BUILDING A NEW RELATIONSHIP WITH SUBSEA ......Agenda Productivity Improvement and Cost Reduction Building New Business Models for Subsea Systems Petrobras Business & Management Plan

BUILDING A NEW RELATIONSHIP WITH SUBSEA SERVICES COMPANIES: How to construct a bright future together—

2016 OctoberRio de Janeiro, Brazil

Agenda

Productivity Improvement and Cost Reduction

Building New Business Models for Subsea Systems

Petrobras Business & Management Plan 2017-2021

Petrobras Business & Management Plan 2017-2021

Highlights

Uncertainties in the Oil Industry—

20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Bloomberg data as of 09/13/2016

4

Brent Price Trend (2005 – 2016)(US$/bbl)

Sharp drop in oil prices

Investment spending by Petrobras (Capex 2017/2021)—

5

0.000.100.200.300.400.500.600.700.800.901.00

82%

17%

1%

Exploration & Production(E&P) Other SegmentsRefining & Natural Gas (RNG)

Total Capex(US$ Billion) 74,1

Suporte Operacional Exploração Desenvolvimento da produção

34% 66%

Production Development + Exploration

Total E&P US$ 60,6 bilion

ConcessionTransfer of RightsProduction Sharing (Libra)

Upstream Capex Breakdown—

13% 11%

76%

Development of ProductionExploration Operational Support Pre-Salt Post-Salt

Start up of new production units—

2017 2018 2019 2020 2021

LEGENDA

CONCESSION

PSA

Transfer of rights

TARTARUGA VERDE E MESTIÇA

LULA NORTE

LULA SUL

TLD DE LIBRA

BÚZIOS 2

BÚZIOS 1

BÚZIOS 3

LULA EXT. SUL

BERBIGÃO

BÚZIOS 4

ATAPU 1

BÚZIOS 5

PILOTO LIBRA

SÉPIA

REVIT. DE MARLIM MÓD. 1

REVIT. DE MARLIMMÓD. 2

LIBRA 2 NW

ITAPU

INTEGRADO PARQUE DAS BALEIAS

8

—Petrobras Production

8

0

1

2

3

4

2017 2021

Produção Óleo, LGN e Gás

Oil + NGL Brazil

Oil + gas Abroad

2,52

3,34

2,07

2,77Natural Gas Brazil

2,62

3,41

Oil, NGL* and Gas Production(million boed)

Productivity Improvement and Cost Reduction

10

—Efficiency gains – Santos Basin pre-salt case

10

Greater productivity ofWells in the concessions

Experience acquiredin the construction of wells

Fewer wells to achieve maximumCapacity of the platform

Construction about 3 times faster

Shorter well construction timein the concessions

2016

2010

26

20

2016

2010

6

8

Production wellsMbpd/well

Até 2016

Até 2010

124

3Number of wells built

(drilled and completed)

2016

2010

89

310Days construction

Per well

Productivity30% higher 25% fewer wells

204 wells drilled

Lower capexfor the sameproduction

Lower capexfor the sameproduction

11

—Lula field – faster construction and tie-in of wells

2010 2016

60% Reduction in well constructionand connection duration

6 units in Angra dos Reis Paraty Itaguaí Mangaratiba Maricá Saquarema

1 unit inAngra dos Reis

12

—

0

250

500

750

1000

1250

1500

179 234102

142

10131033

MM

US$

(M

OD

)

* IPA (Independent Project Analysis)

Petrobras – Competitive Subsea Costs

Risers, Flowline e Umbilicals

Industry Benchmark*Petrobras

Mooring Subsea Tree

According to IPA data:

Petrobras - Pre Salt typical projectsare 7% better than the industrybenchmark.

Costs per mooring line is very competitive (28% better than the industry benchmark).

Large volume, long term contracts and standardization in Subsea Trees, Flowlines and Mooring, deliver the most competitive costs in the industry benchmark.

13

—

0

100

200

300

400

500

600

700

2014 2015 Total

238

280 518

PRCSub – Subsea Installation Cost Optimization Plan – Phase I

+18%

Phase I - 2014/2015

Four main drivers:

Increase availability of critical items;

Increase PLSVs productivity;

Reduce unit costs and fleet site;

Increase logistics efficiency.

PRCSubGains (US$ M)

Financial gain in two years: US$ 518 millions

14

—

Optimize Tax Planning

PRCSub – Subsea Installation Cost Optimization Plan – Phase II

Evaluate the increase of flexible sections in Risers and

Umbilicals

Technical requirementsoptimization for Risers,

Umbilicals and Accessories

Developing solutions for optimization subsea layouts

Optimize flexible risersLazy-Wave configuration

Optimize use ofdirectional wells in

subsea layouts

Optimize and standardizebuoyanoy modules

Project Cost Reduction– Early Engagement -

Adapt the process of issuingrequests

Implement Process SafetyMethod in Subsea Projects

Review the service levels ofsubsea resources

Optimize PLSVsprogramming

Review periodicityof inspection

Review stock management

Operational Technologies

Reduce manifoldsinstallation cost

TARGET 1Project CostOptimization

TARGET 2Process Safety

in Subsea Projects

TARGET 3Critical Resources –

Increase Productivity

TARGET 4Installation and

Maintenance – Cost Optimization

PRCSub Initiatives Phase II - 2016/2018

Four main drivers:

Project Cost Optimization;

Process Safety in Projects;

Critical Resources – Increase Productivity;

Installation and Maintenance – Cost Optimization.

Building New Business Models for Subsea Systems

16

—

OBJECTIVES

Re evaluate PETROBRAS Subsea Projects looking for opportunities cost reduction.

Production Development Project implementation a low oil price scenario.

DRIVER

Oil price reduction from U$ 110,00 to U$ 40,00, that lowered the revenue from Production Assets.

PREMISES

Consider the total life cycle cost on the business opportunities evaluation.

Consider technical disciplines as well as logistics, operations, tax planning, legal an financial aspects.

All the process phases will be developed together with the suppliers.

Early Engagement - Context

17

—Designing the strategy

Investigate new business model

EarlyEngagment

NewAlliances

Low oilpriceTCO

D

CONCEPT BUILDING PROCESSING IMPLEMENTDRIVERS

InternalMeetings

D

Formerkey issues

Partners view

Suppliersview

D

Marlim revitalization

Libra 4

Decom

Lapa NE

Otherprojects

SEP / 16

D

18

—Approach to a new business model

Identify Opportunity ConceptDevelopment Basic Design Execution Operation Demob

Operationalefficiency

Production curve Material costs

Logistic costsEngineeringcosts

Operationalcosts

Inspection costsInstallation costs

Maintenancecosts

Decom costs

Taxes costs

Legal costs

Delivery time

Strategy & Business Model

TechnicalSpecs/ GTD

Project Concept

(subsea layout)

Taxengineering

ComplianceRisks, Finance

ProposalAssessment

1 2 3 4 5 6

INTEGRATION OF TECHNICAL AND BUSINESS DISCIPLINES

Schedule andIncomes

CAPEXOPEXVPLPRODUCTIONRECOVERY FACTOR

CAPEX

OPEX

DEMOB

INCOME

KEY ISSUES

19

—

Alignment of interestsPetrobras: Feasibility of Production Development Projects Reduce the Total Cost of Ownership – TCO (CAPEX+OPEX+DEMOB)

Supplier: Feasibility of new projects (new contracts) Early engagement on the project Use and maximization of factory and installation resources

Alignment of goals operators and suppliers

Boundary Conditions: Recently issued bid law 13.303 Compliance Brazilian regulations: Taxes, ANP, IBAMA Reservoir maturity level

20

—Common challenges

Market Integration

Management of change

Capex vs Opex

Specifications x GTD

Cost x Risk Balance

21

—

Building success in the new oil era

Sharp drop in oil prices: need to change.

Improve efficiency and productivity to reducebreak even price.

Integration between operators and suppliers to create a new business model.

Conclusion

Thank you—