions to the

Project Company made by Petrobras to those made by the

Borrower is not 60:40 (the total amount of capital contributions

of a Sponsor being the aggregate of all equity contributions and

shareholder loans made by such Sponsor after accounting for

any replacement equity contributions or shareholder loans

made by it on behalf of the other Sponsor, and any repayments

of such replacement equity contributions or shareholder loans

by the other Sponsor, in accordance with the Shareholders

Agreement);

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10. a delay of more than 60 days by the Project Company in

reaching certain construction milestones in accordance with the

construction schedule of the Project Budget unless the Project

Company has implemented a corrective action plan acceptable

to the Lenders and their Technical Advisor;

11. (a) the Borrower does not make its pro rata share of any equity

contribution or shareholder loan (to the extent such shareholder

loan constitutes Project Company Permitted Financial

Indebtedness) to the Project Company in the amounts, and at

the times, contemplated by the Project Budget or called for by

the Project Company or (b) the Borrower does not exercise its

right to make a replacement equity contribution or shareholder

loan on behalf of Petrobras as contemplated in the

Shareholders Agreement;

12. If any of the following occurs:

(a) the Consolidated Tangible Net Worth of the Guarantor is, at

any time, less than USD35,000,000,000;

(b) the Consolidated Debt to Consolidated EBITDA Ratio of

the Guarantor is more than 2.5:1; and

(c) the Consolidated Interest Coverage Ratio of the Guarantor

is less than 4:1.

The defined terms for this section are found in Annex A, Part 1.

13. any material part of the Collateral or the property of the Project

Company or the Borrower is expropriated or nationalized or any

procedure for the same is commenced and not stayed or

overturned within 30 days;

14. any event occurs or any condition exists that has had or would

be reasonably likely to result in a Material Adverse Effect;

15. the Guarantor ceases to be the beneficial owner (directly or

indirectly) of 100% of the total share capital of the Quotaholders

and the Borrower, and to control each such entity;

16. the amount available under the SBLC (as defined below) is not,

within 15 business days, reinstated, together with a concomitant

reinstatement or top-up of the USD time-deposit referred to

under part D (Collateral Security) below, in each case up to

USD235 million after a payment made by BANDES and/or a

liquidation of the USD time-deposit pursuant to a demand made

by the Lenders;

17. there occurs any change in any treaty to which Venezuela is a

party, or any new Venezuelan law or policy (or any official

interpretation of any existing law or policy) or any order of any

competent authority or decision of any court of competent

jurisdiction which renders or purports to render any material

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provision of the ECSRA, PDVSA Guarantee or any other

Transaction Document unlawful, invalid or unenforceable, and

(i) has a material adverse effect on the enforceability of the

obligations of the Guarantor under the ECSRA, PDVSA

Guarantee or any other Transaction Document (or the ability of

any creditor to realize upon any judgment or arbitral award

rendered in connection therewith) or (ii) would prevent or delay

the performance or observance by the Guarantor of any of its

material obligations thereunder.

C. Guarantee Facility5

Bank Guarantee

Each Lender shall issue an irrevocable, first-demand guarantee or fiança (a) in a face amount such that its participation in the Guarantee

Facility is pro rata to its participation in the commitments under the

Loan Facility and (b) for the benefit of BNDES to guarantee

repayment to BNDES of a maximum amount of the BRL equivalent of

USD2.1 billion in principal outstanding (and interest accrued thereon).

PDVSA Brasil shall undertake to repay any amounts paid under the

Guarantee Facility and the Collateral described under “Collateral

Security” below will secure PDVSA Brasil‟s repayment obligations

equally and ratably with the obligations owing to the Secured Parties

under the Loan Facility.

Guarantee Facility

Amount

An amount sufficient to guarantee 40% of the obligations of the

Project Company under the BNDES Loan Agreement, which

guaranteed amount shall in no event exceed in the aggregate the

equivalent of USD2.1 billion.

BNDES Credit Limit

Each Lender‟s participation in the Guarantee Facility and

consequently in the Transaction Facilities is subject to acceptance by

BNDES.

First Bank

Guarantee Term

5 years, commencing at the Financial Closing Date.

Initial Bank

Guarantee

The Bank Guarantee issued and valid during the period of the First

Bank Guarantee Term.

Subsequent Bank

Guarantee

The Bank Guarantees issued upon the expiration of Initial Bank

Guarantee.

Subsequent Bank

Guarantee Terms

5 years from expiry date of the Initial Bank Guarantee or the expiry

date of any Subsequent Bank Guarantee.

5 Drawing conditions for the Guarantee Facility shall be substantially similar to the Loan Facility's CPs, including

satisfactory completion of legal due diligence.

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Initial Bank

Guarantee

Commitment Fee

To each Lender for its own account, a fee equal to 2.0% of such

Lender's commitment under the Guarantee Facility, such fee to (a)

accrue during the period from and including the Commitment Letter

Acceptance Date to but excluding the earlier to occur of (i) the

Financial Closing Date or (ii) the date on which PDVSA has officially

notified each Lender that the Transaction has been cancelled and (b)

be non-refundable and earned, due and payable in full upon the

Financial Closing Date out of the proceeds of the first disbursement,

all as set forth in each Lender's Commitment Letter.

Initial Bank

Guarantee Issuance

Fee

To each Lender for its own account, a fee equal to 0.20% of such

Lender's commitment under the Guarantee Facility, such fee to be

non-refundable and earned, due and payable in full upon the date of

issuance of the Initial Bank Guarantee, all as set forth in a fee letter to

be executed by the parties.

Initial Bank

Guarantee

Commission

4.0% per annum paid in advance on a semi-annual basis and

calculated based on the aggregate amount outstanding under the

BNDES Loan Agreement.

Renewal Conditions

Upon the issuance of any Subsequent Bank Guarantee, the

commission shall be 5.0 % per annum also paid in advance on a

semi-annual basis and calculated based on the aggregate amount

outstanding under the BNDES Loan Agreement.

The issuance of any Subsequent Bank Guarantee is subject to (a) no

Event of Default or Guarantee Event of Default (as defined below)

having occurred and (b) no event having occurred and no condition

existing that has resulted in or would be reasonably likely to result in a

Material Adverse Effect.

Guarantee

Commission Step-

up

Upon the occurrence and continuance of an Event of Default or

Guarantee Event of Default relating to a payment obligation, the Initial

Bank Guarantee Commission or the commission for the Subsequent

Bank Guarantees shall immediately increase by 2.0% per annum.

Representations

and Warranties

Representations and warranties substantially similar to those

described under the Loan Facility above.

Affirmative

Covenants

Affirmative covenants substantially similar to those described under

the Loan Facility above.

Negative Covenants

Negative covenants substantially similar to those described under the

Loan Facility above.

Events of Default

Events of default substantially similar to those described under the

Loan Facility above and cross-default to the Loan Facility for events of

default relating to payment obligations (each a "Guarantee Event of

Default").

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Sharing

If BNDES shall make a non-pro rata draw upon any Lender's

guarantee or fiança issued under the Guarantee Facility, the

remaining Lenders shall make payment to such in such amount, and

make such other adjustments from time to time as shall be equitable,

to the end that all the Lenders shall make payment of the drawn amount(s) pro rata in accordance with their participation in the

Guarantee Facility.

Loans

PDVSA Brasil shall, within 5 days of any draw on any guarantee or

fiança, repay the applicable Lender(s) in full the amount of such draw,

with interest thereon calculated at the Reimbursement Loan Interest

Rate (such amount owed by PDVSA Brasil, a "Reimbursement Loan").

Reimbursement

Loan Interest Rate

1 month LIBOR + 6.0% per annum; and

in either case, such rate shall be subject to a 2.0% per annum step-up

in case of the failure by PDVSA Brasil to repay the Reimbursement

Loan within 15 days of the relevant draw on the relevant guarantee or fiança.

Voluntary

Cancellation

PDVSA Brasil shall have the option to cancel the Guarantee Facility,

in whole but not in part, at any time during the Availability Period on

10 business days‟ irrevocable notice.

D. Collateral security

Generally

Applicable

Provisions

Each pledge, grant of a lien under a security agreement, assignment,

account and letter of credit referred to below shall secure, on a pari

passu basis, the repayment when due to the Secured Parties of all

amounts from time to time owing under the Finance Documents

(including, for the avoidance of doubt, any Reimbursement Loan), the

property over which a lien or security interest is granted, or regarding

which an assignment occurs, the “Collateral”. Each Finance

Document shall be in form and substance satisfactory to the Lenders.

RAL Fiduciary

Transfer Agreement

The Borrower, the Project Company and the Onshore Collateral Agent

(on behalf of the Secured Parties) shall enter into a Fiduciary Transfer

Agreement under Brazilian law providing for the creation and

perfection of a first priority security interest in and over or for the

assignment of all the Borrower‟s right, title and interest in, to and over,

all share capital of the Project Company that is owned by the

Borrower from time to time (including all related voting and economic

rights, dividends and other rights and revenues derived therefrom), as

well as the credit rights the Borrower has or may have against the

Project Company and/or Petrobras resulting from a shareholder loan

or equity contribution made on behalf of Petrobras. The shares

arising from any capital increase and subscribed by the Borrower will

also be subjected to the RAL Fiduciary Transfer Agreement.

PDVSA Brasil

Fiduciary Transfer

Agreement

The Borrower, the Quotaholders and the Onshore Collateral Agent (on

behalf of the Secured Parties) shall enter into a Fiduciary Transfer

Agreement under Brazilian law providing for the creation and

perfection of a first priority security interest in and over, or for the

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assignment of, all of their respective right, title and interest in, to and

over, all quotas of the Borrower (including all related voting and

economic rights, dividends and other rights and revenues derived

therefrom), as well as the credit rights any Quotaholder has or may

have against the Borrower, as a result of a Quotaholder loan.

Onshore Dividend

Account Fiduciary

Transfer Agreement

All dividends payable by the Project Company to the Borrower shall

be deposited into an onshore account maintained with the Onshore

Account Bank that is pledged for the benefit of the Secured Parties

(the “Dividend Account”). No funds may be transferred from the

Dividend Account to or for the account of the Borrower or its affiliates

unless (a) after giving effect to such transfer, not less than the BRL

equivalent of USD10 million will remain standing to the credit of the

Dividend Account and (b) prior to and after giving effect to such

transfer, no Default or Event of Default under the Finance Documents

has or will have occurred and is or will be continuing.

BANDES Stand-by

L/C

Banco de Desarrollo Económico y Social de Venezuela (“BANDES”)

shall issue a New York law-governed stand-by L/C (the “SBLC”) in the

amount of USD235 million. The SBLC shall be subject to the [Uniform

Customs and Practice for Documentary Credits 2007 Revision,

International Chamber of Commerce Publication No. 600 (“UCP

600”)][International Standby Practices - ISP 98, International Chamber

of Commerce Publication No. 590 (“ISP 98”)] and, to the extent not

inconsistent therewith, the SBLC shall be governed by and construed

in accordance with the laws of the State of New York. For the

avoidance of he doubt, in the event of any conflict between the laws of

the State of New York and the [UCP 600][ISP 98], the [UCP 600][ISP

98] shall prevail. The SBLC shall be (a) issued for successive periods

of one (1) year until the final repayment of all obligations of the Credit

Parties under the Transaction Facilities, and (b) automatically

renewed by not later than 60 days prior to the expiration of each

period of one (1) year and the failure to so renew for any reason by

such date shall entitle the Beneficiary(ies) to draw thereunder and

(c) the amount available under the SBLC shall be reinstated up to

USD235 million as a consequence of any payment made by BANDES

pursuant to any demand made by the Lenders (in such role, the

“Beneficiary of the SBLC” or the “Beneficiary”), provided that:

(1) PDVSA has reimbursed BANDES for any amounts paid, and

(2) BANDES has notified the Beneficiary of such reinstatement

through the Offshore Collateral Agent. The Beneficiary shall be

entitled to make multiple drawings under this SBLC, provided that the

total amount drawn shall not exceed the available limit at the relevant

time.

BANDES Time-

Deposit Account

Control and Pledge

Agreement

BANDES shall establish with the Offshore Account Bank an account

in Portugal and governed by an Account Control and Pledge

Agreement construed in accordance with the laws of the State of New

York, USA, and shall fund such account with USD time-deposits in an

amount of USD equivalent to the initial face amount of the SBLC.

PDVSA Guarantee

PDVSA shall issue in favor of the Offshore Collateral Agent for the

benefit of the Lenders an unconditional, irrevocable New York law-

governed parent company guarantee guaranteeing the prompt

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payment and performance when due of all obligations of the Credit

Parties and the Quotaholders under the Finance Documents and

providing for customary representations, warranties and covenants to

be agreed.6

E. Equity Contribution and Share Retention

ECSRA

The Quotaholders, the Guarantor and the Administrative Agent shall

enter into an Equity Contribution and Share Retention Agreement (the

“ECSRA”) providing for the Quotaholders‟ and Guarantor‟s joint and

several obligation to make equity contributions to the Borrower in an

aggregate amount equal to the Borrower‟s obligation to provide

(a) base equity as set forth in the Business Plan and called for by the

Project Company in accordance with the provisions of the Project

Company Shareholders Agreement and (b) equity necessary to pay

interest, principal, commissions or any other amount arising from the

Transaction Facilities and owing to any Secured Party.

In the ECSRA the Guarantor will undertake (a) not to transfer or

permit to be transferred any equity (or economic interest) in any

Quotaholders to a party that is not directly or indirectly 100% wholly-

owned by the Guarantor, (b) not to permit the Borrower or

Quotaholders to transfer or allow to be transferred any equity interest

in the Borrower or in the Project Company, and (c) to maintain control

over each Quotaholder and the Borrower (with “control” meaning the

ability to direct the policies and material decisions of the relevant

entity and the ownership of 51% of the record and beneficial

ownership of the equity interests of such entity).

Representations

and Warranties

The Guarantor

7 shall make representations and warranties to be

mutually agreed, including, but not limited to, the following additional

items:

1. the Guarantor has complied with all public bidding and other

requirements under applicable Venezuelan law with respect to

the Transaction Documents;

2. there is no applicable Venezuelan law that limits the

Guarantor‟s or Quotaholders‟ ability to enter into the ECSRA or

limits such agreement‟s effectiveness or enforceability; and

3. the Guarantor and each Quotaholder have received the

requisite authorization to submit disputes under the ECSRA to

resolution in the manner set forth therein, which shall include

dispute resolution before an Arbitral Tribunal.

Affirmative

Covenants

Affirmative covenants by the Guarantor to be mutually agreed.

Negative Covenants

Negative covenants by the Guarantor to be mutually agreed.

6 The need for an aval of PDVSA to be attached to the Promissory Note of the Borrower is subject to review by

Venezuelan counsel. 7 Venezuelan counsel to review and refine reps and other provisions related to PDVSA and other Venezuelan entities.

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F. Other Finance Documents and Miscellaneous

Promissory Note

The Loans will be represented by a Promissory Note, governed by

Brazilian law, in an aggregate principal amount equivalent to 125% of

the principal amount of all the Loans.

Intercreditor

Agreement

The Lenders and Agents shall enter into an Intercreditor Agreement

governed by New York law that shall, inter alia, regulate matters

regarding Lender voting, the taking of enforcement actions and

realization upon Collateral Security, waivers and consents, the ratable

sharing of payments received across the Loan and Guarantee

Facilities and other actions arising in respect of the Loan and

Guarantee Facilities.

Increased Costs

The Loan and Guarantee Facility documents will contain customary

provisions protecting the Lenders in the event of unavailability of

funding, illegality, increased costs and funding losses and capital

adequacy due to changes in law or regulations, all of the foregoing

subject to customary mitigation provisions acceptable to the Borrower,

the Guarantor and the Lenders. Unilateral prepayment will be

permitted for affected Lenders (subject to the payment of breakage

costs).

The Lenders will be permitted to charge, as and to the extent incurred,

any applicable reserves, regulatory charges and other regulatory

requirements, applicable to their funding of LIBOR that arise as a

result of changes in law after the execution of Loan or Guarantee

Facility documents, it being understood that customary provisions

acceptable to the Borrower, the Sponsor and the Lenders shall be

included for the mitigation of the Borrower‟s increased costs.

Taxes

All payments made to the Lenders shall be made free and clear of,

and without deduction or withholding for, any present or future taxes

or other charges, and any and all taxes, levies or contributions

imposed by the Brazilian or any other taxing authorities relating to the

Loan or Guarantee Facility or payments made thereunder will be

borne and paid for by the Borrower. Unilateral prepayment will be

permitted for Lenders who are subject to increased costs or taxes

after the Financial Closing Date (subject to the payment of breakage

costs).

In the event any such taxes or other charges are required to be paid

under applicable law, the Borrower shall pay the full amount thereof

and pay each Lender such amount as would have been payable had

no such withholding been made.

Expenses

All reasonable costs and out-of-pocket expenses of the Lenders and

Agents incurred in the due diligence regarding, and negotiation and

execution of, the Transaction and the Transaction Documents or any

other instruments contemplated herein or therein shall be for the

account of the Borrower (whether or not the Transaction Documents

are executed and the Transaction Facilities are made available to the

Borrower or BNDES).

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Dispute Resolution

Any dispute arising under any Finance Document (other than the

Brazilian law-governed Security Documents) to which any Credit Party

is a party shall be finally settled under the rules of the International

Court of Arbitration of the International Chamber of Commerce (the

"ICC Rules") by a panel of three arbitrators (the “Arbitral Tribunal”)

nominated in accordance with the ICC Rules. The place of arbitration

shall be Paris. The arbitration shall be bilingual (Spanish and

English). Any award issued by the Arbitral Tribunal shall be final and

binding, and the parties shall agree that a judgment recognizing such

award may be entered in any court with jurisdiction and irrevocably

submit to the jurisdiction of any such court over the parties or their

assets for purposes of recognizing and enforcing the award. The

Credit Parties shall waive all immunities under the laws of any

jurisdiction.

Each Credit Party and each Quotaholder party to any Brazilian law-

governed Security Document shall (a) unconditionally and irrevocably

submit to the jurisdiction of the courts of Rio de Janeiro, State of Rio

de Janeiro, Brazil for the resolution of any dispute or controversy

arising under such Security Document and (b) grant to the Secured

Parties the right to raise any claim against such Credit Party or such

Quotaholder in relation to such Security Documents in any jurisdiction

in which such Credit Party or such Quotaholder is domiciled or where

any of such Credit Party's or such Quotaholder's assets are located.

Indemnification

The Borrower shall indemnify the Lenders and each other Secured

Party, including their respective affiliates and officers, directors,

employees, advisors and agents (the “Indemnified Parties”) against all

losses, liabilities, claims, damages or expenses relating to their loans

or commitments and their participation in the Transaction Facilities (or

any Transaction Document), including, but not limited to, reasonable

attorney and other professional fees and settlement costs and losses,

liabilities, claims, damages or expenses arising from or relating to the

environmental impact of the Project (except, in each case, to the

extent that such losses, liabilities, claims, damages or expenses are

found by a final, non-appealable judgment of a court of competent

jurisdiction to result directly from the Indemnified Parties‟ gross

negligence or willful misconduct) but shall not include any indirect or

consequential damages.

Waiver of Immunity

Each Credit Party shall agree that, to the extent that such Credit Party

or any of its assets has, at the time of execution of the Transaction

Documents, or thereafter acquires, any right of immunity, whether

characterized as sovereign immunity or otherwise, from any legal

proceedings, to enforce or collect upon the Loans or any other liability

or obligation of such Credit Party related to or arising from the

transactions contemplated by any of the Transaction Documents

including immunity from service of process, immunity from jurisdiction

or judgment of any court or tribunal, immunity from execution of a

judgment, and immunity of any of its property from attachment prior to

any entry of judgment, or from attachment in aid of execution upon a

judgment, such Credit Party shall irrevocably waive any such immunity

and agree not to assert any such right or claim in any such

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proceeding.

Governing Law

The Finance Documents (other than any fianças under the Guarantee

Facility, which will be governed by Brazilian law) shall be governed by

and construed in accordance with the laws of the State of New York,

USA, except that certain Security Documents and project documents

will be governed by Brazilian law.

Syndication and

Transfers, Clear

Market

The Lenders will be permitted to assign loans under the Loan Facility

with prior notification and consent (such consent not to be

unreasonably withheld) of the Borrower, unless there is a Default

outstanding in respect of the Loan Facility, in which case no consent

from the Borrower shall be required. All assignments will also require

the consent of the Administrative Agent, not to be unreasonably

withheld or delayed. Each assignment will be in an amount of an

integral multiple of USD1 million and shall require, as a condition to its effectiveness, the assignee‟s assumption of a pro rata portion the

assignor‟s obligations and rights under the Guarantee Facility.

The Lenders will be permitted to sell participations in loans and

commitments without restriction. Voting rights of participants, as

established in the Intercreditor Agreement, shall be limited to matters

in respect of (i) increases in commitments of such participant,

(ii) reductions of principal, interest or fees payable to such participant,

(iii) extensions of final maturity or scheduled amortization of the loans

or commitments in which such participant participates, (iv) releases of

all or substantially all of the value of the Collateral, (v) approvals of

any changes in the Project Company‟s Project Budget and Business

Plan and (vi) waivers of any breach of the ECSRA.

The Borrower shall be responsible for any taxes or increased costs

affecting any assignee or participant in the same amount that the

assigning or participating Lender would have been affected.

During the period from the date of this Summary of Indicative Terms

and Conditions until such time as the Mandated Lead Arrangers

receive firm commitments from financial institutions sufficient to

consummate the Transaction on the terms described herein, the

Borrower must not announce, enter into discussions to raise, raise or

attempt to raise any other finance in the international or any relevant

domestic syndicated loan, debt, bank, capital or equity market(s)

(including, but not limited any bilateral or syndicated facility, bond or

note issuance or private placement) without the prior written consent

of the Mandated Lead Arrangers. With respect to other financings of

a similar nature which are intended to be raised in the international or

any relevant domestic syndicated loan, debt, bank, capital or equity

market(s) (including, but not limited any bilateral or syndicated facility,

bond or note issuance or private placement) by the other members of

the PDVSA Group, the Borrower will ensure, subject to applicable

confidentiality obligations, that such members of the PDVSA Group

will coordinate with the Mandated Lead Arrangers to cause such

financings to be brought to market in a manner and time frame that

shall not compete with the Transaction Facilities.

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Yield Protection

Customary, for a facility of this nature, including a market disruption

clause. Unilateral prepayment will be permitted for affected Lenders

(subject to the payment of breakage costs).

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ANNEX A – Term Sheet

Part 1 – Financial Definitions

Consolidated Debt

As to any person at any time of determination, all Financial

Indebtedness of such person and its subsidiaries determined on a

consolidated basis in accordance with IFRS.

Consolidated Debt

to Consolidated

EBITDA Ratio

As to any person at any time of determination, the ratio of (a) such

person's Consolidated Debt as of such time of determination to (b)

such person's Consolidated EBITDA for the 12-month period ending

on the last day of its fiscal quarter then ending, or if not then ending,

most recently ended.

Consolidated

EBITDA

The sum of such person's and its subsidiaries'

1. Consolidated Net Income;

2. depreciation and amortization;

3. corporate tax and other taxes on income and gains;

4. financial expenses (including interest on loans and financings, the

interest component of any payments made under finance leases,

commissions, fees, discounts, monetary and exchange variation

on liabilities, losses on hedging agreements and other finance

charges); and

5. non-operational costs and charges,

minus

1. the sum of such person's and its subsidiaries'

2. financial income (including monetary and exchange variations on

assets, gains on hedging agreements and other finance income);

and

3. non-operational income or gains,

in each case, for such period and determined on a consolidated basis

in accordance with IFRS.

Consolidated

Interest Coverage

Ratio

As to any person at any time of determination, the ratio of (a) such

person's Consolidated EBITDA for the 12-month period ending on the

last day of its fiscal quarter then ending, or if not then ending, most

recently ended to (b) such person's Consolidated Interest Expense for

the 12-month period ending on the last day of its fiscal quarter then

ending, or if not then ending, most recently ended.

Consolidated

Interest Expense

As to any person for any period, the sum of (a) all interest incurred or

accrued in respect of all outstanding Consolidated Interest

Indebtedness of such person and (b) all interest capitalized or

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deferred in respect of Consolidated Interest Indebtedness of such

person, in each case, during such period and determined on a

consolidated basis in accordance with IFRS.

Consolidated

Interest

Indebtedness

As to any person, all Financial Indebtedness of such person and its

subsidiaries for borrowed money that bears interest or otherwise

accrues interest expense, determined on a consolidated basis in

accordance with IFRS.

Consolidated Net

Income

As to any person for any period, the aggregate of all amounts

(exclusive of all amounts in respect of any extraordinary gains but

including extraordinary losses other than any extraordinary non-cash

losses) which would be included as net income (loss) on the

consolidated financial statements of such person and its subsidiaries,

determined on a consolidated basis in accordance with IFRS.

Consolidated Net

Worth

As to any person at any time of determination, the sum of all items

that would be included under shareholders', partners' or members'

equity on the balance sheet of such person, determined in accordance

with IFRS.

Consolidated

Tangible Net Worth

As to any person at any time of determination:

the Consolidated Net Worth of such person,

minus

all goodwill and intangible assets of such person and its subsidiaries

at such time of determination and determined on a consolidated basis

in accordance with IFRS.

Financial

Indebtedness

As to any person at any time of determination, any indebtedness for or

in respect of the following to the extent accounted for as financial debt

in the accounts of such person prepared in accordance with IFRS:

1. moneys borrowed;

2. any amount raised by acceptance under any acceptance credit

facility;

3. any amount raised pursuant to any note purchase facility or the

issue of bonds, notes, debentures, loan stock or any similar

instrument;

4. the amount of any liability in respect of any lease or hire purchase

contract which would, in accordance with IFRS, be treated as a

finance or capital lease;

5. receivables sold or discounted (other than any receivables to the

extent they are sold on a non-recourse basis);

6. any amount raised under any other transaction (including any

forward sale or purchase agreement, sale and sale back or sale

and leaseback agreement and any amount prepaid or required to

be prepaid under or in connection with any commercial contract)

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having the commercial effect of a borrowing;

7. any derivative transaction entered into in connection with

protection against or benefit from fluctuation in any rate or price

(and, when calculating the value of any derivative transaction,

only the marked to market value shall be taken into account);

8. any counter-indemnity obligation in respect of a guarantee,

indemnity, bond, standby or documentary letter of credit or any

other instrument issued by a bank or financial institution in respect

of an underlying liability of an entity which is not a member of the

PDVSA Group which liability would fall within one of the other

paragraphs of this definition;

9. without double counting, the amount of any liability in respect of

any guarantee or indemnity for any of the items referred to in

paragraphs (1) to (8) above; and

10. any amount of any liability in respect of any of the items referred

to in paragraphs (1) to (9) above of any other person which is not

a member of PDVSA Group for which any security has been

granted.

Part 2 – Material Adverse Effect Definition

Material Adverse

Effect

A material and adverse effect on (a) the business, financial condition

or operations of the Borrower, or of the Guarantor, or the ability of the

Guarantor or the Borrower to perform its obligations under any

Transaction Document to which it is a party, (b) the business, financial

condition or operations of the Project Company or the ability of the

Project Company to (x) perform its obligations under the BNDES Loan

Agreement or any other Material Project Document to which it is a

party or (y) construct, commission and operate the Project according

to the construction schedule, within the Project Budget, and in

accordance with the operating phase projections set forth in the

Business Plan, (c) the rights and remedies of the Lenders set forth in

or intended to be established pursuant to the Finance Documents or

(d) the validity or enforceability of any material provision of any

Transaction Document, or the validity, enforceability, priority or

perfection of the security interests under the Security Documents over

any material portion of the Collateral.

Part 3 – Permitted Indebtedness Definitions

Borrower Permitted

Financial

Indebtedness

The Loan, any Reimbursement Loan and any loan from any

Quotaholder or the Guarantor to the Borrower subordinated on terms,

and documented in form and substance, acceptable to the Lenders

and subject to restricted payment conditions.

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Project Company

Permitted Financial

Indebtedness

Indebtedness permitted under the BNDES Loan Agreement as in

effect as of the date of the Loan Facility including any permitted loan

from the Borrower or Petrobras to the Project Company subordinated

on terms, and documented in form and substance, acceptable to the

Lenders.

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Appendix

A) Draft Shareholders Agreement

B) RAL x BNDES Loan Agreement