Latin America Perspectives and Opportunities Raul Adalberto de Campos Investor Relations Executive Manager April, 2007
Jul 15, 2015
Latin America Perspectives and Opportunities
Raul Adalberto de CamposInvestor Relations Executive ManagerApril, 2007
PETROBRAS IS A MARKET ORIENTED AND PROFIT DRIVEN ENTERPRISE…
Top ADR: turnover (traded volume) in NYSE 2006 American Depositary
Receipts (US$ billion)TOP
VOLUMEADR
IN NYSE
Petrobras* BP Nokia AmericaMovil*
BHP Billiton
Cemex Total RD Shell*
81,9
60,653,2
38,628,5 26,3 25,0 22,6
PETROBRAS IS CONTROLLED BY THE GOVERNMENT OF BRAZIL BUT.........
Most of NOC´S•Control over their home market•Produce in home country only•Are endowed with prodigious quantities of “easy” oil
• Little technological exchange
PETROBRAS –•Exposed to Competition•Operates internationally•Develops and applies advanced technologies•Engage in joint-ventures•Highly committed with corporate governance rules
PETROBRAS COMPLIES WITH ALL SARBANES-OXLEY PROVISIONS
INVESTMENT GRADE S&P AND MOODY’S
Integration of the Company´s Activities
Energy
Industry
Imported OilProducts
ImportedOil
Imported Gas
International OilProduction
H - Bio
DomesticNatural GasProduction
Biodiesel Oil Productssold in Brazil
InternationalSales
OtherRenewables
Infrastructure
Petrochemical Plants
Brazilian OilProduction
Throughputin Brazil
InternationalRefining
Ethanol
PRODUCTION X DEMAND X REFINING CAPACITY: REACHING SELF-SUFFICIENCY
112,197,670,449,355,356,216,719,532,228,430,53,0
2011F20062000199519901985198019751970196519601955Production/ Consumption
(%)
1954 1960 1970 1980 1990 2000 2006 2011
THO
USA
ND
BPD
0
500
1000
1500
2000
2500
Production
Consumption
Refining
Brazil: first major market to shiftfrom import dependency to selfsufficiency since first oil fromNorth Sea in 1971 began to shifteuropean balance
Proj.
PETROBRAS Investment Plan 2007-2011
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
Note: Includes International area
Upstream Downstream G&EPetrochemical Distribution Corporate
9%4%
3% 26%
56%
3%
US$ 87.1 billion
49,3
23,07,5
3,32,31,8
Business Plan 2007-2011 - Total Production – Oil, NGL’s and Natural Gas
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
1 . 6 8 4 1 . 8 8 01 . 5 4 0 1 . 4 9 3
2 5 0 2 6 5 2 7 4
2 8 91 3 3
1 6 1 1 6 81 6 3
8 51 0 1
9 49 6
2 0 0 3 2 0 0 4 2 0 0 5 M e t a 2 0 0 6
Ól e o + L G N B r a s i l G ás N a t u r a l B r a s i l
Ól e o + L G N I n t e r n a c i o n a l G ás N a t u r a l I n t e r n a c i o n a l
2.036
2 . 3 7 42 . 8 1 2
5 5 1
7 2 4
7 4 2
1 8 5
2 7 8
3 8 3
M e t a
2 0 1 1
M e t a
2 0 1 5
2,0202,217
2,403
3,493
4,556Thousand boed
7.8% p.a.
7.5% p.a.
Investment in E&P ofUS$ 49.3 billion in
2007-2011
Oil + NGL International International Natural GasNatural Gas Brazil
,
Target Target 2011 Forecast 2015
Oil + NGL Brazil
1984 1994 2004
Total762 billion barrels
Total1,017 billion barrels
Total1,194 billion barrels
In 20 years, Latin America proven reserves increased from 36.6 billion barrels (1984) to 103 billion.Source: BP Statistical Review of World Energy
R/P* = 26.77 R/P* = 41.78 R/P* = 41.84
* Reserves/Production Latin America (years)
12.7%
7.6%
13.4%
5.0%
4.8%
56.5%
Middle Orient Europe & Eurasia AfricaNorth America Pacific Asia Latin America
7.9%
6.4%
8.8%
3.8%
8.0%
65.1%11.7%
9.4%
5.1%
3.5%
8.5%
61.8%
7
Latin American Share of Oil World Reserves Latin American oil reserves are becoming increasingly important
Source: Internacional Energy Agency Reference Scenario
Net Oil and Oil Products Availability (excluding OPEC countries)
Mbpd
Latin America (including Venezuela)
Russia
AsiaUnited StatesOECD(- Mexico)
Projected growth in oilproduction anddemand suggestsbalance andindependence of supply from politicallyunstable regions
8
Ability to produce non-conventional heavy oil will play an increasing role in LA
Source: Cambridge Energy Research Associates.
Gas Rich Region with limited infrastructureProven Reserves as of January 1, 2005
14.5 Tcf
10.9 Tcf
Brazil
Argentina
Perú
Mexico
Venezuela
26.1 TcfBolivia
11.7 Tcf
17.7Tcf
151.9 Tcf 19.4 Tcf
Trinidad
2005 GasProven ReservesWorld:179,8 T m3 / 6,350 TcfSouth and Central America:7,02 T m3 / 247,9 Tcf
9
0.41 T m3
4.3 T m30.55 T m3
0.31 T m3
0.33 T m3
0.74 T m3
0.50 T m3But:::: Will require increasing energy
integration and::: Substantial investments in
infrastructure covering great distances and environmentally sensitive regions
Ample gas reserves will allow for:::: Regional growth in consumption
substituting some demand for oil::: Higher exports of liquids
Consumption of oil as % of Production 2005
Source: BP Statistical Review 2006; EIA; INE/BO; Superintendence de Hidrocarburos de Bolivia
15%18%
80%
58% 53%42%
27%
106%
Brazil Bolivia Oil Argentina Mexico Colombia Ecuador Venezuela Bolivia Gas
10
Relative importance of oil sector varies widely among the main players in the region affecting legislation, pricing and curbing integration prospects
International prices affect each country's trade balance differently
11
87%
60%
36%
26%
15%
9%7%
Venezuela Ecuador Bolívia (gas) Colômbia México Argentina Brasil
Exports of oil as % of total Goods Exports 2005 (in US$)
11
Bolívia (oil)
11%
Source: BP Review 2006; EIA; INE/BO
• Countries that have recently changedor have manifested a desire to change legislation towards higher Government Participation in production and revenues: Venezuela, Ecuador, Bolivia
• Countries that are in the process of liberalizing legislation to encourage foreign participation: Colombia & Peru
• Countries that have consolidated reforms: Argentina (w/ price controls) & Brazil (w/o price controls);
• Mexico remains the most closed oil economy but there are indications that a move towards opening to investment is possible.
Regulatory Challenges – Recent Trends
12
Latin America offers excellent resources to expand agricultural production
Africa Latin America Asia OCDE World
More than 3 times the average world per capita water availability
3,966 4,050
24,973
11,1967,055
Nearly half world sugar cane production Nearly 1/3 world main oil seed production
Availability per capita (m3/year)
Higher Potable Water availability per capita
Million Metric Tons
World South and Central Americaand Caribbean
Soybeans, Groundnuts, Sunflower, Rape Seed, Cotton Seed
95
359
World South and Central Americaand Caribbean
631
1,328
Sugar cane production
Million Metric Tons
13
Bio-fuel usage in OECD Countries will benefit LA
Global warming, energy security and/or cost effectiveness are
encouraging renewable fuels with two important initiatives: (i) ethanol and (ii) biodiesel. Both can be
produced and consumed in Latin America advantageously.
Production of biofuels in LA will also contribute to displace production of liquids increasing export availability.
14
Ethanol Production
Growth: sales of ethanolpoweredcars Stagnation:
discredit;low HP vehicles;preference for sugar;importedautomobiles
Stagnation:discredit;low HP vehicles;preference for sugar;importedautomobiles
Retrench:Increase in legal ethanol in gasoholraised to 24%
Retrench:Increase in legal ethanol in gasoholraised to 24%
Currentphase:Growth in sales of flexfule vehicles
Currentphase:Growth in sales of flexfule vehicles
Program went through four phases as a result of prices, legislation, consumer preferences and technology
0
2.000
6.000
10.000
14.000
18.000
80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07
Crop Year
thou
sand
(m³/t
on)
Anhydrous Hydrated Total 2006/07Estimates
2006/07Estimates
2006/07Estimates
Original drivers were energy security and economic attractiveness;
Today environmental benefits are also a consideration.
CNG
ETHANOL
GASOLINE
Source: MME, BEN 2006
120000
140000
1976 1980 1984 1988 1992 1996 2000 2004
In this period, ethanol utilization avoided 644 million tons CO2 emissions
1972
Brazil is the 1st country to reap benefits from Ethanol
Fuel demand for Otto Cycle Vehicles
160000
10000
80000
60000
40000
20000
01000
BEP
16
Accumulated effective economy:1 Billion boe ~US$ 52 bi
Ethanol motivated and boosted greater land productivity
46,557,0
63,2 61,566,6 67,6 72,8
1975 1980 1985 1990 1995 2000 2005
Brazillian Productivity
53,8 55,3 58,561,6 62,8 64,2 65,6
1975 1980 1985 1990 1995 2000 2005
World Average Productivity
+ 57%
+ 22%
+11%-14%
MTper Ha
Importing States
Exporting States
INTERSTATE TRADE REPRESENTS 33% OF CONSUMPTION
DISTRIBUTION AND REGIONALIZATION
ETHANOL DISTRIBUTION
PRO
DU
CIN
G S
TATE
S
CONSUMING STATES
33% OF PRODUCTION EXPORTED FROM PRODUCING TO CONSUMING STATES
21 Importes States 6 Self-Suficient States
Primary Base
Ethanol Logistics System
Secondary BaseCollection Centers
RailwaysInland Navigation
RoadMulti product pipelines
Large scale marine terminals improveefficiencyLarge storage capacitynecessary to regulatesupplyPipelines reducetransport costs; improveenergy efficiency
Ethanol collection, storage and
distribution centersare spread out
through producingand consuming
regions
Petrobras in 2006 received the American Society of Mechanical Engineersaward for technological advances in pipeline technology
Industrial Plants
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
But the main hurdles and challenges are:
BA
MG
CE
Montes Claros
semi-arid region
3 Projects Being Implemented
Capacity: 171 thousand m3/year
Investments: ~ US$ 60 million
Jobs Generations: Construction: 1,200 direct and 400 indirectOperation: 105 directRaw material production:70,000 families
Start up: 4 Q/2007
InputsFamily Agriculture: castor, cotton, and palm.Complementary: soy.
All Petrobras Biodiesel has Social Fuel Seal
Ethanol
EthanolMultiproduct
pipeline
REFINARYTERMINAL
Distribuitionbases
MARITIME TERMINAL
GasolineEthanol
Multiproduct pipelines
Ethanol and gasohol
REFINARY
EthanolSERVICE STATIONS
MARITIME TRANSPORT
Ethanol
MARITIME TRANSPORT
Transport facilities are fully integrated with refineriesand blenders
Brazilian New Car Sales by Fuel
0
400
800
1.200
1.600
Num
bero
f Veh
icles
x1.00
0
78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
ETHANOL GASOHOL FLEX - FUEL
Year
Raw Material Energy output / energy input
Tomorrow: Lignocelluloses Biomass technology will double ethanol per ha. yield
1 metric ton of sugar cane
Molasses yields only 85 L of ethanol,
But
Cane bagasse yields 185 L of ethanolBase calculation
23
Global ethanol market totals 46.5 Billion LitersFuel Ethanol represents 30.6 Billion Liters, 67% of total ethanol production
Today global ethanol consumption is 2,6% of gasoline fuel marketIncreasing ethanol to 10% of gasoline will represent 118 Billion Liters
Rio de Janeiro(REFINERY)
150 km 370 kmTaubaté City
Existing Pipelines
Future Pipelines
Paulínia(REFINERY)
Export Capacity 18 Millions Kl/year
Ilha D’ÁguaMarine Terminal
GuararemaTerminal
130,000 dwt
15km
4 Millons Kl/ano
Regions:PiracicabaS.J.Rio PretoBauruAraçatubaMSMT
ConchasRiver
Terminal
90 km
200 k
m
Ribeirão PretoCollect Center
São SebastiãoMarine Terminal
300,000 dwt
90 km
4 Millons Kl/ano
Ethanol Exportation in Brazil - Future
Tietê River(Waterway
)
Senador CanedoTerminal
800 kmIncludes 800 Km exclusive ethanol
pipeline
TIETÊ – PARANÁ INLAND WATERWAY
REPLAN
REPAR 4 or 5 river terminalsand a 90km pipeline
Possible integration with REPAR-Cuiabapipeline
INVESTMENTS: US$ 160 M
(2008 a 2010)
Petrobras is also integratingwaterways with pipelines
H-BIO and BIODIESEL – Complementary Processes
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
But the main hurdles and challenges are:
Complementary and not competitive processes
H-BIO Process in Refinery
OIL
FCC
DIESEL DD
DIESEL COKE
DIESEL FCC
Existing HDT
OTHER FRACTIONS OF DIESEL
DIESELGasoil
VacuumResidue
VEGETABLE OIL
Process HBIO
ATMOSPHERIC DISTILLATION
VACUUMDISTILLATION
DELAYED COKING
atmosphericresidue
Potential Capacity of H-BIO
Short Term
2007
Medium Term
2008
Long Term
2011
n/a25%15%Equivalent Volume of Diesel Imports
1,050,000 cu.m/year425,000 cu.m/year256,000 cu.m/yearVegetable Oil
Consumption
1054Refineries
H-BIO
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
But the main hurdles and challenges are:
Castor-Oil Plant Sunflower African Oil PalmSoy Cotton
• HBIO is a HBIO is a processprocess of:of:
– Oil refining that utilizes vegetable oils as rawmaterial in order to obtain diesel oil
– Hydrogenation of a blend of diesel and vegetableoils
Principal Conclusions, Hurdles and Challenges
• Latin America is in a privileged position regarding oil reserves, and energy independence;
• Use of natural gas prospects are encouraging and should contributeto increase liquid fossil fuel exports availability but integration and financial issues are a main concern;
• Land, water and human resource availability and biodiversity place Central and South America and Caribbean in a privileged position to use and supply OECD countries with renewable fuels, and also further liberating liquid fossil fuels for export.
• Heavy oil production technology development will expand LA reserve growth possibilities;
• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;
• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;
• Further progress in regional integration.
But the main hurdles and challenges are: