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ANNUAL REPORT 2006 | www.petrobras.com.br
AN
NU
AL R
EP
OR
T 2
00
6
ANNUAL REPORT 2006
05002.RAi_Capa1.indd 1 6/14/07 7:42:46 PM
Renato Menezes FeRReiRaMaintenance technician (Cenpes
– Petrobras Research Center)
outlook: To make a professional contribution to society’s future and
that of the generations to come.
“Petrobras is committed to the development of technology for the expansion of its activities and the ongoing enhancement of the quality of its products.”
Profile, Mission, Vision and Values 02 Petrobras Activities 04Highlights 06Message from the CEO 10Oil Market 14Corporate Strategy 16
Business areasExploration and Production 20Refining and Commercialization 26Petrochemicals 30Transportation 34Distribution 38Natural Gas 40Energy 42
international expansion South America 50North America 53Africa 54Asia 55
social and environmental ResponsibilitySustainability Indices 58Human Resources 60Health, Safety and the Environment 65Sponsorship 72
intangible assetsTechnological Capital 78Organizational Capital 80Human Capital 82Relationship Capital 83
Business ManagementBusiness Performance 88Capital Markets 91Risk Management 96Corporate Governance 99
Contents
4456
1802
8676
� | ANNuAl REPORT 2006 | PETROBRAS
Petrobras is a publicly listed company that operates on an integrated and specialized basis in the following segments of the oil, gas and energy sector: exploration and production; refining, commercialization, transportation and petrochemicals; distribution of oil products; natural gas and energy. Founded in 1953, Petrobras is now the world’s 14th largest oil company, according to the publication Petroleum Intelligence Weekly. Leader in the Brazilian hydrocarbons sector, Petrobras has been expanding, in order to become an integrated energy company with international operations, and the leader in Latin America.
Profile
Duque de Caxias refinery – Rio de Janeiro
Pro
file
| M
ISS
ION
| V
ISIO
N
MissionOperate in a safe and profitable manner in the oil, gas and energy sector in Brazil and abroad, with social and environmental responsibility, providing products and services that meet clients’ needs and that contribute to the development of Brazil and the other countries in which it operates.
Vision Petrobras will be an integrated energy company with a strong presence in the international market and as a leading force in Latin America, focusing on profitability and social and environmental responsibility.
Valuesk Giving importance to the company’s principal stakeholders: shareholders, clients, employees, society, government, partners, suppliers and the communities within which the company operates;k A spirit of enterprise and the ability to meet challenges;k A focus on quality in the results;k An innovative and competitive spirit, focused on providing outstanding services and maintaining the highest technological standards;k Quality and leadership in the issues of health, safety and environmental preservation;k A constant quest for business leadership.
� | ANNuAl REPORT 2006 | PETROBRAS
Highlights
�00� �00�
PROVEN RESERVES – SPE criteria - (billions of barrels of oil equivalent – boe) (1)(2) 1�.9 1�.0
Oil and condensate (billion barrels) 12.3 12.3
Natural gas (billion boe) 2.6 2.7
AVERAGE DAILY PRODUCTION (thousand boe) (1) �,�17 �,�98
Oil and NGL (thousands of barrels per day - bpd) 1,847 1,920
Onshore 396 367
Offshore 1,451 1,552
Natural gas (thousands of boed) 370 378
Onshore 213 206
Offshore 157 172
PRODUCING WELLS (oil and natural gas) – december 31st (1) 1�,��7 1�,89�
Onshore 11,860 12,170
Offshore 697 725
DRILLING RIGS – december 31st �� �3
Onshore 22 19
Offshore 42 44
PRODUCING PLATFORMS – december 31st 97 103
Fixed 73 76
Floating 24 27
PIPELINES (km) – december 31 (1) 30,3�3 31,089
Oil and oil products 12,857 12,913
Natural gas 17,486 18,176
SHIPPING FLEET – december 31st
Vessels – company operated 50 51
– operated by third parties 75 104
Tonnage (million deadweight tons – dwt) 8.2 11.1
TERMINALS – december 31st
Number 66 66
Storage capacity (million m3) (3 ) 10.4 10.4
(1) Includes information from abroad, corresponding to Petrobras’ stake in each partnership(2) Proven reserves are calculated according to SPE (Society of Petroleum Engineers) criteria (3) Only includes Transpetro’s terminals(4) Excludes flare off, own E&P consumption, liquefaction and reinjection(5) Only includes assets in which Petrobras has an equity stake of 50% or more(6) Only includes natural gas powered thermoelectric plants
oPERATIoNAL summARY 2006
www.petrobras.com.br | ANNuAl REPORT 2006 | 7
�00� �00�
REFINERIES – december 31st (1)(5)
Number 15 16
Nominal installed capacity (thousand bpd) 2,114 2,227
Average throughput (thousand bpd) 1,830 1,872
Brazil 1,727 1,746
Abroad 103 126
Average daily production of oil products (thousand bpd) 1,839 1,892
IMPORTS (thousand bpd)
Oil 352 370
Oil products 94 118
EXPORTS (thousand bpd)
Oil 263 335
Oil products 260 246
COMMERCIALIZATION OF OIL PRODUCTS (thousand bpd)
Brazil 1,644 1,697
INTERNATIONAL SALES (thousand bpd)
Oil, gas and oil products 385 503
NATURAL GAS SOURCES (million m3 per day) (4 ) �� ��
Domestic gas 23 23
Bolivian gas 22 24
NATURAL GAS MARKET DISTRIBUTION (million m3 per day) (4 ) �� ��
Distributors 31 33
Thermoelectric plants 7 6
Internal consumption 7 7
ENERGY (1 )
Number of thermoelectric plants (5)(6) 9 10
Installed capacity (MW) (5)(6) 3,203 4,126
Energy sales (TWh) 16.64 17.57
Number of hydroelectric plants 2 2
Installed capacity (MW) (5) 285 285
Transmission lines (km) 15,414 15,414
Energy distribution (TWh/year) 13 13
FERTILIZERS (1)
Production units 3 3
Average daily production of
2,298 thousand boe
8 | ANNuAl REPORT 2006 | PETROBRAS
CONSOLIDATED FINANCIAL INFORMATION (R$ million, unless otheRwise specified) �00� �00� % change
Gross operating revenue 179,065 205,403 15
Net operating revenue 136,605 158,239 16
Operating income 39,773 42,237 6
Net financial income (expenses) (2,843) (1,332) -53
Net earnings 23,725 25,919 9
Net earnings per share (R$) 5.41 5.91 9
EBITDA 47,808 52,061 9
Gross debt 48,242 46,605 -3
Net debt 24,825 18,776 -24
Market capitalization 173,584 230,372 33
Gross margin (%) 44 40 -4 pp
Operating margin (%) 29 27 -2pp
Net margin (%) 17 16 -1 pp
FINANCIAL - ECONOMIC INDICATORS
Brent oil (Us$ / baRRel) 54.38 65.14 20
Average exchange rate (R$ / Us$) 2.4350 2.1752 -11
Year-end exchange rate (R$ / Us$) 2.3407 2.1380 -9
INVESTMENT (R$ million) �00� �00� % change
Direct investment 22,927 29,769 30
Exploration & Production 13,934 15,314 10
Downstream 3,286 4,181 27
Gas & Energy 1,527 1,566 3
International 3,153 7,161 127
Distribution 495 642 30
Corporate 532 905 70
Specific purpose companies (spCs) 2,385 3,507 47
Projects under negotiation 311 409 32
Structured projects 87 1 -99
Total investment ��,710 33,�8� 31
Hig
hli
gh
ts
FINANcIAL summARY 2006
��.7%�.9%8.�%
�.�%Federal Government
BNDESpar
ADR Level 3
FMP-FGTS PetrobrasForeign Investors (CMN Resolution nº 2,689)Other individuals and legal entities
Voting CaPital 2006 COmmOn ShAreS
�7.0%
1.8%
BNDESpar
ADR Level 3 and Rule 144-AForeign Investors (CMN Resolution nº 2,689)Other individuals and legal entities
non-Voting CaPital 2006 Preferred ShAreS
3�.3%
8.3%
18.3%
�.�%
Federal Government
BNDESpar
ADR (Common shares)
ADR (Preferred shares)
FMP-FGTS Petrobras
Foreign Investors (CMN Resolution nº 2,689)Other individuals and legal entities
CaPiTal SToCk 2006
1�.�%
1�.�%
7.� %
3�.�%1�.�%
3�.1%
1�.8%
SToCk YeaR-end CloSing PRiCe (r$ / ShAre) (2)
2006
2005
2004
2003
2002
�9.80��.�9
Common shares
Preferred shares
41.3037.21
26.6224.28
21.0219.10
13.2011.60
www.petrobras.com.br | ANNuAl REPORT 2006 | 9
Hig
hli
gh
ts
(1) The fiscal years 2004, 2005 and 2006 include the figures for Special Purpose Companies (SPCs) whose activities are controlled, directly or indirectly, by Petrobras.(2) For the purpose of comparison, the Earnings per Share for the previous fiscal years have been recalculated, to reflect the share split approved at the EGM of July 22, 2005.(3) The fiscal years 2002 and 2003 include debt incurred by the SPCs which Petrobras used to structure project finance and consortia. The fiscal years 2002 to 2006 include leasing contracts.All indicators have been prepared in accordance with BR GAAP criteria.
PRoduCTion of oil and naTuRal gaS (thOuSAnd BOed)
PRoven ReSeRveS of oil and naTuRal gaS(SPe CriteriA - BiLLiOn BOe)
ConSolidaTed neT inCoMe (r$ miLLiOn)(1)
eaRningS/ShaRe (r$/ShAre) (1)(2)
MaRkeT CaPiTalizaTion vs neT equiTY (r$ BiLLiOn)(1)
debT RaTioS (3)
2006
2005
2004
2003
2002
�,�983781,9�0
370 2,2171,847
359 2,0201,661
335 2,0361,701
1,8102751,535
2006
2005
2004
2003
2002
1�.01�.3 �.7
2.612.3 14.9
2.8 14.912.1
2.9 14.511.6
2.3 12.19.9
2006
2005
2004
2003
2002
16,887
��,919
23,725
17,795
8,098
2006
2005
2004
2003
2002
3.85
�.91
5.41
4.06
1.86
2002 2003 2004 2005 2006
54
87112
174
�30
977862
49
34
Market capitalization
Net equity
2006
2005
2004
2003
200254%
16%41%
18%
17%32%
24%23%
1�%�8%
Short Term Debt/Total Debt
Net Debt/Net Capitalization
gRoSS, oPeRaTing and neT MaRginS
Gross Margin
Operating Margin
Net Margin
�0%�7%
1�%
44%29%
17%
41%27%
15%
45%29%
19%
36%20%
12%
2006
2005
2004
2003
2002
Oil Natural Gas
Oil Natural Gas
10 | ANNuAl REPORT 2006 | PETROBRAS
José seRgio gaBRielli De azeVeDoPetrobras President and Ceo
outlook: leadership in oil, natural gas, oil products and biofuels in
latin america by 2015, with selective expansion in petrochemicals and
renewable energy.
“Petrobras is on the right path to becoming an integrated energy company with international reach, striving always for growth allied with profitability and social and environmental responsibility.”
www.petrobras.com.br | ANNuAl REPORT 2006 | 11
t he year 2006 was one of achievement and new prospects
for Petrobras. In addition to the records attained — con-
solidated earnings of R$ 25.9 billion and investments of
R$ 33.7 billion — and a 4% increase in total production of oil and
natural gas, the company is girding itself for a new challenge, set
down in the Business Plan 2007-2011: to maintain its rapid growth
rate. The targets are ambitious ones, leading Petrobras, for the first
time, to plan its production over the long term: a total of 4 million
556 thousand barrels a day (bpd) of oil and natural gas will be
produced in Brazil and abroad in 2015. The planned investments
are in keeping with the grandeur of the projects, amounting to the
sum of US$ 87.1 billion by 2011.
Domestic production grew by 5% in 2006, due to a 340 thou-
sand barrels a day increase in production capacity, as a result of the
P-34, FPSO-Capixaba and P-50 platforms all coming on-stream.
A new production record was set in October, with the company
achieving an output of 1.91 million barrels per day.
As a guarantee of a solid foundation for future growth, for
every barrel that was produced during the year 1.739 barrels
were added to the reserves. This was bolstered by the 27 new
areas that had their commercial viability confirmed, with the
total volume of recoverable oil estimated at 2.5 billion barrels of
oil equivalent (boe). New exploration prospects arose with the
discovery of light oil below a layer of salt in the Santos Basin.
***on top of the strong performance in oil, progress was also
made in the area of natural gas. Along with a 1.5% increase in
domestic production, Petrobras announced its Plan to Advance
the Production of Natural Gas (Plangás), which will raise the sup-
ply of natural gas in the southeast of Brazil from the present 15.8
million m3 to 40 million m3 a day by 2008. The plan, which also
Message from the cEo
1� | ANNuAl REPORT 2006 | PETROBRAS
includes projects for the processing and transportation of natural
gas, aims to increase the share of Brazilian gas supplying domestic
demand. Following the company’s strategy to guarantee safety and
flexibility in supplying the Brazilian market, Petrobras sanctioned
its entry into the liquefied natural gas (LNG) market as an importer
and continued with its expansion of the gas pipeline network. .
***other milestones in 2006 were the launching of Diesel
Podium and the development of H-Bio – a pioneering technol-
ogy from Petrobras that combines vegetable oil with fractions of
mineral oil in the production of diesel fuel. The company also
augmented the supply of diesel S500, with its reduced sulfur
content, to eight metropolitan areas. In order to further raise the
quality of its fuels, Petrobras continued to make improvements
at its refineries, with the installation of new hydrotreatment and
conversion units, which reduce the sulfur content in the oil prod-
ucts and optimize the output of diesel fuel from Brazilian oil.
In this way, the company enhances the value of domestic oil
and meets the most rigorous environmental specifications, while
at the same time opening up new export markets. In line with its
social and environmental commitments, Petrobras fortified its
biodiesel program, beginning the construction of three plants,
which will produce 171 million liters annually, thus meeting 20%
of the country’s demand in 2008. As well as generating employ-
ment and income for family subsistence farmers, the product will
help to reduce imports of diesel fuel and light oil.
Despite the high prices and volatility of the oil market, the
company’s results were sustained by production growth, without
passing on the price instability to the domestic market. Brent oil
hit a peak of US$ 78.63 a barrel in August, but closed the year down
25%, back around the US$ 60 level, the same as when Petrobras
Me
ssa
ge
fro
m t
he c
Eo
The goals are ambitious, leading Petrobras, for the first time ever, to plan its production over the long term: 4 million 556 thousand barrels a day (bpd) of oil and natural gas in 2015. The anticipated investment to bring this about is compatible with the huge scale of the projects themselves: us$ 87.1 billion up to 2011.
announced its last readjustment in the price of gasoline and diesel
fuel, in September 2005.
***the company’s excellent results in Brazil are mirrored
by its performance abroad. In addition to strengthening activi-
ties in the countries where it is already established, Petrobras
augmented its involvement in focus areas such as Africa and the
American sector of the Gulf of Mexico. Furthermore, it expanded
its activities in international refining, with the acquisition of a 50%
stake in the Pasadena refinery, in the United States, and is looking
at other refining prospects abroad. The objective is to add value
www.petrobras.com.br | ANNuAl REPORT 2006 | 13
to the heavy oil the company produces, offering a mix of more
esteemed and higher quality products to the market.
The investors’ confidence was reflected in the 34% appre-
ciation of Petrobras’ shares and the lower cost of securing fund-
ing. As a result, the company’s market capitalization, for the first
time, attained a monthly average of more than US$ 100 billion,
in December, and its first global securities issue since becom-
ing investment grade was at the lowest ever funding cost for a
10-year maturity.
Petrobras’ good results are also the fruit of its investment in
its human resources, who are considered essential to the imple-
mentation of the strategies that have been delineated. In addition
to heavy investment in training and skills development, the com-
pany hired 8,539 new employees during 2006, to help sustain its
growth. That the company’s measures in this area have been spot
on is reflected in the increase in the staff satisfaction index, from
66% to 68%, and the reduction in accidents, leaks and spills and
pollution emissions, which resulted in improved HSE (Health,
Safety & the Environment) indicators.
These successes alone would be ample reward for the
endeavors of the employees and the confidence of the share-
holders, but Petrobras also won further important recognition
of its performance: its selection for the Dow Jones Sustainability
Index and the ISE (Bovespa Corporate Sustainability Index), and
the classification of its shares as investment grade by the rating
agency Standard & Poor’s.
These accomplishments all strengthen our faith that
Petrobras is on the right path and will continue to grow, profit-
ably and showing social and environmental responsibility.
José seRgio gaBRielli De azeVeDo
President and CEO
Me
nsa
ge
m d
o P
rsid
ente
Castor bean plantation, Morro do Chapéu, BahiaRecord net
earnings of
25.9 billion reais in 2006
1� | ANNuAl REPORT 2006 | PETROBRAS
oil market
with an accumulation of inventories, and yet prices remained
high. Despite a slowing of the growth in world demand, influenced
by the high prices, oil continued to earn a risk premium, due to
the geopolitical instability provoked by events such as Israel’s
incursion into Lebanon and the nuclear issue in Iran. Aware that
geopolitical questions in the Middle East would keep prices high,
OPEC maintained its production quotas at the same level for most
The year 2006 saw a break in the continuous upward movement
of oil prices, which began in 2002. Although the price of Brent oil
reached a peak of US$ 78.63 a barrel in August, it had fallen back
25% by the year end. The average price, over the course of the
year, was US$ 11 higher than that of 2005, while the market has
become more volatile.
As in previous years, there was a supply surplus in 2006,
oil PRiCeS (noMinal) (uS$/BArreL)
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Dec
06
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
West Texas Intermediate
Brent
August 7, 2006 Brent peak price US$ 78.63/barrel
July 14, 2006WTI peak price US$ 77.03/barrel
January 2001 WTI US$ 27.21/barrel Brent US$ 22.97/barrel
January 2002 WTI US$ 21.01/barrel Brent US$ 20.40/barrel
January 2003 WTI US$ 31.85/barrel Brent US$ 30.77/barrel
January 2004 WTI US$ 33.78/barrel Brent US$ 31.16/barrel
January 2005 WTI US$ 42.12/barrel Brent US$ 40.36/barrel
www.petrobras.com.br | ANNuAl REPORT 2006 | 1�
of the year, thus favoring the building up of inventories.
The upward price trend began to be reversed when August
went by and fears that the Atlantic hurricane season would be as
devastating as that of 2005 were not realized. Amid controversy over
the influence of speculation on prices, the fact that there were no
major hurricanes obliged OPEC to announce cuts in production,
for the first time since December 2004 and the biggest reduction
since 2002. The first announcement was made in September and
the second came in December, effective as of February 2007.
Another factor pushing down prices, towards the end of
2006, was the abnormally mild winter temperatures in the north-
ern hemisphere, with a consequent reduction in oil consumption.
This led the market to feel the supply surplus more acutely, and
could be another sign that the upward price spiral of the last four
years may be coming to an end.
Ever since the August peak, the market has been char-
acterized by what analysts call a “correction movement” – with
prices oscillating downwards, as the market seeks a new balance
between supply and demand, against a backdrop of changing sen-
timent regarding potential shortages brought about by a disrup-
tion in supply. This downward movement in oil prices has, once
again, shown how susceptible prices are to the impact of unfore-
seeable events – something the world oil market has always had
to live with. +
transpetro fleet tanker “navion stavangar”
bRenT oil hiT
78.63 dollaRS a baRRel in auguST
oil
ma
rket
1� | ANNuAl REPORT 2006 | PETROBRAS
Petrobras has retained its aggressive growth targets in its Business
Plan 2007-2011. For the first time, the company has released esti-
mates of its oil and natural gas production for 2015 and listed the
main projects that will buttress its growth after 2011. The com-
pany’s strategic positioning places emphasis on the expansion of
refining in Brazil, so as to add value to the country’s increasing oil
production – whether by augmenting sales to the growing Brazilian
market or by expanding the export of oil products. Petrobras thus
seeks to strike a long term balance between production growth
and refining capacity. In the renewable energy market, the focus
is on biofuels, within a corporate strategy of leadership in the pro-
duction of biodiesel in Brazil and augmenting sales of ethanol.
Brazilian production of oil and natural gas will reach 2 million
925 thousand boed by 2011. Paralleling this increase, the country’s
refineries will be processing 1 million 877 thousand bpd and the
daily throughput of Brazilian oil will rise to 1 million 710 thousand
bpd. With this expansion, the company will raise the proportion
of domestic oil processed in the refineries from the current 80%
to 91%, thereby consolidating the country’s self-sufficiency. Sales
of the surplus, which in 2006 amounted to 335 thousand bpd, will
reach 584 thousand bpd by 2011.
Of the total planned investment for the period 2007-2011
— amounting to US$ 87.1 billion, an average of US$ 17.4 billion a
year —, US$ 75 billion (86%) is to be invested in Brazil, leading to
the creation of 838 thousand direct and indirect jobs. The greatest
investment will be in the areas of Exploration & Production and Gas
& Energy and in the Downstream area of Supplies. With US$ 12.1 bil-
lion (14%) earmarked for investment abroad, 65% will go into Latin
America, western Africa and the Gulf of Mexico — which are all a
priority within Petrobras’ strategy for international expansion.
Petrobras’ production abroad, which in 2006 amounted
to 243 thousand boed of oil and natural gas, will increase to 568
corporate strategy
1�%
Planned inveSTMenT 2007-2011(uS$ BiLLiOn)
8�%
Planned inveSTMenT PeR buSineSS aRea 2007-2011 (uS$ BiLLiOn)
BUSINESS AREAExploration & Production 40.7
Downstream 23.1
Gas & Energy 7.2
International 12.1
Distribution 2.2
Corporate Areas 1.8
Total 87.1
Own Resources
Third Party Resources
thousand boed by 2011, while the company’s throughput in refiner-
ies outside Brazil will reach 499 thousand bpd.
Growth in the production of oil and NGL and in the
finanCial ReSouRCeS: SouRCeS vs uSeS(2007-2011 fOreCASt, in uS$ BiLLiOn)
12.2
99,3
87.1
86.7 12.6
99,3
Investment
Debt Amortization
In Brazil
Abroad
www.petrobras.com.br | ANNuAl REPORT 2006 | 17
87.1billion dollars to be invested during the period 2007-2011
PRoduCTion vs Refining (thOuSAnd BPd)
forecast 2015
target 2011
2006
3,554
3,201
1,9�01,87�
2,757
2,376
Total production of oil and NGL
Total primary throughput
Oil + NGL – Brazil
Oil + NGL – Abroad
PRoduCTion gRowTh (thOuSAnd BOed)
2003 2004 2005 2006 target forecast 2011 2015
2,036 2,0202,217
�,�98
3,493
4,556
1,540 1,493 1,684 1,7782,374
2,812
2007-2015 7.9% p.a.
2007-2011 8.7% p.a.
85161250
94168265
96163274
101142277
185383551
278
742
724
Natural Gas – Brazil
Natural Gas – Abroad
throughput of the refineries preserves the balance between
Exploration & Production, on the one hand, and the company’s
Downstream area, on the other, while opening up opportunities for
the integration of these activities in Brazil and abroad.
As part of its corporate strategy for consolidation as an inte-
grated energy company with international reach, Petrobras is placing
greater emphasis on its renewable energy goals. By 2011, the company
should be making available 855 thousand m3/year of biodiesel and
exporting 3.5 million m3 of ethanol. The capacity of the thermoelectric
and co-generation plants, meanwhile, will have reached 4,554 MW.
Petrobras maintains the policy of keeping its prices aligned
with those of the international market. The company’s forecast cash
flow generation for the period 2007 to 2011, of US$ 86.7 billion, will
be sufficient to meet almost all its investment needs. The raising of
funds in the financial markets and the amortization of debt will be
in alignment with the company’s policy of extending its debt profile
and reducing its financial leverage. The average Return on Capital
Employed (ROCE) for the period should be 16%.
In line with its commitment to social and environmental
responsibility and being at the technological cutting edge, the
company will invest a total of US$ 6.2 billion in Health, Safety and
the Environment (HSE), technology, telecommunications and
Information Technology (IT) during the period 2007 to 2011.
Petrobras is pursuing its endeavors to apply in the social and
environmental spheres the level of quality achieved in its business
performance, and remains committed to the principles of transpar-
ency and responsibility in its relations with all the stakeholders.
Already internationally recognized for its standard of excellence in
the production of oil, natural gas and oil products, the company con-
tinues to strive to raise those standards higher still and to enhance its
international reputation as a Brazilian business that is dedicated to
overcoming the challenges of producing energy.
co
rpo
rate
str
ate
gy
18 | ANNuAl REPORT 2006 | PETROBRAS
FRanCisCo De assis PeReiRaTruck driver, for a Petrobras client,
at the betim cargo terminal
outlook: The hope for a better life is what drives us on.
“Preservation of the environment has become urgent and is the responsibility of all of us, each one according to his role. Petrobras is doing its bit, but it is too much to handle on its own.”
www.petrobras.com.br | AnnuAl RepoRt 2006 | 19
Business Areas
exploRAtion & pRoduction 20Refining And commeRciAlizAtion 26
petRochemicAls 30tRAnspoRtAtion 34
distRibution 38
nAtuRAl gAs 40eneRgy 42
The intensification of the company’s oil exploration and production led Petrobras to establish new records in 2006. With new platforms coming on-stream — notably the P-50 — output continued to grow, reaching almost 2 million barrels a day. Natural gas production also expanded and, in the southeast, should increase to 40 million m3 daily by 2008, from the present level of 15.8 million m3, according to the provisions of Plangás (Plan to Advance the Production of Natural Gas), drawn up to augment the production and supply of natural gas in that region. Under its strategy for the sustain-able growth of Brazilian consumption, Petrobras is preparing to become an importer in the global market for liquefied natural gas (LNG). The goals set out in the Business Plan 2007-2011, aimed at sustaining the country’s self-sufficiency and maintaining the rapid growth rate, take into account the coming on-stream, during this period, of 15 major oil and 10 natural gas projects.
20 | AnnuAl RepoRt 2006 | petRobRAs
Sustained growth in production The increase in domesTic oil producTion in 2006
represenTed anoTher advance in peTrobras’
growTh sTraTegy. The company’s brazilian ouTpuT
ToTalled 1 million 778 Thousand barrels per day
(bpd) of oil, naTural gas liquids (ngl) and conden-
saTe — up 5.6% in relaTion To The 2005 producTion
figure, of 1 million 684 Thousand bpd.
Two of the three major new projects contributing to the pro-
duction increase are located in the Campos Basin: platform P-50,
in operation since April 21st, and the FPSO P-34, in operation since
December 17th. In the Espírito Santo Basin, the FPSO Capixaba
came into operation on May 6th. With the addition of these new
projects, Petrobras’ production capacity was raised by 340 thou-
sand bpd. The P-50, operating in the Albacora Leste field, has a
production capacity of 180 thousand bpd; the FPSO Capixaba, in
the Golfinho field, and the P-34, in the Jubarte field, can process
100 thousand bpd and 60 thousand bpd, respectively.
Despite the higher production in 2006, the annual average
was 5.4% lower than the target, of 1 million 880 thousand bpd,
that had been set for the year. This shortfall was due to delays in
the operational start-up of the P-50 and P-34.
However, new production records have brought Petrobras to
the threshold of the 2 million barrels per day mark. On October 23rd,
the company produced 1,912,733 barrels — 31 thousand more than
the previous record, set on May 29th. In addition to the good perfor-
mance of the P-50 and the other platforms in the Campos Basin, a
contribution to these production peaks came from the Recage pro-
gram (Program for the Rejuvenation of Heavily Exploited Fields),
The FPSO P-50, in the Campos Basin (RJ), contributing to the country’s oil self-sufficiency
Business AreasExPLorATioN & ProdUcTioN
www.petrobras.com.br | AnnuAl RepoRt 2006 | 21
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which helps to minimize the decline of mature production areas.
The company’s production of natural gas (excluding NGL)
also increased in 2006, attaining an average of 44 million m3/day,
a 1% rise in relation to the 43.5 million m3/day of the previ-
ous year. This growth was maintained as a result of continued
efforts to expand the supply of domestic gas, in line with the
corporate strategy of ensuring a reliable supply of the product
to the Brazilian market.
In the Espírito Santo Basin, a major gas project came into
Production of oil and natural Gas (thousand boed)(1)
1,270
1,336
1,500
1,540
1,493
1,684
1,778
Oil, NGL and Condensate
Natural Gas
2,812
2,374 551 2,925
724 3,536forecast
2015
target 2011
2006
2005
2004
2003
2002
2001
2000 221
232
252
250
265
274
277 2,055
1,958
1,758
1,790
1,752
1,568
1,491
1.91 million
bPd Production record in october
(1) Average annual growth in oil production: 6.76% Average annual growth in natural gas production: 3.71%
22 | AnnuAl RepoRt 2006 | petRobRAs
operation on February 22nd: the Peroá platform (production of
around 1 million m3/day). In Rio Grande do Norte, the Guamaré
UPGN III (production of 1.5 million m3/day) came on-stream, fol-
lowing a pre-operational phase that kicked off in December 2005.
The average lifting cost in 2006, not including the government’s
take was US$ 6.59 per barrel of oil equivalent (boe) — an increase of
15% over the previous year’s figure. The increase was mainly due to
an 11% appreciation of the local currency (real) against the US dol-
lar and to contractual readjustments, particularly drilling contracts,
as well as the oil market heating up, enlargement of the workforce,
in line with the Business Plan forecast, and the coming on-stream of
the platforms P-50, FPSO Capixaba and P-34.
The Challenge OF gROwThThe targets set down in Petrobras’ latest business plan provide for 15
major oil and 10 natural gas production projects to come on-stream
by 2011, when the company’s average production of oil and natural
gas in Brazil is estimated to reach 2 million 925 thousand boed.
During 2007, the following platforms will come on-stream
in the Campos Basin: the FPSO Cidade do Rio de Janeiro (100
thousand bpd), in the Espadarte field; the P-52 and P-54 (180
thousand bpd, each), in the Roncador field; the SSP 300 (30 thou-
sand bpd), in the Piranema field; and the FPSO Cidade de Vitória
(100 thousand bpd), in module 2 of the Golfinho field. In Bahia,
the Manati platform (6 million m3/day) will come into operation
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Petrobras declared to the ANP the commercial viability of 27 discoveries, some of which are classified as new oil and natural gas fields. estimates indicate a recoverable volume of 2 billion 440 million boe: 53 million onshore and the rest all offshore.
unit liftinG cost, excludinG Government take (us$/barrell)
5.60target 2011
2006
2005
2004
2003
2002 3.00
3.36
4.28
5.73
6.59
Production of natural Gasby water depth
39%
20%
3%
38%
Total Production: 43,975 thousand m3/day
Production of oil, nGl and condensate by water depth
69%
13%5%
13%
Total Production: 1,778 thousand bpd
Onshore
0 - 300
300 - 1,500
>1,500
Onshore
0 - 300
300 - 1,500
>1,500
www.petrobras.com.br | AnnuAl RepoRt 2006 | 23
in 2007, augmenting the company’s production of natural gas.
Two more platforms destined for the Campos Basin are cur-
rently under construction: the P-51 and P-53 (180 thousand bpd,
each), with operational start-up scheduled, respectively, for 2008
and 2009, in the Marlim Sul and Marlim Leste fields. Additionally,
an FPSO will be leased in 2008, for use in the Jabuti area of the
Marlim Leste field.
Looking ahead to 2009, production is scheduled to begin
under the Parque das Conchas Project (100 thousand bpd), oper-
ated by Shell. 2010 should see the Frade field (100 thousand
bpd) come into operation, in a partnership with Chevron, and in
2011 the P-57 platform (180 thousand bpd), under phase 2 of the
Jubarte field, and the P-55 (180 thousand bpd), in module III of the
Roncador field, will both come on-stream.
The exploration and production of natural gas is also being
intensified, under Plangás, which is fundamental to ensuring the
supply of natural gas to the markets in the south and southeast of
Brazil. In the southeast, the supply will rise from the present 15.8 mil-
lion m3/day to 40 million m3/day by the end of 2008. In the Espírito
Santo Basin, Plangás provides for the expansion of the Peroá proj-
ect to 9.4 million m3/day and the development of the Canapu and
Camarupim fields, in addition to expansion of the Cacimbas Gas
Processing Complex to 20 million m3/day. The first phase of this
expansion (5.4 thousand m3/day) will be completed in early 2007,
when the Peroá Gas Processing Plant comes into operation. In the
Campos Basin, Plangás gives priority to the production of non-associ-
ated gas from a variety of reservoirs located near the existing infra-
structure within the Albacora, Roncador and Marlim Sul fields, as
well as initial development of the Jabuti field. In the Santos Basin, the
Merluza platform’s output will be expanded to 2.5 million m3/day,
with increased production from the Merluza field and initial devel-
opment of the Lagosta field. Plangás foresees the expansion of gas
supplies in the southeast to a total of 55 million m3/day, by 2010, with
initiation of the Mexilhão (2009) and Uruguá and Tambaú (2010)
projects, located in the Santos Basin, in addition to the Caraguatatuba
Gas Processing Plant, whose first module will come on-stream in
2009, followed by the second module in 2010.
OnShORe and OFFShORe diSCOveRieSIn 2006, Petrobras reported the commercial viability of 27 discov-
eries to the ANP (National Oil, Natural Gas and Biofuels Agency).
Some of these areas — 18 of which are located offshore and 9
onshore — were classified as new oil and natural gas fields, while
others were incorporated within neighboring fields. The explora-
tion highlight was the discovery of light oil and gas in ultra-deep
waters in the Santos Basin block BM-S-11.
Estimates of Petrobras’ stake in the new commercially viable
areas indicate a total recoverable volume in the region of 2 bil-
lion 440 million boe, but this figure is subject to a more precise
assessment. Of this total, 2 billion 387 million boe lie in offshore
accumulations and 53 million boe are to be found onshore. Ten
of the 27 areas are located in the Campos Basin; four are in the
Santos Basin; seven are in the Espírito Santo Basin; and six are
located in basins in the north and northeast of Brazil.
In the Santos Basin, three areas operated by Petrobras were
declared commercially viable and reclassified as the oil and natu-
ral gas fields of Tambuatá, Pirapitanga and Carapiá. A fourth area
was incorporated within the Mexilhão field. The total volume
is estimated at 560 million boe. In addition to these four areas,
the company has a 40% stake in two other areas that were also
reported to the ANP as being commercially viable.
What is more, the discovery of light oil and gas in block BM-
S-11, in which Petrobras has a 65% stake, opens up promising new
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Cacimbas gas treatment
plant, linhares, espírito Santo
24 | AnnuAl RepoRt 2006 | petRobRAs
prospects not only for operations in the Santos Basin but for opera-
tions in ultra-deep waters in other regions. In order to reach the oil
and gas, the company had to bore through a layer of salt that was
more than two thousand meters thick, in waters with a depth of
two thousand meters.
In the Espírito Santo Basin, four offshore and three onshore
areas operated by Petrobras were declared commercially viable. On
the continental shelf, where the new discoveries are estimated at 168
million boe, two areas were reclassified as the Carapó and Camarupim
gas fields and two areas containing gas and light oil were incorporated
within the Golfinho and Canapu fields. The declaration of the onshore
areas resulted in the creation of three new fields — Saíra, Seriema and
Tabuiaiá —, with a total estimated volume of 7.4 million boe, which
will help to maintain the level of onshore production.
With regard to the Campos Basin, the commercial declara-
tions covered ten areas. Seven of these were classified as new fields:
Maromba, Carataí, Carapicu, Catuá, Caxaréu, Mangangá and Pirambu.
One area was incorporated within the Baleia Azul field and two others
into the Viola and Marlim Leste fields. The total estimated volume
comes to 1 billion 510 million boe. Another important discovery was
made in the Roncador field, in reservoirs below the productive seam.
Five declarations of commercial viability were made by
Petrobras for onshore areas within coastal basins in the northeast
of Brazil. Three were classified as fields: Tangará, in the Recôncavo
Bahiano; and Pintassilgo and Jaçanã, in the Potiguar Basin. The other
two areas were incorporated within the existing fields of Baixa do
Juazeiro and Canto do Amaro, also located in the Potiguar Basin.
In addition to those, three other onshore areas were discovered in
the Sergipe-Alagoas Basin and two in the Recôncavo Basin. In the
Solimões Basin, the company declared the commercial viability of
the Araracanga field — a natural gas discovery made in 1997.
During the year, a total of 331 wells were drilled and completed
for the development of production — 283 onshore and 48 offshore.
For exploratory purposes, 80 wells were drilled — 50 onshore and 30
offshore. The exploration success rate was 48.7%, as 39 of the 80 wild-
cat wells that achieved their geological objective show good prospects
of becoming discoveries or producers of oil or natural gas.
new COnCeSSiOnSAt the ANP’s Eighth Bidding Round, held in November, Petrobras
proceeded with restructuring and extending the profile of its portfo-
lio of exploration areas. The company acquired 21 of the 22 areas for
which it bid, covering a total of 7,841.21 km2. The new concessions
that have been added to its exploratory portfolio — 13 onshore, in
the Tucano Basin, and eight in the Santos Basin — will be important
to the attainment of the oil and gas production levels called for in
the company’s Business Plan 2007-2011.
The winning bids made by Petrobras and its partners in the
eighth round came to a total of R$ 276,924,361, of which the com-
pany’s share was R$ 248,227,933.50. Petrobras has exclusive rights
to seven of the 21 blocks acquired, and is the operator in two of
them, in partnership with other companies. In the other 12 blocks,
the operations will be carried out by partners.
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exPloration success rate
20%24%
23%
55%
49%39%
50%
Fazenda alegre oil treatment
and transfer unit, Jaguaré,
espírito Santo
2003 2004 2005 2006200220012000
www.petrobras.com.br | AnnuAl RepoRt 2006 | 25
The offshore concessions acquired in the Santos Basin, covering
a total area of 5,553.03 km2, are considered to offer great potential. The
onshore concessions in the Tucano Basin, covering a total of 2,288.15
km2, are in new frontier areas, with potential for the discovery of deep
accumulations of natural gas. When the contracts are signed, these
concessions will probably be grouped by the ANP in various blocks.
With the various acquisitions and areas handed back over
the course of the year, the company’s portfolio of exploratory
concessions comprises 144 blocks, covering a total area of 149.2
thousand km2. Adding to this the ten areas with discovery evalu-
ation plans (3.6 thousand km2) in operation, Petrobras’ present
exploration area covers a total of 152.8 thousand km2.
PROven ReSeRveSPetrobras’ proven reserves of oil, condensate and natural gas in
Brazil amounted, at the end of 2006, to 13 billion 753 million boe,
following ANP/SPE criteria — representing an increase of 3.9% in
relation to the previous year. A total of 1 billion 226 million boe was
added to the reserves over the course of 2006, against an accumu-
lated production volume of 705 million boe, generating a Reserve
Replacement Index (RRI) of 174%. This means that for every barrel
of oil equivalent produced during the year, 1.74 barrels were added
to the company’s reserves. Meanwhile, the reserves/production
(R/P) ratio is at 19.5 years.
Two factors underlie the increase in proven reserves — one
being due to the appropriation of amounts discovered in fields
declared commercially viable during the course of 2006. Some of
these declared areas are close to fields that are in the development
phase and were, therefore, included within the figures for those
fields. The other contributing factor arises from reservoir manage-
ment practices in discovered fields that are already in the develop-
ment or production phase. +
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Proven reserves of oil and natural Gas(spe Criteria - billion boe)
2006
2005
2004
2003
2002
2001
2000 8.29
8.32
9.56
10.60
11.05
11.36
11.67
1.36 9.65
1.35 9.67
1.45 11.01
1.99 12.59
1.97 13.02
1.87 13.23
2.08 13.75
Oil, NGL and Condensate
Natural Gas
chanGe in level of Proven reserves (spe Criteria - billion boe)
2006
2005 13.23
0.24
0.98
13.75
Remaining 2005 reserves
Addition of new discoveries
Additions from existing fields
Production in 2006: 0.71 billion boe
12.52
reserve replacement index of
174%
26 | AnnuAl RepoRt 2006 | petRobRAs
increased sales, both in Brazil and abroada new refining record and a 3% increase in domes-
Tic oil producT sales were oTher highlighTs of
The year’s resulTs. The 11 peTrobras refineries saw
Their primary processing of oil and producTion
of oil producTs boTh rise in comparison wiTh 2005.
The sTrong domesTic oil producTion and com-
pany logisTical sTrucTure, TogeTher wiTh The
opening up of new markeTs, enabled peTrobras To
also seT new foreign sales records, and Thereby
consolidaTe iTs posiTion as The counTry’s lead-
ing exporTer.
ReFiningIn 2006, Petrobras set new records for refining and the production of
oil products in Brazil. The average processed throughput (primary
processing) of the company’s 11 Brazilian refineries amounted to
1 million 746 thousand bpd of oil, while the production of oil prod-
ucts totaled 1 million 764 thousand bpd — representing increases
of 1% and 2%, respectively, in relation to the previous year. The
80 % share of domestic oil in the total 2006 processed throughput
is a reflection of the operational reliability of the units, which were
working at an average of 89 % of their refining capacity.
The company proceeded with its investments to adapt the
country’s refineries to process the heavy oils that are produced
in Brazil. New catalytic cracking and retarded coking units came
on-stream at the Alberto Pasqualini Refinery (Refap) and a new
coking unit will start operating at the Duque de Caxias Refinery
unit cost of refininG(us$ /barrel)
target 2011
2006
2005
2004
2003
2002 0.94
1.14
1.38
1.90
2.29
2.90
Business AreasrEfiNiNG & commErciALizATioN
oil Products market(thousand bpd)
2003 2004 2005 2006
1,749
2002
1,7001,755 1,766
1,821
1,641
1,639
1,6961,735
1,764
1,609
1,510
1,637 1,644
1,697
Demand for Oil Products
Production of Oil Products
Sales of Oil Products
www.petrobras.com.br | AnnuAl RepoRt 2006 | 27
(Reduc) in 2007. With the coking units, Petrobras is able to opti-
mize the rendering of domestic oil into diesel fuel.
As part of the company’s strategy for improving the quality of
its fuels, Petrobras pressed ahead with the installation of hydrotreat-
ment units (HDTs) at nine refineries. The process of treatment with
hydrogen, which reduces the sulfur content of the oil products, will
meet the most stringent environmental specifications that are to
come into effect as from 2009. At the same time, this will open up
new export markets, such as the USA and the EU.
The launching of Podium Diesel and the development of
H-Bio were milestones for quality and environmental protection in
2006. As with Podium gasoline, the new diesel fuel offers improved
performance with less engine wear and lower sulfur content.
H-Bio, a pioneering process from Petrobras, blends vegetable
oil with mineral oil to produce diesel fuel. The company also
expanded the supply of diesel S500 to eight new metropolitan areas
— Curitiba, Salvador, Recife, Fortaleza, Belém, Vitória, Aracaju and
Porto Alegre. This product, launched in 2005, has a sulfur content
that is just one quarter that of ordinary diesel fuel.
Parallel with the growth in domestic oil production,
Petrobras is developing two major projects — the Abreu Lima
Refinery, in the state of Pernambuco, with a capacity of 200 thou-
sand bpd, is a US$ 4.0 billion undertaking that is being studied,
together with Petróleos de Venezuela (PDVSA); and the Premium
Refinery, at an as yet undefined location, with a capacity of 500
thousand bpd, will be the largest in the country. With operational
start-up scheduled for 2011 and 2014, respectively, these new
refineries will cope with the growing domestic demand, reduce
imports of diesel fuel and bolster the country’s exports of oil prod-
ucts, thus making the most of any Brazilian oil surpluses. +
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isaac Sabbá refinery (Reman),
Manaus, amazonas
sales of
1.70 million
bPd of oil Products in the brazilian market
28 | AnnuAl RepoRt 2006 | petRobRAs
COMMeRCializaTiOnIn 2006, Petrobras sold an average of 1 million 697 thousand bpd
of oil products in the Brazilian market – a 3% increase in relation
to 2005. The leading products, in terms of sales volume, were
gasoline, naphtha, fuel oil, diesel fuel, liquefied petroleum gas
(LPG) and aviation fuel.
Gasoline registered the biggest increase in sales, by 7%,
mainly due to the reduction, in March, of the percentage of etha-
nol that is mixed with the gasoline sold at service stations, from
25% to 20%. In November, it was raised to 23%. Another factor
was the expansion of the gasoline powered vehicle fleet, including
the users of flex fuel vehicles who chose to use gasoline. Working
in the opposite direction were a 5.1% real increase in the pump
price and the growing use of natural gas to power vehicles.
There was a 5% increase in sales of naphtha. Faced with
growing demand from the petrochemical centers, Petrobras
expanded its production and partially substituted imports, thereby
securing increased business.
After several years of declining business in the fuel oil seg-
ment, sales were up 1%, helped by gains in market share and the
response to new consumers. Among the sectors showing strong
demand were manufacturing in the state of Pará and the new ther-
moelectric power plants in the state of Amazonas.
Sales of diesel fuel were also up 1%, lagging behind the
country’s GDP growth. The principal reason was the poor per-
formance of the agribusiness sector, which is still recovering from
crisis in 2005/2006 and the appreciation of the real against other
important currencies.
LPG saw an increase of 1.5% in sales, in response to a grow-
ing population and their improved purchasing power, brought
about by a higher minimum wage and broad government measures
to safeguard household incomes. Sales of aviation fuel remained
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The hydrodesulfurization unit at the getúlio
vargas refinery (Repar), araucária, Paraná
oil imPorts and exPorts(thousand bpd)
Imports
Exports
2003 2004 2005 20062002
326 319
450 352 370
233 233181 263
335
oil Product imPorts and exPorts(thousand bpd)
2003 2004 2005 20062002
216
213
228 260246
206
105
109
94
118
stable in relation to those of 2005.
The increase in domestic oil production, the optimization
of the company’s logistical structure and the opening up of new
commercial opportunities enabled Petrobras to set new records
Imports
Exports
www.petrobras.com.br | AnnuAl RepoRt 2006 | 29
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oil Product exPorts Per tyPe(volume)
66%12%
6%
16%
Aviation Fuel
Gasoline
Fuel Oil & Bunker Fuel
Others
destination of oil Product exPorts(volume)
oil Product imPorts Per tyPe(volume)
17%
43%
17%23%
Naphtha
Diesel Fuel
LPG
Others
oriGin of oil Product imPorts(volume)
22%
6%
2%
8%
3%4%
12%
22%
Argentina
Aruba
Belgium
UAE
USA
India
Nigeria
Venezuela
Others
21% Dutch Antilles
Argentina
Bahamas
Cyprus
Singapore
USA
Italy
Nigeria
Uruguay
Others
21%
7%
3%
8%
4%
5%
11% 12%
18%
11%
destination of oil exPorts(volume)
31%
8%
4%
12%
Aruba
Bahamas
Chile
China
S. Korea
USA
France
Portugal
Others
11%
10%
4%
4%
16%
oriGin of oil imPorts(volume)
Angola
Saudi Arabia
Algeria
Congo
Iraq
Nigeria
Others
43%
4% 4%
6%
10%
11%
22%
in international sales and consolidate its position as the country’s
leading exporter. Oil exports hit a record 484 thousand bpd in
November and closed the year at an average of 335 thousand bpd,
an increase of 27% in relation to the previous year. Exports of oil
products were down 5.4% compared with 2005, at an average of
246 thousand bpd. Imports averaged 370 thousand bpd of oil and
118 thousand bpd of oil products. The company recorded a trade
surplus of US$ 421 million in 2006. +
30 | AnnuAl RepoRt 2006 | petRobRAs
Strategically important products for the company’s businessespeTrochemicals are of sTraTegic imporTance To
peTrobras, providing diversificaTion of The prod-
ucT porTfolio and adding value To The oil and
naTural gas, in synergy wiTh The company’s oTher
operaTions. peTrobras’ acTiviTies in The secTor,
under The aegis of iTs subsidiary peTrobras química
s.a. (peTroquisa), have been selecTively builT up for
The producTion, in associaTion wiTh parTners, of
basic inpuTs and ThermoplasTic resins.
Petroquisa, which in 2006 became a wholly-owned sub-
sidiary of Petrobras, has a stake in all the country’s petrochemi-
cal hubs, whose products, such as calcined petroleum coke and
catalytic agent for cracking oil, are of strategic interest to Petrobras.
Petroquisa’s net earnings for the year came to R$ 133.5 million.
Notable among the various units that are being planned is
the Rio de Janeiro Petrochemical Complex (Comperj), to be con-
structed in the municipalities of Itaboraí and São Gonçalo, in part-
nership with the Ultra Group and the Brazilian Development Bank
(BNDES), at an estimated cost of US$ 8.3 billion. The technical and
economic studies for the project were completed in March.
This complex will process up to 150 thousand bpd of heavy
oil, for the production of petrochemical raw materials and oil prod-
ucts, with an annual output of 1.3 million tons of ethylene, 880
thousand tons of propylene, 600 thousand tons of benzene and 700
thousand tons of paraxylene, as well as other oil products, especially
Campos elíseos petrochemical complex, duque de Caxias, Rio de Janeiro
Business AreasPETrochEmicALs
www.petrobras.com.br | AnnuAl RepoRt 2006 | 31
coke. In addition to the basic petrochemical unit (UPB), the utilities
center and the second generation units, Comperj will be equipped
with a business and employee training center and a distribution
center for channeling liquid products to loading terminals on the
shores of Guanabara Bay. The operational start-up is scheduled for
the beginning of 2012.
The second generation units will use as raw material the basic
petrochemicals produced at the UPB, for the annual production of
880 thousand tons of polyethylenes, 850 thousand tons of polypro-
pylene, 500 thousand tons of styrene, 600 thousand tons of ethylene
glycol and 600 thousand tons of purified terephthalic acid (PTA).
Another important undertaking that is under way is the indus-
trial unit of Petroquímica Paulínia S.A., in an association between
Petroquisa, which holds a 40% equity stake, and Braskem, at an
estimated cost of US$ 328 million. Located in the municipality of
Paulínia (SP), next to the Paulínia Refinery (Replan), this unit will
produce 300 thousand tons per year of polypropylene, using propyl-
ene supplied by the neighboring refinery and by the Henrique Lage
Refinery (Revap). With an environmental license granted towards
the end of 2006, construction of the production plant is going ahead
and the unit is scheduled to go into operation in 2008.
Petrobras is proceeding with the technical, economic and
environmental evaluation of the Minas Gerais integrated acrylic
complex — a US$ 540 million undertaking for the annual pro-
duction of 160 thousand tons of raw acrylic acid and certain by-
products. The complex, a pioneering initiative in Latin America, is
scheduled for operational start-up in 2011.
Petroquisa has taken further steps to set up a purified tere-
phthalic acid (PTA) unit in Pernambuco, with the founding of
Companhia Petroquímica de Pernambuco — PetroquímicaSuape. The
industrial unit, involving the investment of US$ 514 million, will have
a production capacity of 640 thousand tons per year, and is scheduled
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to start operations in 2009. The raw material for the process will be
paraxylene, which at first will be imported, but will subsequently be
supplied by the Rio de Janeiro Petrochemical Complex.
Within the production chain to be created by the activities
of PetroquímicaSuape, some of the PTA will serve as raw mate-
rial for Companhia Integrada Têxtil de Pernambuco — CITEPE.
This company, in which Petroquisa has a 40% stake, was founded
in 2006, with a view to setting up an industrial plant to produce
polyester fiber (POY). The unit, budgeted at US$ 273 million,
will produce 215 thousand tons of the product annually, and is
scheduled to go into production in 2009. +
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The rio de Janeiro petrochemical complex is one of Petrobras’ most important projects in the petrochemical area. involving an investment of Us$ 8.3 billion, the complex will produce raw materials for the petrochemical processes, as well as oil products, all deriving from heavy oils.
Petroquisa equity Holdings
Company Product Voting Capital (%)
Total Capital (%)
Braskem S.A. Basic, intermediate and final petrochemicals 9.8 8.3
Copesul - Companhia Petroquímica do Sul Basic petrochemicals 15.6 15.6
Petroquímica União S.A. Basic petrochemicals 17.5 17.4
Riopol - Rio Polímeros S.A. Polyethylenes, ethylene and propylene 16.7 16.7
Metanor S.A. Metanol do Nordeste Methanol and by-products 49.5 34.3
Deten Química S.A. Linear alkyl benzene and sulfonated linear alkyl benzene 28.6 27.7
Fábrica Carioca de Catalisadores S.A. Catalysts 50.0 50.0
Petrocoque S.A. Indústria e Comércio Calcined petroleum coke 40.0 40.0
Petroquímica Triunfo S.A. Low density polyethylene, ethylene copolymer and vinyl acetate (EVA) 70.5 85.0
Petroquímica Paulínia S.A. Polypropylene 40.0 40.0
Companhia Petroquímica de Pernambuco - Petroquímica Suape Purified terephthalic acid (PTA) 50.0 50.0
Companhia Integrada Têxtil de Pernambuco - Citepe Polyester fibers (POY) 40.0 40.0
Nitroclor Produtos Químicos Ltda. In the process of being wound up 38.8 38.8
www.petrobras.com.br | AnnuAl RepoRt 2006 | 33
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investment in fertilizer Plants boosts Production
Petrobras pushed ahead with the modernization of its fertilizer production plants and the development of new projects to expand the production of nitrogen compounds, in line with the strategy of increasing its activities in the seg-ment. In 2006, sales of ammonia and urea generated US$ 350 million in gross revenue for the company – an increase of 6% in relation to the previous year.
The company’s fertilizer plants, located in the states of Bahia and Sergipe, received R$ 92 million of investment in projects to improve their operational reliability, logistics and product quality, as well as in Health, Safety and the Environment (HSE). In Sergipe, completion of the new urea warehouse, with a capacity of 30 thousand tons, doubled the unit’s storage capacity and brought additional flexibility to the logistical operations.
In a fifth successive year of sales growth, the two plants sold 213 thousand tons of ammonia in the domestic mar-ket. In the urea fertilizer segment, Petrobras retained its leadership in the Brazilian market, with 710 thousand tons sold in 2006. As a result of the investment in reliability, the Bahia plant achieved its highest production figure in the last seven years, of 285 thousand tons.
A new urea granulation unit will come on-stream at the Sergipe plant in 2007, with an output of 600 tons a day. In order to substitute imports of nitrogenated fertilizers, Petrobras went ahead with the conceptual design of a new industrial plant — the UFN-3, which will use natural gas as a raw material. At an estimated cost of US$ 822 million, this unit should produce 1 million tons of urea and 760 thou-sand tons of ammonia a year, as from 2012.
Another project that is being studied is the construc-tion, at the Bahia plant, of an industrial unit with the capa- city to produce 120 thousand tons of nitric acid a year for the Camaçari Petrochemical Complex. The unit would come on-stream in 2009.
Production of urea at the nitrogenous Fertilizer Plant (FaFen), laranjeiras, Sergipe
34 | AnnuAl RepoRt 2006 | petRobRAs
logistics yield competitive advantagesfor The TransporTaTion and sTorage of oil, oil
producTs, eThanol and naTural gas, peTrobras
works Through iTs fully-owned subsidiary
peTrobras TransporTe s.a. — TranspeTro, which
operaTes 53 ships, 44 Terminals and 9,958 kilome-
Ters of pipeline. This company fulfills a sTraTe-
gic role, providing The inTegraTed logisTical
soluTions and operaTional flexibiliTy ThaT give
peTrobras a compeTiTive edge.
FleeT OF 46 TankeRSTranspetro is the largest shipowner in South America, with a total
deadweight capacity of 2.6 million tons (dwt). The company has a
fleet of 46 oil tankers and leases the rest from third parties on bareboat
charters. On this basis, contracts were signed in 2006 for the Navion
Stavanger (Suezmax) and two other vessels, which will be received in
2007. The fleet also includes a Floating Storage and Offloading unit
(FSO) and an Anchor Handling Towing Supply vessel(AHTS).
Transpetro operates at a high level of reliability, providing
quality services at competitive prices and an excellent level of
compliance with Health, Safety and the Environment (HSE) stan-
dards. The vessels are regularly inspected under the Navio 1000
Program, which evaluates the fleet management, operating condi-
tions and safety, in accordance with international regulations.
As part of its strategy to expand the services it provides to
Petrobras, in line with the increasing domestic oil production,
Business AreasTrANsPorTATioN
The ilha d’Água maritime terminal, guanabara Bay,
Rio de Janeiro
www.petrobras.com.br | AnnuAl RepoRt 2006 | 35
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Transpetro proceeded in 2006 with its Fleet Modernization and
Expansion Program. Having completed the first phase tender-
ing process, 26 vessels have been ordered from shipyards with
Brazilian operations. Under the second phase of the program, a
further 16 tankers will be built.
The first 26 vessels, divided into five tendering lots, rep-
resent a total investment of US$ 2.5 billion, and comprise ten
vessels of the Suezmax type; five Aframax; four Panamax; four oil
product carriers and three liquefied-gas tankers. In the negotia-
tions with the shipyards, the company managed to obtain a 14%
price reduction, bringing the average price to around the level it
would have paid if the orders had been placed abroad. Having
the vessels built in Brazil aids the recovery of the country’s large-
scale shipbuilding industry, as well as developing a new supply
center for Petrobras.
TeRMinalS and Oil PiPelineSThe operator of the majority of Petrobras’ oil pipelines, land-based
and waterway terminals, Transpetro transported 654 million m3 of
oil, oil products and ethanol in 2006. During the year, the water-
way terminals handled an average of 350 vessels a month.
The network operated by Transpetro comprises 7 thousand
kilometers of oil and multi-product pipelines. The 44 terminals
have storage capacity for 65 million boe (10.3 million m3).
In order to modernize and extend the network, adjusting it
to the future requirements of both Petrobras and the country as a
whole, the company is engaged in a number of initiatives. One of
these is the Master Plan for Pipelines in São Paulo, covering a total of
27 municipalities, under which the network will be redesigned, keep-
ing it away from more densely populated areas and thus improving
operational safety. The new logistical infrastructure will be inte-
grated with the expansion of Petrobras’ petrochemicals, thermo-
electric generation, refining capacity and natural gas supplies.
With planned investments totaling more than R$ 2 billion,
the plan includes the establishing of new pipeline courses and
the extension of existing ones, the construction of 500 kilometers
of pipeline and the deactivating of 110 kilometers of pipeline
courses and 280 kilometers of pipelines in the Greater São Paulo
metropolitan area. The Guararema terminal is to be expanded and
a new one will be built in Mauá. A total of 28 thousand direct and
indirect jobs will be created by these investments.
The company completed the studies for implementation of
the Ethanol Export Corridor, which will raise the ethanol transpor-
tation potential from the present 1.2 million m3/year to 4 million
m3/year in 2010. The first three projects — part of the plan to invest
US$ 600 million over six years — will connect Replan by pipeline to
Guararema and the Triângulo Mineiro, via Ribeirão Preto, as well as
establishing integration with the Tietê-Paraná waterway, connecting
São Paulo with the country’s mid-western region.
The Transpetro Ethanol Program has aroused the interest
of other countries in Brazil’s experience with the transportation
of ethanol, creating opportunities for developing partnerships in
Latin America, the United States, Europe, Africa and Asia. In 2006,
more than 80 thousand m3 of ethanol were exported to Venezuela,
as a result of a bilateral agreement.
Yet another initiative is the Underground Water Treatment
Program, which provides a logistical response to the growing quan-
tity of water produced by Petrobras’ fields, due to the increased
production, together with the maturing of reservoirs and the tech-
nical methods used to recover the oil. In the area of tank storage, in
order to eliminate logistical bottlenecks, Transpetro is augment-
ing its storage capacity by 500 thousand m3. +
a monthly averaGe of
350 vessels
are handled at the terminals
36 | AnnuAl RepoRt 2006 | petRobRAs
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The admiral Maximiano Fonseca terminal, angra dos Reis, Rio de Janeiro
natural Gas: more Gas PiPelines in 2007
In the natural gas segment, Transpetro transported an average of 34 million m3 per day in 2006. In addition to expanding the system, with the integration of two new delivery points and a new gas pipeline (Dow-Camaçari), the company transferred the operation of its Espírito Santo and Bahia networks to the National Operational Control Center, which operates all the pipelines by remote control.
The company is preparing the way for the integration into the system, in 2007, of 1.8 thousand kilometers of gas pipelines that are under construction. A further 1.6 thousand kilometers of gas pipeline that is on the draw-ing board should come into operation between 2008 and 2011, when the volume of natural gas transported by Transpetro will reach the milestone of 100 million m3 a day, including imported liquefied natural gas (LNG).
The Cabiúnas Terminal (RJ), Brazil’s largest center for the processing of natural gas, will also see its capacity augmented in 2007, from the current 14.9 million m3 to 17 million m3 a day. Two new projects under way at the center will further raise the processing capacity, to 22.4 million m3 a day.
38 | AnnuAl RepoRt 2006 | petRobRAs
The country’s largest network of service stationspeTrobras operaTes in The fuel disTribuTion markeT
Through iTs subsidiary peTrobras disTribuidora,
The markeT leader, wiTh The counTry’s largesT
neTwork of service sTaTions. of The 5,870 peTrobras
service sTaTions locaTed ThroughouT brazil, 638
belong To The company and The oTher 5,232 are run
by dealers represenTing The peTrobras brand.
The revenues of Petrobras Distribuidora in 2006 from prod-
ucts and services came to a total of R$ 47.1 billion — up 8.0% in
relation to the previous year, due to higher sales, which established
a new record in October. The company’s share of the distribution
market reached 33.6% — 0.2 percentage points below the figure
for 2005, as a result of fierce competition in 2006. In the second
half of the year, Petrobras Distribuidora managed to regain market
share and in December accounted for 34.9% of sales.
The leading position in sales of vehicular natural gas (VNG)
is also held by Petrobras Distribuidora. Its market share in 2006
was 23.7%, with the product available at 355 service stations. In
the liquefied petroleum gas (LPG) market, operating through
Liquigás Distribuidora, Petrobras had a market share of 21.7%
— a dip of 0.1% in comparison with 2005.
One of the distinctive features of the network in 2006 was the
increased supply of biodiesel. In line with the company’s strategy of
retaining its position as the consumer’s favorite brand and adding
value for the Petrobras System, the distributor made the product
available at 3,740 service stations all over Brazil. Biodiesel should
Business AreasdisTriBUTioN
Petrobras service station,
Rio de Janeiro
www.petrobras.com.br | AnnuAl RepoRt 2006 | 39
fuel distribution market share in brazil
be available throughout the entire network by June 2007.
The arrival of biodiesel at the pumps reinforced the public
association of Petrobras Distribuidora with virtues such as inno-
vation, quality and social and environmental responsibility. Also
launched in 2006 were Diesel Podium, with its low sulfur content;
the Evolua line of cleaning and protective products; and new lubri-
cants. The distributor also invested in the expansion and modern-
ization of the service stations, bringing them into compliance with
the latest safety and environmental protection standards.
To further please its customers, Petrobras Distribuidora
extended projects such as the “Cartão Petrobras” card, carried
out promotions and trained its attendants, under the “Capacidade
Máxima” program. In terms of its relationship with dealers and
end consumers, the company organized regular visits by commer-
cial representatives and gatherings for the presentation of plans
and strategies, as well as distributing the “Jornal do Revendedor”
newsletter.
Petrobras Distribuidora has a 45.5% share of the direct con-
sumer market, with notable participation in the segments of avia-
tion products (53.5%), asphalt (29.4%) and retail road transporta-
tion (40.4%). During 2006, the company developed new services
to gain customer loyalty in the transport sector.
Since 2005, Petrobras Distribuidora has been investing in
the adaptation of the installations of its distribution network – the
largest in Brazil – to handle biodiesel. Its 56 strategically posi-
tioned bases and terminals ensure ample reach for the placing
of Petrobras products. The network also allows the integration
of transport and storage solutions with service quality, thereby
giving the company a competitive edge. +
network of active service stations
total 5,870
Urban 4,560
Highway 1,282
Maritime 28
own outlets 638
third-party outlets 5,232
convenience stores 740
vng outlets 355
Petrobras distribuidora earns
47.1billion dollars in sales revenues
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Petrobras Ipiranga Shell Esso Texaco Othersdistribuidora
2002
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2005
2006
40 | AnnuAl RepoRt 2006 | petRobRAs
Rising consumption is a reflection of the product’s qualityThe naTural gas markeT conTinues To grow, wiTh
average sales To disTribuTors reaching 38.7 mil-
lion m3/day in 2006 — 7% more Than in The previous
year. This increased consumpTion is driven by fac-
Tors such as The expansion of The logisTics infra-
sTrucTure, The enTry of new large-scale consum-
ers inTo The markeT and a sharp increase in The
naTural gas powered vehicle fleeT. The increase
also reflecTs The consumer’s growing recog-
niTion of The producT’s Technological, opera-
Tional, environmenTal and economic qualiTies.
To supplement domestic production, in order to meet the level
of demand, Petrobras imported an average of 24.7 million m3/day of
natural gas — an increase of 9% in relation to the volume in 2005.
Following its strategy of developing and consolidating the
market, Petrobras set in motion its Plan to Advance the Production of
Natural Gas (Plangás). The supply of domestic gas to the southeast
of Brazil will be augmented in two stages — in the first, up to 2008,
from the current 15.8 million m3/day to 40 million m3/day; in the
second, up to 2010, the volume will reach 55 million m3/day.
To ensure that the increasing level of consumption in the coun-
try is sustainable, Petrobras is preparing the way for its entry into
the global liquefied natural gas (LNG) market as an importer. The
company will set up two floating regasification terminals, one in the
state of Ceará and one in Rio de Janeiro, with respective capacities
of 7 and 14 million m3/day.
a natural gas powered bus, São Caetano do Sul, São Paulo
Business AreasNATUrAL GAs
www.petrobras.com.br | AnnuAl RepoRt 2006 | 41
TRanSPORTaTiOnImplementation of the Natural Gas Basic Transportation Network
(RBTGN) proceeded through 2006. The putting together of a sup-
ply system that is flexible, safe and competitive — a network of
interconnected gas pipelines extending from Fortaleza to Porto
Alegre and from São Paulo to Bolivia — is in alignment with the
development of production in the Campos Basin and the explo-
ration of the company’s offshore blocks, allowing the immediate
channeling of production from new discoveries.
One of the leading RBTGN projects that is under way is the
Northeast-Southwest Interconnection Gas Pipeline (Gasene) —
comprising three stretches of pipeline: Cabiúnas–Vitória
(Gascav), Cacimbas–Vitória and Cacimbas–Catu (Gascac). In
2006, Petrobras closed two financing deals with the Brazilian
Development Bank (BNDES), for the specific purpose company
Transportadora Gasene S.A., which is responsible for the project,
for the total sum of R$ 1.36 billion.
The 131-kilometer stretch in the state of Espírito Santo
(Cacimbas–Vitória) will be operational in early 2007. Work
on the stretch connecting Rio de Janeiro and Espírito Santo
(Cabiúnas–Vitória) began in June and is scheduled to be com-
pleted in October 2007. The Cacimbas–Catu stretch, between
Espírito Santo and Bahia, is at the tendering stage and should be
ready in the second half of 2009.
In the north, construction of the 670-kilometer Urucu–Manaus
Gas Pipeline was started in June and is scheduled for completion in
the first quarter of 2008. In the northeast, the Atalaia–Itaporanga
pipeline, in the state of Sergipe, and the Dow–Aratu–Camaçari pipe-
line, in Bahia, both came into operation. Another three pipelines
– the Carmópolis–Pilar, between Sergipe and Alagoas, Itaporanga–
Carmópolis (SE) and Catu–Itaporanga, connecting Bahia and Sergipe
– should start up in 2008. +
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42 | AnnuAl RepoRt 2006 | petRobRAs
Thermoelectric generation augments integrationpeTrobras has increased iTs parTicipaTion in The
ThermoelecTric energy segmenT, following
a sTraTegy of consolidaTion as an inTegraTed
energy company. The company is involved in The
enTire ThermoelecTric energy generaTing chain,
as well as in The process of commercializaTion.
At an energy auction organized by the National Electricity
Agency (Aneel) in October, Petrobras sold 205 MW produced by its
plants. As a result, the company has secured a stable revenue stream
of R$ 103 million/year, for a period of 15 years, beginning in 2011.
In 2006, Petrobras completed its acquisition of the merchant
power plants, with the purchase of the UTE Mário Lago (formerly
Macaé Merchant). This takeover, along with the acquisitions of
the MPX Termoceará and Eletrobolt power plants, puts an end
to the legal controversy surrounding the consortium contracts
signed in 2001 and 2002, under which the company was obliged
to make contingency payments in regard to taxes, fees, tariffs,
operating expenses, maintenance and investment in the event
that the plants did not earn sufficient revenue. These acquisitions
have reduced expenses and guarantee full receipt of the revenue
from power generation, in accordance with Petrobras’ guidelines
for its participation in the electricity sector.
Petrobras also purchased the UTE Bahia I (31MW), a fuel oil
powered thermoelectric plant, to serve as a generation back-up. With
the same intent, the company closed a contract for the provision of
services by the UEG Araucária (428MW), which also allows for the
efficient allocation of the natural gas, due to its adjusted cycle.
Two thermoelectric plants are under construction —
Termoaçu (RN) and Cubatão (SP) —, within co-generation pro-
jects that are in synergy with Petrobras’ activities in these regions.
Projects are also under way for cycle closure and the conversion of
thermoelectric plants to dual fuel (natural gas and diesel), bring-
ing enhanced efficiency and reliability in the supply of fuel to the
power plants. +
Business AreasENErGY
855 million
liters a yearis the Production tarGet
for biodiesel
www.petrobras.com.br | AnnuAl RepoRt 2006 | 43
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renewable enerGy: PursuinG market leadershiP
Attaining leadership in the domestic production of biodiesel and expanding its ethanol business have become priorities for Petrobras. To this end, the company has developed a variety of activities in the field of renewable energy, with a view to hitting the audacious targets set down in the Business Plan 2007-2011 — during this period a total of US$ 700 million will be invested in renewable sources of energy.
The generation of electricity by wind farms and small-scale hydroelectric plants are other areas in which Petrobras is investing in the field of renewable energy. According to the goals defined in 2006, by 2011 the company will be producing 855 million liters of biodiesel, exporting 3.5 billion liters of ethanol and generating 240 MW of electricity through renew-able sources.Biodiesel In order to attain leadership in Brazilian biodie-sel production and strengthen its position as an integrated energy company, Petrobras threw itself into large-scale production in 2006, by beginning the construction of three plants. Representing a total investment of R$ 227 million, the units, located in Candeias (BA), Montes Claros (MG) and Quixadá (CE), will have a combined annual production capac-ity of around 57 million liters of biodiesel and will be inaugu-rated before the end of 2007.
These undertakings are in alignment with the National Program for the Production and Use of Biodiesel. As from January 2008, it will become compulsory for diesel fuel to have a 2% biodiesel content. In order to obtain the necessary ingredients — soybeans, cotton, castor beans and oil palm fruit, as well as animal fat —, the company is entering into partnerships with entities formed by small-scale farmers, thereby gaining the tax benefits allowed under the “Selo Combustível Social (Seal of Approval for Socially Responsible Fuels)”, granted to biodiesel companies that generate work and income for subsistence farmers.
Petrobras aims to produce 855 million liters of biodiesel a year by 2011. In order to attain this level of production, the company is analyzing some fifteen other projects in various parts of the country, in partnerships with investors ranging from large corporate groups to rural workers’ cooperatives.
Biodiesel provides reduced emissions of greenhouse gases, sulfur and particulates, as well as improving engine per-formance. In addition to the environmental and social benefits, in harmony with the growing use of sustainable sources of energy, this product will hasten the end of diesel imports.etHanol Petrobras’ strategy for its ethanol business is focused on exports, with a view to opening up new markets and developing long-term relationships with the clients, in increasing synergy with the company’s International area. In 2006, earnings from foreign sales of ethanol exceeded US$ 14 million. The volume sold, amounting to more than 80 million liters, helped to consolidate the logistical corridor for the exporting of ethanol from the south-central region, through the Ilha D´Água Maritime Terminal, via the Paulínia Refinery.
Concern over the imbalance between supplies and the growing demand for the product in the first few months of the year led the company, out of a sense of responsibility and commitment to sustaining domestic supplies, to export ethanol only in the second half of the year, when the situa-tion had stabilized and domestic demand was being met. This meant that the export volume was lower than had initially been forecast for the year.
To encourage the consolidation of the international etha-nol market, Petrobras joined the board of the recently formed International Ethanol Trading Association (IETHA) and set up a joint-venture, Brazil-Japan Ethanol (BJE), based in Tokyo, devoted to developing the Japanese market for the product. The company also reached agreements with the Central Energy Fund (CEF), of South Africa, and with Mitsui, of Japan, for exporting ethanol.
Barbados nut cultivation under the “Molhar a Terra”
project, Ceará Mirim, Rio grande do norte
44 | AnnuAl RepoRt 2006 | petRobRAs
aguSTina hulJiCh in the Quality and hse area at the Puerto General san martín petrochemical plant
– santa fé, argentina
OuTlOOk: i hope to keep on learning, so that i can use this knowledge in my work
as an environmental engineer.
“Petrobras is very concerned about health, safety and the environment and this guides its actions. it is a company that helps to improve the quality of life, not only of its employees, but of the general population.”
www.petrobras.com.br | AnnuAl RepoRt 2006 | 45
international Expansion
With a business presence in 19 foreign countries, Petrobras is consolidating its position as an integrated energy company with international presence and leadership in Latin America. The company is involved in the entire chain of activities in the Latin American oil, natural gas and electricity sector, while at the same time augmenting its stake in undertakings in North America, Africa and Asia. The sum of US$ 12.1 billion has been earmarked for investment abroad, representing 14% of the total investment under the Business Plan 2007-2011. Of that amount, 65% will go into Latin America, western Africa and the Gulf of Mexico, all priority areas for Petrobras expansion.
south AmeRicA 50noRth AmeRicA 53
AfRicA 54AsiA 55
46 | AnnuAl RepoRt 2006 | petRobRAs
new business in foreign marketsThe acTiviTies in The inTernaTional Business
area encompass oil and gas exploraTion and pro-
ducTion in 16 foreign counTries — argenTina,
Bolivia, colomBia, ecuador, peru, venezuel a,
mexico, The uniTed sTaTes, angola, equaTorial
guinea, mozamBique, nigeria, Tanzania, iran, liBya
and Turkey. peTroBras is also developing oTher
acTiviTies, including refining and disTriBuTion,
as well as mainTaining represenTaTive offices in
cerTain sTraTegic locaTions.
The strategy for growth abroad provides for the bolstering of
the company’s activities in countries where it is already present,
such as Argentina, while opening up new business fronts in other
markets, such as refining in the USA. In the areas of exploration
and production, the priority regions are the Gulf of Mexico and
Africa, where Petrobras is girding itself to produce oil in deep
and ultra-deep waters off the Niger River Delta, in Nigeria, and
is pursuing exploration opportunities in frontier regions, such as
the ultra-deep waters off the coast of Tanzania.
In refining, the goal is to augment the company’s activi-
ties through investments in the expansion and conversion of the
Pasadena refinery, in the United States, and seeking opportunities
for new refineries abroad. The objective is to add value to the
heavy oil produced by the company, providing the market with a
product mix combining enhanced value and improved quality. To
this end, investments will be focused on the adoption of technol-
ogy that will enable refineries that were originally built to handle
light oil to be able to process heavier throughput.
international Expansion
Fertilizer plant at campana, in the province of Buenos Aires, Argentina
www.petrobras.com.br | AnnuAl RepoRt 2006 | 47
1.27 billion
boE In ProvEn ForEIGn rESErvES, In 2006
inte
rna
tio
na
l Exp
ans
ion
IntErnAtIonAl lIFtInG And rEFInInG coSt(US$ / barrel)
target 2011
2006
2005
2004
2003
2002
cHAnGE In IntErnAtIonAl ProvEn rESErvES (SPe Criteria – million boe)
1,681
2006
2005
352
1,240
89
30
IntErnAtIonAl ProductIon oF oIl, nGl, condEnSAtE And nAturAl GAS (thoUSand boed)
target 2011
2006
2005
2004
2003
2002
Oil, NGL and Condensate Natural Gas
85 246
94 263
96 259
101 243
185383 568
161
169
163
142
3558
23
IntErnAtIonAl ProvEn rESErvES oF oIl, nGl, condEnSAtE And nAturAl GAS(SPe Criteria – million boe)
Oil, NGL and Condensate Natural Gas
803320 1,123
8911,013 1,904
8651,007 1,872
726955 1,681
613657 1,2702006
2005
2004
2003
2002
3.36
Lifting Refining
1.80
1.73
2.901.30
2.601.09
2.461.17
2.080.94
Remaining 2005 reserves
Appropriations
Production in 2006
Contractual revisions, etc.
1,270
48 | AnnuAl RepoRt 2006 | petRobRAs
100%
100%
100%
100%
KH
AK
I 01
KH
AK
I 02
KH
AK
I 03
KH
AK
I 04
Petrobras around the world
Exploration & Production
Refining
Gas
Petrochemicals
Power
Distribution
Representative office
angola
equatorial guinea
nigeria
libya
usa
mexico
venezuela
chile
peru
ecuador
paraguay
colombia
bolivia
uruguay
argentina
great britain
www.petrobras.com.br | AnnuAl RepoRt 2006 | 49
inte
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100%
100%
100%
100%
KH
AK
I 01
KH
AK
I 02
KH
AK
I 03
KH
AK
I 04
equatorial guinea
tanzania
mozambique
turkey
iran
china
singapore
japan
IntErnAtIonAl ProvEn rESErvES oF oIl And condEnSAtE PEr country (SPe Criteria)
22%12%
10%
25.6%
Angola
Argentina
Bolivia
Colombia
Ecuador
USA
Nigeria
Peru
Venezuela
3.8%11.7%
6.4%
7.4%
1.1%
IntErnAtIonAl ProvEn rESErvES oF nAturAl GAS PEr country (SPe Criteria)
5.2%1.5%
64.1%
Argentina
Bolivia
USA
Peru
Venezuela
27.1%
2.1%
50 | AnnuAl RepoRt 2006 | petRobRAs
sOutH AmericAArgentinA As an integrated energy company, Petrobras par-
ticipates throughout the entire value chain for oil and natural gas,
along with electricity generation. The company’s 2006 produc-
tion in Argentina – its highest outside Brazil – attained an average
of 62.1 thousand bpd of oil and NGL and 45.8 thousand boed of
natural gas, making a total of 107.9 thousand boed. Petrobras had
a stake and operated in 17 blocks that are in production and in
10 that are in the exploration phase, and initiated its exploration
of deep waters off the Argentinean coast. The lifting cost was
US$ 4.4 per boe.
In the areas of petrochemicals and fertilizers, Petrobras
owns the Puerto General San Martin, Zarate and Campana plants
and has a 40% stake in Petroquímica Cuyo. The operations in
Argentina are tied in with the southern Brazilian state of Rio
Grande do Sul, where its subsidiary Innova turns out products
such as styrene, polystyrene and UAN.
Petrobras distributes oil products through a network of 719
service stations, which sold 48 thousand bpd of fuels and lubricants
in 2006 and has a 13.8% share of the gasoline and diesel market
and 11.1% of the lubricants market. The number of service sta-
tions operating under the Petrobras banner increased from 457 to
492 during the year. Reflecting the growing brand presence, sales
increased by an average of 2.7%. The company has a 50% stake in
the parent company of Transportadora de Gás Del Sur (TGS), which
owns the country’s largest network of gas pipelines.
In the area of electricity generation, Petrobras owns the
Genelba thermoelectric plant, which uses natural gas, and the Pichi
Picún Leufú hydroelectric plant. It also has a 27.3% stake in Edesur,
the distributor for the central area of Buenos Aires. Petrobras is
negotiating the sale of its equity stake in Transener, the country’s
leading electricity transmission company.
Petrobras has a 34% equity stake in Cia. Mega, which works
with oil products and logistical services. In 2006, this company
sold 1 million 433 thousand tons of ethane, propane, butane
and natural gasoline.
BOliviA The Bolivian production of natural gas for export is
essential to sustaining the growing consumption in Brazil, which
in 2006 imported 24.7 million m3/day. Petrobras sold 7.27 million
m3/day of Bolivian natural gas, representing 23.4% of the total
exported by that country.
In 2006, as a result of the Hydrocarbons Law, introduced
the previous year, the nationalization of foreign assets imposed
significant changes on the sector, with taxation, operational and
financial impacts. Even with the new regulatory framework estab-
lished by the nationalization decree, signed in May 2006, Petrobras
remains the largest oil and natural gas company in Bolivia, and
contributed 22% of the country’s taxation revenue for the year.
The decree tied companies’ continuation in Bolivia to the
signing of new contracts. In its negotiations with the govern-
ment regarding exploration and production activities, Petrobras
reached the following agreements: contracts will be for shared
production, and not for the provision of services; the company
will bear the full cost and risk of all oil operations; payment of
royalties and other government quotas is to be made through
Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), through
which the production is channeled, and amounts to some 80%
of revenue; compensation will be paid by YPFB, to be calculated
based on the recovery of costs, prices, volumes and investments,
net of due taxes.
Moreover, Petrobras retains responsibility for operations in
the San Alberto, Rio Hondo, Ingre and Irenda blocks, ownership
of the assets and rights to the reserves that are to be booked by
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www.petrobras.com.br | AnnuAl RepoRt 2006 | 51
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the company. The contracts, which are still pending approval by
the Bolivian Congress, are valid for 30 years.
The new regulations reduce to 49.9% the proportion
of Petrobras’ stake in the refineries of Gualberto Villaroel, in
Cochabamba, and Guillermo Elder Bell, in Santa Cruz de La
Sierra, which process a total of 39.9 thousand bpd. The company’s
refining activities are now performed as a provision of services.
Negotiations are still under way with the Bolivian government
over the amount of compensation to be paid to Petrobras.
In the area of oil product sales, YPFB has become the only
wholesale distributor. Petrobras has fully withdrawn its EBR
(Empresa Boliviana de Refinación) brand and currently retains
just 26 service stations under the Petrobras name.
With regard to natural gas, in February 2007 it was decided
that no changes would be made in the volumes or in the formula for
calculating the purchase price of natural gas from Bolivia contained
in the present contract between YPFB and Petrobras (GSA). The
company agreed to pay YPFB, at the prevailing international market
prices, for the net hydrocarbon fractions (ethane, butane, propane
and natural gasoline) present in the natural gas effectively delivered
that raise its calorific value to over 8,900 kilocalories (kcal) per m3,
equivalent to 1,000 BTU per cubic foot. YPFB will ensure that the
minimum calorific value of 9,200 kcal/m3 is met, and Petrobras will
study the best way to exploit these components in the future.
In the area of transportation, in addition to its stake in GTB,
operator of the Bolivian stretch of the Bolivia–Brazil gas pipeline,
Petrobras retains its stakes in the Yacuiba–Rio Grande (Transierra)
gas pipeline, as operator, and in the San Marcos gas pipeline.
natural gas plant in san
Alberto, Bolivia
52 | AnnuAl RepoRt 2006 | petRobRAs
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cOlOmBiA In the area of exploration and production, Petrobras has
a stake in 16 contracts — 7 for production and 9 for exploration —,
and is the operator in ten of these. In 2006, the average production
amounted to 16,843 bpd of oil and NGL and 6.25 thousand m3/day of
natural gas, making a combined total of 16,880 boed. One of the high-
lights is the company’s involvement as operator of the Tayrona block,
the country’s only offshore block, in partnership with Exxon and
the state-owned company Ecopetrol. Following a 50% contractual
devolution, the block still covers an area of more than 22,000 km2.
The first wildcat well is to be drilled in 2007. The company has also
formed a consortium with Ecopetrol for the revitalization of the Tibu
field. The investment, which will raise the production from 2,000
bpd to 15,000 bpd, is estimated at US$ 500 million over the next six
years, with the consortium members having the option to withdraw
from the contract at the end of the first or second year, having made
investments of US$ 20 or US$ 40 million, respectively.
cHile Petrobras continues to seek business opportunities in
this country, through a representative office in Santiago that was
opened in 2005. The company sells the lubricant Lubrax here,
with sales amounting to 848 m3 in 2006.
ecuAdOr Petrobras, operating in two blocks, produced 11.9
thousand boed of oil and NGL in the country in 2006. At the begin-
ning of 2007, the company received government approval for the
sale of 40% of its stakes in Block 18, which is in production, and
Block 31, which is in the exploration phase, to the Japanese com-
pany Teikoku. Petrobras is also negotiating with the government
for EIA approval of the development of Block 31.
PArAguAy In 2006, Petrobras entered the segment of oil product
distribution. The company presently owns 131 service stations and
gas plant in the guando field, colombia
www.petrobras.com.br | AnnuAl RepoRt 2006 | 53
45 convenience stores. The network has annual sales of 317 thou-
sand m3 of oil products. Among the assets acquired are installations
for the sale of LPG and the marketing of aviation products.
Peru The company has a stake in six blocks — one of them in
production (Lot X) and the others in the exploration phase. In 2006,
the average production amounted to 12.7 thousand bpd of oil and
1.8 thousand boed of gas, making a total of 14.6 thousand boed.
uruguAy Petrobras entered the oil product distribution seg-
ment, taking over 89 service stations racking up annual sales of
330 thousand m3 of oil products, in addition to maritime prod-
ucts, asphalt and aviation products. The company is also involved
in the distribution of natural gas, in the province of Montevidéu
and in the interior of the country, selling a total of 120 thousand
m3/day of gas.
venezuelA The new legal framework for the country’s oil
industry introduced a new contractual model for the activities
of companies operating mature fields under a provision of services
contract. As from April 2006, the fields in this country operated
by private national or foreign companies under this type of con-
tract will be operated by mixed companies under the control of
Petróleos de Venezuela S.A (PDVSA), which will have a 60% stake.
Petrobras, which operated the Oritupano-Leona, Acema, Mata
and La Concepción fields, became a partner in the corresponding
mixed companies, with stakes ranging between 22% and 36 %.
Petrobras continues to operate the Moruy II block, in the Gulf
of Venezuela, for the exploration of natural gas. Moreover, the com-
pany is studying a partnership with Petróleos de Venezuela (PDVSA)
for the production of extra-heavy oil from Carabobo I, in the Orinoco
Strip; and for the production of natural gas in Mariscal Sucre, in the
Venezuelan sector of the Caribbean. The agreements also embrace
studies for the setting up of a mixed company to produce oil from five
mature fields, onshore, in the Oriente and Maracaibo basins.
nOrtH AmericAunited stAtes The company has stakes in 302 blocks within
the American sector of the Gulf of Mexico, and is the operator in
149 of them. In an auction held in September, Petrobras secured
the greatest number of blocks – 34 –, at a cost of US$ 45 million.
The company has begun exploratory work, in the extreme
west of the Gulf of Mexico, to test new geological possibilities.
The first well drilled indicated the presence of natural gas, but the
thickness of the reservoir was not sufficient to make it commer-
cially viable. Nevertheless, the result demonstrated the potential
of the area, where at least one more well will be drilled in 2007.
Petrobras’ average production in the Gulf was 4.0 thousand
boed, below the forecast for the year, largely due to the effects of
the hurricane season, towards the end of 2005. Normal production
was restored only in August 2006.
In ultra-deep waters, the company managed to obtain a
larger stake in the discoveries of Cascade and Chinook, becom-
ing the operator for the two projects. The production, with start-
up scheduled for 2009, will make use of a Floating Production,
Storage and Offloading (FPSO) platform ship. Putting into effect
a project of this kind, embracing new technology, represents a
landmark in the American oil industry.
In deep waters, in the Garden Banks Quadrant, Petrobras
pushed ahead with the development of the Cottonwood field, in
which it has assumed full control, having bought out its partner’s
20% stake. Production began in February 2007.
At the Pasadena Refinery, in Texas, in which the company
has a 50% equity stake, studies are proceeding for the doubling
In Texas, the company has a 50% equity stake in the Pasadena refinery and is conducting studies for the doubling of its present 100 thousand bpd capacity and the installation of units for the processing of heavy oils, at an estimated investment of US$ 2 billion.
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54 | AnnuAl RepoRt 2006 | petRobRAs
of the processing capacity, from the present 100 thousand bpd,
and the installation of units for the processing of heavy oils. The
investment is estimated at US$ 2 billion.
mexicO Petrobras is participating, in partnership with Teikoku, of
Japan, and Diasvaz, of Mexico, in two contracts for the provision of
multiple services to Pemex, in the Cuervito and Fronterizo blocks.
The services include exploration, production development and
production. Petrobras has a 45% stake in each of these contracts.
During 2006, 12 wells were drilled and the company
obtained ISO 14001 and OHSAS 18001 certification of the process
of “development, infrastructure and maintenance in the operation
of fields for the production of non-associated gas”.
AFricAnigeriA The Agbami and Akpo projects — giant fields in the
Niger Delta — continue to be implemented, with start-up sched-
uled for 2008. Production at Agbami should attain 250 thousand
bpd, the company’s part being 37 thousand bpd. Akpo will pro-
duce 185 thousand bpd, with Petrobras’ share amounting to 36
thousand bpd. The company has already invested US$ 930 million
in the projects, of a forecast total of US$ 1.9 billion.
In Block OML 130, in which it has a 16% stake, Petrobras
received an indemnity of US$ 354 million from the Nigerian com-
pany South Atlantic Petroleum (Sapetro), which sold its stake
(45%) to China National Offshore Oil Company (CNOOC). This
compensation, provided for in the contract, corresponds to 50%
of the investments made by the company, which will be respon-
sible for 20% of the future investment. The existence of significant
accumulations of oil in the block has been confirmed, following
the drilling of four wells at the Egina hub. Testing of the field’s
commercial viability will be carried out in 2007.
As the operator of Block OPL 324, in the Gulf of Guinea,
Petrobras drilled a 6,091 meter well in 2,670 meters of water
— a new record for the Gulf of Guinea — , but without finding
hydrocarbons. The company expanded its activities in the Gulf
of Guinea, strengthening its presence in deep waters off the
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17%PetrOBrAs’ stAke in
the Zambezi Delta block, the company’s first investment
in mozambique.
6,091 meters, A lOcAl recOrd.
that is the depth of the well drilledby petrobras in the Gulf of Guinea,
in 2,670 meters of water.
www.petrobras.com.br | AnnuAl RepoRt 2006 | 55
tAnzAniA Petrobras completed the seismic surveying of blocks
5 and 6, in ultra-deep waters of the Máfia Basin, having signed the
contract for Block 6 in December. The company has full rights over
the blocks and, depending on the seismic analysis and technical
and economic evaluation, could take on partners, while working
as the operator. The company’s presence in Tanzania reinforces its
position at the frontier of exploration off the east coast of Africa.
Petrobras has 20.2 thousand km2, in ultra-deep waters, under full
concession and operation rights.
mOzAmBique Petrobras bought a 17% stake in the Zambezi
Delta block, off the coast of Mozambique, in its first opportunity
for investment in this African nation. The commitments under-
taken provide for the acquisition of 2D seismic data and the drill-
ing of a well in 2007. Petrobras’ effective entry into the consortium
is still awaiting local government authorization, which ought to
be granted in 2007.
AsiAirAn In November, the company started drilling the first of
two exploration wells in the Tusan block, in shallow waters in
the south of the Persian Gulf. Petrobras is the operator, holding
a 100% stake, according to a contract closed in 2004 with the
National Iranian Oil Company (Nioc).
turkey Petrobras is in a partnership with the Turkish state-
owned company TPAO for exploration and production in two
Black Sea blocks with potential for holding large reserves — the
Kirklarelli block, in the western part of the Turkish sector, under
1,200 meters of water; and the Sinop block, to the east, with a
depth of 2,200 meters. +
Petrobras’ office in nigeria
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West African coast. With a 45% stake, Petrobras is the operator
of Block OPL 315, along with partners Statoil, of Norway, and
Ask Petroleum, of Nigeria. Studies are in progress to place the
block in its regional geological context, with a view to drilling
the first exploration wells.
In support of the use of ethanol as a fuel in this country,
Petrobras continued its negotiations with the Nigerian National
Petroleum Corporation (NNPC) to supply the product. The
accords include the providing of technical support for adding
the product to the country’s gasoline.
AngOlA Taking a stake in four more contracts, Petrobras
brought its total assets in this country at the end of 2006 to six —
among them, Block 2 of the Lower Congo Basin, where the com-
pany produced 5.4 thousand bpd. In Block 34, despite not finding
oil in two wells that have been drilled, technical analyses have led
to the conclusion that deeper geological layers present good pros-
pects, and therefore the exploration deadline has been extended,
with the drilling of another well planned for 2007. Petrobras is the
operator, for the first time in Angola, in the new exploration blocks
6, 18/06 and 26, and is a partner in Block 15/06.
equAtOriAl guineA In negotiations with the government,
Petrobras has extended for another two years the contract to
explore Block L, with no obligation to drill an exploration well.
liByA The company proceeded with its exploration of Area 18 in
the Libyan sector of the Mediterranean. Partnered by Oil Search
Limited, of Papua New Guinea, Petrobras is the operator, with a 70%
stake, and has a contract for the sharing of the production with the
state-owned company National Oil Company (NOC). In the event
of exploration success, NOC will assume 51% of the investment.
56 | AnnuAl RepoRt 2006 | petRobRAs
FáBiO lugAtO de sOuzAEquipment operator at the Guanabara
bay center for environmental protection.
OutlOOk: My future is already determined; I’m going to give my 10-year
old daughter a better life.
“Information about preserving the environment should be made available to everybody from an early age, at school. this is the biggest environmental problem today. Petrobras invests heavily in technology and environmental protection.”
www.petrobras.com.br | AnnuAl RepoRt 2006 | 57
Social and Environmental Responsibility
Petrobras has broadened its commitment to the reduction of social inequality, envi-ronmental conservation and ecological efficiency. The first Latin American company to join the UN Global Compact, in 2003, Petrobras made further advances in its alignment with the ten principles of the compact — which address issues such as human rights, working conditions, the environment and fighting corruption — when in 2006 it joined the Council of the Global Compact and assumed the vice-presidency of the Brazilian arm. Other triumphs in the area of Social and Environmental Responsibility were the company’s inclusion in the Dow Jones Sustainability Index (DJSI) and Bovespa’s Corporate Sustainability Index (ISE). Under the former, Petrobras has been recognized as one of the world’s most sustainable companies, among 13 oil and gas companies worldwide and just 6 Brazilian companies. Inclusion in the ISE, in addition to emphasizing the company’s commitment to sustainability, also expanded its investor base, by attracting those that place a premium on the criteria of social and environmental responsibility when compil-ing their investment portfolios.
sustAinAbility indices 58HumAn ResouRces 60
HeAltH, sAfety And tHe enviRonment 65sponsoRsHip 72
58 | AnnuAl RepoRt 2006 | petRobRAs
global Compact, dJSi (NYSe) and iSe (bovespa)Because of its socially and environmentally
responsiBle performance, petroBras was selected
in septemBer for the dow Jones sustainaBility
index (dJsi) – a yardstick for investors who are
concerned aBout social and environmental
responsiBility, provided By the new york stock
exchange. in Brazil, since decemBer, the compa-
ny’s shares have Been included in the corporate
sustainaBility index (ise) of the são paulo stock
exchange (Bovespa). the company’s inclusion in
these indices is recognition of petroBras’ com-
mitment to ideals such as environmental equi-
liBrium, social Justice, economic efficiency and
good corporate governance.
Petrobras made further advances in its alignment with
the ten principles of the United Nations (UN) Global Compact,
addressing themes such as human rights, working conditions, the
environment and fighting corruption. In 2006, the company joined
the Compact’s Council and assumed the vice-presidency of the
Brazilian arm of this initiative. This participation is an extension
of the company’s pioneering attitude, in voluntarily signing up to
this global agreement, back in 2003, driven by its commitment to
the reduction of social inequality, environmental conservation
and ecological efficiency.
In December, the Executive Board gave approval to sup-
porting the Extractive Industry Transparency Initiative (Eiti), as
Social and environmental ResponsibilitySUSTAINABILITy INDICES
www.petrobras.com.br | AnnuAl RepoRt 2006 | 59
Petrobras has been a member of the Eiti International Advisory
Group since 2005. In January 2007, the company joined the World
Business Council for Sustainable Development (WBCSD), a coali-
tion of 180 international corporations that are dedicated to sus-
tainable development.
Petrobras’ international involvement also extended into
other forums. The company joined the ISO 26000 committee,
as the representative of Brazil, which is leading, together with
Sweden, the preparation of international rules for social respon-
sibility, to be issued in 2008. Within Arpel (Regional Association
of Oil and Natural Gas Companies in Latin America and the
Caribbean), where it already presides over the Corporate Social
Responsibility Committee, the company has joined the working
group for Relations with Indigenous Peoples.
Another accomplishment by Petrobras was to pick up three
of the five prizes awarded at the International Pipeline Conference
& Exhibition (IPCE), one of the most important global events in
the area of pipeline transportation, held in Canada. Winner of the
main prize, the “Agricultura Familiar em Faixa de Dutos (Family
Subsistence Farming in the Pipeline Strip)” project has become a
model around the world in terms of community relations.
The company was also awarded the “Selo Pró-Eqüidade de
Gênero (Pro Gender Equality Seal)” 2007 by the federal govern-
ment’s Special Secretariat for Women’s Issues (SPM), for promot-
ing gender equality. The Petrobras Gender Commission saw its
mandate extended, becoming the Commission for Diversity.
At the international level, the company chose as the focus
of its social activities the issues of the Rights of Children and
Adolescents. In addition to this principal line of support, the
Business Units are able to define other priorities abroad, in accor-
dance with local needs in a regional context. +
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InclusIon In ThE DJsI sPoTlIGhTs
PETroBras as onE of ThE worlD’s
13 MosT susTaInaBlE
oIl & Gas coMPanIEs
the hybrid environmental robot “Chico Mendes”, developed by the Cenpes
Robotics Lab, performs environmental monitoring of the strip of land in
the amazon region where the Coari-Manaus gas pipeline is to be installed
60 | AnnuAl RepoRt 2006 | petRobRAs
extra staff taken on to sustain company expansionthe most recent version of the strategic plan
2015 singles out human resources as one of the
key factors in the implementation of the compa-
ny’s strategies. 2006 saw the consolidation of the
hr strategic proJect, which will contriBute to
attainment of the corporate targets for 2011. the
challenge is “to Be an international Benchmark
for the energy sector in personnel management,
with the employees as its most precious asset.”
Code oF ethiCSThe Petrobras System’s Code of Ethics has been revised, by means
of a transparent and participative process that involved the clients,
suppliers, executive board, board of directors and workforce of
the company’s various organizational units, with the aim of bring-
ing it into alignment with the values specified in the Strategic
Plan, the prevailing business context and the requirements of the
Sarbanes-Oxley Law. The adopted themes were those of the Ethos
Institute’s Corporate Social Responsibility Indicators.
adMiSSioNSIn order to sustain the increasing expansion of the company’s activi-
ties and areas of operation, public selection processes have been
systematically carried out, in order to build the right permanent
staff to meet the needs of the Strategic Plan. During 2006, a total
of 8,539 new employees were taken on. As a result, the company’s
Social and environmental ResponsibilityHUmAN RESOURCES
Schist processing unit at São Mateus do Sul, Paraná
www.petrobras.com.br | AnnuAl RepoRt 2006 | 61
So
cia
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| H
um
An
Re
so
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ce
s
PETroBras sTaff PEr BusInEss arEa
Downstream
International Business area abroad
International Business area Brazil
Subsidiaries
Senior Management support
Corporate support
R&D
Gas & Energy
E&P
363
12,999
6,857
515
7,454
20,585
1,3121,814
10,367
aDMIssIons In 2006
PETroBras sTaff
2006
2005
2004
2003
2002
suBsIDIarIEs – nuMBEr of EMPloyEEs
Transpetro
Petroquisa
Petrobras Distribuidora
Refap S.A.
2,910
111
3,691
742
8,006
Parent company
Transpetro
Petrobras Distribuidora
Refap S.A.
Petroquisa7
31
44
451
47,955
6,857 7,454
40,541
6,166 7,197
39,091
5,939 7,007
36,363
5,810 6,625
34,520
6,328 5,875
Parent company
Petrobras abroad Subsidiaries
8,539new hirings through public selection processes
62 | AnnuAl RepoRt 2006 | petRobRAs
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| H
um
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s
permanent staff has steadily increased, from 46,723 in 2002 to
62,266 at the end of 2006. The total number of employees, including
the subsidiaries in Brazil and the companies abroad, grew by 15% in
2006. Among the companies abroad, the increase was 11%.
ReMuNeRatioN PoLiCYThe personnel expenses at the parent company amounted to
R$ 7,337 million, based on the fixed remuneration, which com-
prises salaries, extras, bonuses and the respective payroll taxes.
The variable remuneration includes profit and results shar-
ing schemes, which are linked to the achievement of corporate
targets, so as to stimulate the employees’ commitment to the goals
of the Strategic Plan. As in previous years, the employees received
their allocations in relation to the 2005 profits and results, divided
in two payments, one in January and the other in July.
1.0 0.4 0.71.0 0.4 0.6
Basic education Secondary education
Kindergarten Child supervision Day-care centers
54.054.5 59.2
24.025.2 29.7
20.019.5
16.8
nuMBEr of EMPloyEEs aBroaD
Angola
Argentina
Bolivia
Colombia
USA
Libya
Nigeria
Paraguay
Uruguay
5,128 2114164274
84115
284116
EDucaTIonal allowancE(R$ million)
2006
2005
2004
www.petrobras.com.br | AnnuAl RepoRt 2006 | 63
eduCatioNaL beNeFitSThe educational benefits paid by the company are of a supple-
mentary nature, in the form of an allowance to complement the
beneficiary’s own payments for these services, which comprise
day-care centers or child supervision, kindergarten, basic educa-
tion and secondary education. The corresponding cost amounted
to R$ 107 million, including taxes.
heaLth CaReThe Multidisciplinary Health Care Scheme, covering current and
retired employees and their dependents, made a total of 112 thou-
sand attendances, through a network of 21 thousand accredited
establishments throughout Brazil, including hospitals, laborato-
ries and dental and medical offices and clinics, including special-
ized areas such as psychology and phonoaudiology. The net cost
to the company of the medical appointments, examinations and
internments was R$ 510 million.
Under the Collective Labor Agreement, Petrobras has taken on
the commitment to implement a Pharmacy Benefit, which is to be
added to the range of benefits already provided by the company.
PeNSioN FuNdIn 2006, Petrobras presented a proposed new Supplementary
Pension Model, the fruit of the combined efforts of the company,
Petros and the employee representatives. The proposal aims to
stabilize the financial situation of the existing Petros Plan, solv-
ing the structural problems and providing it with a sustainable
future, as well as providing a new supplementary pension scheme
to employees who do not have one.
The new supplementary pension scheme, which is close to
approval by the official bodies, is of the variable or mixed con-
tribution kind, purely for pension purposes, with defined risk,
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TraInInG In 2006
health promotion center at the Petrobras headquarters, Rio de Janeiro
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guaranteed minimum benefit, a lifetime income option and con-
tribution defined annually by the participant.
CoLLeCtive LaboR agReeMeNt The ongoing process of negotiations with the union bodies aims to
align the employees’ expectations with those of the company, thus
facilitating the putting together of a Collective Labor Agreement
that is satisfactory to all parties.
In 2006, this process took as its basis the Collective
Agreement signed in 2005, which is valid for two years, with the
exception of the economic clauses. These were the focus of the
negotiations between Petrobras and the employee representatives,
which led to an adjustment of 2.80%, making up for losses due to
inflation, as measured by the ICV-Dieese index, plus a collective
increase of one level on the salary scale and a gratuity payment
equivalent to 80% of monthly remuneration.
CaReeR PLaNAs part of the process of adjusting the career plan structure to meet
the challenges of the Strategic Plan 2015, the company approved
the new structure for middle level employees. Technical stud-
ies are proceeding regarding the plan for upper level employees,
as well as for defining job descriptions and values and the rules
governing career progress.
PRoFeSSioNaL tRaiNiNgThe Petrobras University, devoted to the education and training
of the company’s technical and administrative staff, had a total
of 2,469 new employees enrolled in its training program during
2006. Based on the results it has achieved, the Petrobras Training
Program was chosen as one of the five finalists in the Petroleum
Economist Awards 2006, in the category Best Educational Program
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for Young People in the Energy Industry.
During the year, the Petrobras University had 2,275 people
enrolled on its project management development and special-
ization courses, which, added to all the other courses on offer,
brought total enrollments to more than 50 thousand.
Petrobras invested R$ 302 million, over the course of 2006,
in human resources development, and the total amount of training
provided came to 5.7 million man-hours.
CoRPoRate CuLtuReAlignment between the corporate values laid down in the
Strategic Plan and those embedded within the culture of the
organization is extremely important to the attainment of the
company’s objectives.
To this end, discussions were initiated to disseminate
and expand upon the results of the cultural analysis carried out
during the period 2004/2005. This study identified the charac-
teristic traits of the Petrobras corporate culture — its essential
values, as well as tracing newly emerging values within the com-
pany environment. +
www.petrobras.com.br | AnnuAl RepoRt 2006 | 65
a quality agenda through to 2015the management of health, safety and the
environment (hse) at petroBras aims to consoli-
date hse considerations as values that are intrin-
sic to the company’s planning and management
processes. the company’s hse policy, laid out in the
strategic plan, contains 15 corporate guidelines,
approved By the executive Board, which have Been
expanded into standards at various different lev-
els, all compiled in a management handBook.
These guidelines orientate the development and implementa-
tion of corporate action plans and specific plans for the Business and
Service Units, so that the HSE policy objectives will be met at all levels
of the company. The visible commitment of the senior management
and professional training are also among the issues addressed by the
corporate guidelines. The senior management, executive managers or
general managers participated in 1,143 HSE audits during 2006. This
involved field trips to the operational front lines in order to observe the
activities and correct any errors or omissions. The CEO or directors
participated in 28 of these visits.
Petrobras’ strategic agenda includes the Strategic Project
for HSE Quality, which aims to ensure that, by 2015, the company
has attained performance levels equivalent to those of the best
companies in the world’s oil and gas sector, by means of corpo-
rate action across six focus areas: Integrated HSE Management;
Ecological Efficiency in Operations and Products; Prevention of
Accidents, Incidents and Failures; Health of the Workers; Readiness
for Emergencies; and Minimizing Remaining Risks and Exposure.
Petrobras invested R$ 3.21 billion in HSE during 2006.
Social and environmental ResponsibilityHEALTH, SAfETy AND THE ENvIRONmENT
Community vegetable gardens along the strip of land covering pipelines in Nova iguaçu, Rio de Janeiro
66 | AnnuAl RepoRt 2006 | petRobRAs
Of this total, R$ 1.77 billion was directed to programs, projects and
other activities in the area of safety; R$ 1.20 billion to the environ-
mental area, and R$ 238 million into health. These amounts do not
include spending on the Multidisciplinary Health Care Scheme
nor the sponsorship of environmental programs and projects
developed by third sector organizations.
Part of this spending — R$ 850 million — was channeled
through the Program for Quality in Environmental Management
and Operational Safety (Pegaso), for the purpose of eliminating
the risks and exposure in the company’s installations and activi-
ties. This initiative — one of the most important of its kind in the
industry — has absorbed investments and operating expenses
amounting to R$ 10.49 billion since 2000.
Pegaso also includes expenditure of R$ 373 million by
Transpetro, of which R$ 90 million was allocated to the Pipeline
Integrity Program and invested in the inspection, testing, appraisal,
repair and restoration of oil and gas pipelines.
The implementation of HSE policy at Petrobras is overseen
by the HSE Management Evaluation Program. In 2006, apprais-
als were conducted at 27 operational units in Brazil, Argentina,
Bolivia, Venezuela and Colombia, representing 96% of the total
appraisals scheduled for the period.
These appraisals are based on the company’s corporate
guidelines and the ISO 14001 and OHSAS 18001 standards, which
have certified the health, safety and environmental management
systems at 160 installations in Brazil and a further 20 abroad,
representing approximately 85% of the certifiable installations
in Brazil and 91% of those located abroad.
oPeRatioNaL SaFetYPetrobras continues to cut down the Frequency Rate of Injuries
resulting in Time Off work (TFCA) and the Fatal Accident Rate
frEquEncy raTE of InJurIEs rEsulTInG In TIME off work (Tfca)(Compound TFCA)
1.53
1.23
1.04
0.97
2011
2006
2005
2004
2003
2002
average 2005 OGP
average 2005
API
average 2005
ARPEL
0.5
0.97
1.20
2.40
0.77
Number of accident victims requiring time off work per million man-hours of exposure to risk, covering the company’s own employees and outsourced workers.Sources: OGP – Oil and Gas Producers – Safety performance indicators – 2005 dataAPI – American Petroleum Institute – 2005 survey of petroleum industry occu-pational injuries, illnesses, and fatalities summary reportArpel – Association of Oil and Gas Companies in Latin America and the Caribbean – Accident statistics for the oil and gas industry in Latin America and the Caribbean 2005
training with oil containment and absorption equipment in the Campos basin, Rio de Janeiro
Maximum Limit
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(TAF), to levels comparable with those of the international oil
and gas sector benchmarks. The TFCA of 0.77 recorded in 2006
is below the ceiling of 0.81 that had been set for the year.
The number of fatalities was down in relation to the previous
www.petrobras.com.br | AnnuAl RepoRt 2006 | 67
nuMBEr of faTalITIEs
2002 2003 2004 2005 2006
Employees
Outsourced Workers
Total
1
89
1515
0
1615
19
16
3
18
3
21
faTal accIDEnT raTE (TAF)
2006
2005
2004
2003
2002
average 2005 OGP
average 2005
ARPEL
6.29
4.57
3.30
2.81
3.50
4.50
1.60
Number of fatalities per 100 million man-hours of exposure to risk, covering the company’s own employees and outsourced workers.
year. The company gives special attention to this number, as the cor-
porate target for this type of incident is zero. This reduction in the
number of injuries and fatalities occurred at the same time as the
company’s activities are augmenting — the total number of man-
hours of exposure to risk increased from 533 million to 564 million.
eNviRoNMeNtActivities in 2006 in the area of environmental responsibility
were related mainly to controlling atmospheric emissions, water
resources, liquid effluents and waste; the appraisal and monitor-
ing of ecosystems; the recuperation of affected areas and ensuring
that the company’s installations and operations are in compliance
with the legal requirements.
eMiSSioNSThrough its System for Controlling Atmospheric Emissions
(Sigea), Petrobras monitors the principal greenhouse gases –
3.21 billion
rEaIs InvEsTED In hsE
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carbon dioxide, methane and nitrogen monoxide – that are emit-
ted as a result of its activities. This monitoring is extended also
to carbon monoxide, sulfur and nitrogen oxides, volatile organic
compounds and particle matter.
In 2006, Petrobras introduced the indicator Prevented
Emissions of Greenhouse Gases, in order to monitor the results
of its efforts to reduce emissions of these gases in its operations.
The company is committed to the 2011 goal of preventing the
emission of 3.93 million tons (CO2 equivalent) of greenhouse
gases. Between 2006 and 2011, the emission of a total of 18.5
million tons of CO2 equivalent will have been prevented.
eNeRgY eFFiCieNCY
The In-House Energy Conservation Program is responsible for
the development, coordination and implementation of activities
related to energy efficiency, promoting a proportional reduction
in the flaring off of fossil fuels and, consequently, of the emission
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of CO2, one of the principal greenhouse gases.
In order to meet the established targets for the reduction of
energy consumption and emissions, in addition to the projects
mentioned, energy analyses have been carried out at the company’s
industrial units, and this will be extended to the business units that
will operate future production platforms, so that the basic designs
can also be developed with a view to energy efficiency.
The program’s activities brought about a saving of approxi-
mately 2,500 barrels of oil equivalent a day in 2005. The gain is
not just economic, but also environmental, since the company
reduced its CO2 emissions, through a proportional decline in
electricity consumption and the flaring off of fossil fuels.
WateR ReSouRCeS aNd eFFLueNtSIn 2006, Petrobras approved the corporate standard for the man-
2011
2006
2005
2004
2003
2002
EMIssIons of sulfur oxIDE – sox (ThousAnd Tons)
156.7
148.5
140.1
135.7
137.2
131.0
Maximum Limit (not including chartered vessels)
n.a.
12.3
13.6
15.9
21.0
Chartered vessels
0.77TfCA; compatible with international quality benchmarks
GrEEnhousE Gas EMIssIons(million Tons oF Co2 equivAlenT)
30.43
39.09
44.41
51.56
2006
2005
2004
2003
2002
Total emissions directly or indirectly connected with Petrobras’ operations in Brazil and abroad.
50.43
www.petrobras.com.br | AnnuAl RepoRt 2006 | 69
agement of water resources and effluents, embracing the reutiliza-
tion and optimal use of water in its operations and the protection
of bodies of water within its areas of influence.
The drawing up of detailed statements of water resources for
the refineries and fertilizer plants is one of the activities aligned
with the requirements of the standard. The studies, which include
assessing the tolerance capacity of the water bodies that receive
effluents from these units, should be completed in 2007.
In the area of Exploration & Production, one project is aim-
ing to make the Campos Basin platforms self-sufficient in fresh
water, which will reduce the volume of water taken from the River
Macaé by 1.1 thousand m3/day. Another initiative, concluded in
2006, promotes the reinjection of the water from oil production
at the Fazenda Belém field, thus reducing by 2 thousand m3/day
the amount of water removed from the Açu aquifer, the principal
water reservoir serving that semi-arid region.
SoLid WaSteThe company produced 315 thousand tons of hazardous solid
waste, in Brazil and abroad, in 2006. During this period, 268 thou-
sand tons of hazardous waste was treated or disposed of in an
environmentally appropriate manner.
bioLogiCaL diveRSitYIn 2006, Petrobras approved the corporate standard for control-
ling the potential impact of the company’s activities on biological
diversity, based on the strategic commitment to apply the principles
of environmental responsibility in all stages of its projects, including
planning, construction, operation and decommissioning.
The standard envisages the definition of the protected or envi-
ronmentally sensitive areas that are influenced by the company’s
operations, with a view to protection, mitigating the impact on bio-
logical diversity and recuperation of these areas. To this end, backed
by an investment of around R$ 9 million, a study has been under way
since March 2005 to make an assessment of the various ecosystems of
the Guanabara Bay area, in Rio de Janeiro. Approximately 75% of the
work of characterizing the fauna around the bay, included in the study,
has already been completed. In the Amazon region, studies carried
out alongside universities and research institutes assess the potential
impact of Petrobras’ operations on the surrounding ecosystems.
eMeRgeNCY ReadiNeSSPetrobras’ strategy for dealing with emergencies is based upon the
integration of the contingency resources of its business units, with
vessels dedicated for this purpose operating along the Brazilian
coastline, and the company’s Environmental Protection Centers
(CDAs). The CDAs operate around the clock, staffed by trained
professionals and equipped to react quickly and effectively to any
situation. Their resources include special vessels, oil collectors
and contention and absorption barriers.
There are nine CDAs located in Brazil, comprising six out-
posts in the north, one in Natal, one at the Mocanguê naval base,
in Rio de Janeiro, and one in Uberaba. This network of protection
against the potential repercussions of accidents, which can also
count on the resources of public agencies and local communities,
has emergency contingency plans covering the whole country and
is regularly tested by means of simulated exercises. During 2006,
seven regional exercises were conducted, with the participation
of the Brazilian navy, the Civil Defense Corps, the fire brigade, the
police, environmental bodies, local governments and communi-
ties. Two exercises were also conducted at units in Argentina.
The company has three vessels for dealing with emergencies that
operate around the clock in the Guanabara Bay, off the coast of the state
of São Paulo and off the coast of the states of Sergipe and Alagoas.
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Reforestation project at Pontal do Paranapanema, São Paulo
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SPiLLSThe volume of oil and oil product spills in 2006 remained at the
same level as in 2005, an excellent result by the standards of the
world oil and gas industry. The volume was below the ceiling of
475 m3 that had been set for the year. The 2011 ceiling for oil and
oil product spills has been set at 601 m3, taking account of the
forecast increase in production and the addition to this indica-
tor of potential new sources of leakages, such as the tank trucks
working for Petrobras Distribuidora.
heaLthThe promotion by Petrobras of good health and the prevention
of illness among the workers is based on the concept of integral
health — inside and outside the workplace. The company’s pro-
grams and other endeavors in this area are guided by the epide-
miological analysis of information on, for example, mortality,
oIl anD oIl ProDucT sPIlls (m3)
197
276
530
269
2011
2006
2005
2004
2003
2002
601
Spills exceeding 1 barrel (0.159 m3) that have affected the environment beyond the installation perimeter.
293
Maximum Limit
Simulation drill at Repar; evacuation of the local community near the refinery in araucária, Paraná
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morbidity and the prevalence of risk factors.
This systematic approach has yielded positive results. In
2006, the indicator Proportion of Time Lost (PTP), based on the
employees’ time off work due to illness or accidents, continued the
downward trend of recent years. The figure was below the ceiling
that had been established for the year, of 2.34. The ceiling for 2011
has been set at 2.18.
Non-occupational illness, unrelated to work activities, pre-
dominated among the reasons for employees’ time off work in
2006, as in previous years. This explains the emphasis given by the
company to the Program for Health Promotion, which encourages
employees to adopt healthy lifestyles. Petrobras also motivates and
monitors the participation of all its employees in the annual medical
check-ups and encourages them to follow the recommendations
of the doctors.
tiMe oFF WoRkThrough its Occupational Hygiene and Ergonomics Program, the
company is able to identify, control and eliminate occupational haz-
ards at all its units. The procedures to ensure the health of employ-
ees on trips, which include check-ups prior to traveling and medical
observation following their return, are also being standardized.
In order to provide a better standard of health for its workers
and their families, Petrobras has trained 500 health professionals,
through the São Caetano do Sul Center for the Study of Physical
Aptitude, to promote physical activities among its employees, fol-
lowing Health Ministry guidelines.
The company also has a corporate policy for addressing HIV/
aids. In trying to further the well-being of all its workers, without
distinction as to background, race, gender, creed or sexual prefer-
ence, Petrobras collaborates in an affirmative manner to promote
an appropriate attitude to this illness. Moreover, both in Brazil and
abroad, the company maintains relations with government and
non-government organizations devoted to monitoring, assistance
and research with regard to HIV/aids. +
At the São Caetano do Sul Center for the Study of Physical Aptitude, Petrobras trained 500 health professionals to help promote physical activities among its employees, following Health ministry guidelines.
ProPorTIon of TIME losT (pTp)
3.01
2.88
2.57
2.48
2011
2006
2005
2004
2003
2002
2.18
Percentage of the total potential working hours lost due to medically autho-rized time off (for illness, occupational or otherwise, or accidents in the work-place); counting only the company’s own employees.
2.06
Maximum Limit
rEason for TIME off work
91.89%
4.41%3.59%
0.06%0.04%
Non-occupational illness
Occupational illness
Workplace accident
Accident unrelated to work
Accident on the way to or from work
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76 new projects were chosen for sponsorshipSoCiaL PRoJeCtS The Petrobras Zero Hunger Program has been running for three
years and during this time has invested a total of R$ 366 million
in projects devoted to generating employment and income, to
education and professional training, and to protecting the rights
of children and adolescents. In the 2006 public selection process,
76 projects were chosen for sponsorship, from a total of 4,517
registered. These initiatives, synchronized with public policies for
the eradication of poverty and hunger, also seek to promote racial
and gender equality and concern for the handicapped. During
2006, R$ 175.8 million was invested in the program.
One of the program’s projects is “Molhar a Terra (Irrigate the
Soil)”, under which inactive oil wells are used to supply drinking
water to communities in the country’s semi-arid region. Another
activity is “Mova Brasil (Mobilize Brazil)”, which, in a joint edu-
cational and work-related effort, in partnership with the Paulo
Freire Institute, the Oilworkers’ Federation (FUP) and the federal
government, has taught 46 thousand young people and adults how
to read and write. In stimulating cooperativism, in addition to the
Family Subsistence Farming in the Pipeline Strip project, men-
tioned earlier, the company helps some 10 thousand autonomous
collectors of recyclable materials in different parts of the country
to organize themselves, in an initiative that combines the goals of
social inclusion and environmental protection.
Through the Petrobras Zero Hunger Program, which, since
2003, has drawn corporate efforts together in the fight against hun-
Social and environmental ResponsibilitySPONSORSHIP
Sports training under the Mangueira Social Project, sponsored by Petrobras, Rio de Janeiro
www.petrobras.com.br | AnnuAl RepoRt 2006 | 73
ger and misery, Petrobras has accumulated a wealth of institutional
relationships covering more than 15 thousand governmental and
non-governmental partnerships. More than 10 million people have
been assisted by these sponsored projects, which are contributing
to the building of social justice in Brazil.
Another activity in the social area is passing on resources to
the Fund for Childhood and Adolescence (FIA). In 2006, a total of
R$ 48.6 million was provided to projects in more than 200 munici-
palities in almost every state. These actions, in partnership with the
Special Secretariat for Human Rights and the National Council for
the Rights of Children and Adolescents (Conanda), seek to prevent
the sexual exploitation of children and teenagers and put a stop to
child labor and the unlawful employment of teenagers. The spon-
sorships also include initiatives to reduce school drop out rates and
for the social inclusion of people with special needs.
eNviRoNMeNtaL PRoJeCtSDuring 2006, Petrobras invested R$ 44.6 million in environmental
projects. In its second public selection process, the Petrobras
Environmental program received 856 applications and chose to
sponsor 36 new projects, which will receive investments amount-
ing to R$ 48 million over the next two years. The program retained
the theme of “Water: bodies of fresh and salt water and their bio-
logical diversity”, to preserve the focus defined in the first selec-
tion process, in 2004, when the sum of R$ 40 million was invested.
The theme was chosen because Brazil, which accounts for 12% of
the volume of water in all the planet’s rivers, has a considerable
proportion of the world’s available fresh water.
Because it gives importance to sharing responsibility for the
protection of water resources, the company also supports initiatives
that develop awareness and promote the rational use of water, the
preservation and restoration of the vegetation bordering streams and
10million
PEoPlE havE BEEn assIsTED By ThE coMPany’s
socIal ProJEcTs
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rivers and the protection of marine environments. The projects, which
embrace a variety of ecosystems, river basins and landscapes, are
developed in all the country’s biomes, notably the Amazon Rainforest,
the Caatinga, the Cerrado, the Atlantic Forest and the Pantanal.
The activities of the Petrobras Environmental program,
launched in 2003, cover more than 5 thousand species of Brazilian
fauna and flora. Sponsorship has enabled the setting up of 15 data-
bases and 12 Geographical Information Systems , as well as the pub-
lication of 70 specialized works, with 220 thousand copies distrib-
uted. The initiatives reach out to 250 municipalities, having an area
of influence of over 900 thousand hectares, and benefit 20 million
Brazilians — 3 million of them directly. The work involved in the
projects provides an income for more than 5 thousand people.
Other programs are also developed by Petrobras, which has
been investing in the environmental sphere for decades, with the
disbursement of R$ 103 million in environmental sponsorship since
2004. To help marine biological diversity, the company sponsors
projects and behavioral studies, as well as the protection of endan-
gered species, such as the manatee, the humpback and right whales,
the spinner dolphin and the marine turtle (the Tamar Project has
been active on Brazil’s coast for over 20 years). Under the “De Olho
no Ambiente (Keep an Eye on the Environment)” program, 335
communities neighboring the operational units are encouraged to
plan the area’s sustainable development, introducing at the local
level the global commitments of the UN’s Agenda 21.
CuLtuRaL PRoJeCtSPetrobras continues to be the country’s greatest cultural sponsor,
making an annual investment of R$ 288 million and with a portfo-
lio of more than one thousand ongoing projects. The company’s
policies and guidelines for this area emphasize the Brazilian cul-
ture and seek more opportunities for the creation, distribution and
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The Petrobras Cultural Program has begun sponsoring education in the arts. Directly chosen projects in the areas of the cinema, theater, visual arts and music and maintaining archaeological sites such as those at Xingó and Serra da Capivara are also sponsored.
the Petrobras Cultural Program provides support for the National Circus School
www.petrobras.com.br | AnnuAl RepoRt 2006 | 75
Olympic Committee (COB), strengthening the association of the
Petrobras name with the ideals of the Olympic movement and with
sports promotion, recognizing the important role sport plays in the
development of young people. The Pan-American Games, attracting
athletes from 42 different countries, is the greatest sporting event in
the Americas.
In motor racing, Petrobras continues to support the Williams
Formula 1 team, the Petrobras Lubrax team in rallying, the Action
Power team in stock car racing, Team Scud Petrobras in motorcycle
racing, the Petrobras “Seletiva de Kart”, “Formula Truck” and the SAE
competitions “Baja” and “Fórmula”. The development of products
for motor racing is part of the company’s strategy to use the race
tracks as laboratories.
With its sponsorship of the 3rd edition of the Petrobras
Tennis Cup, held in Brazil, Argentina, Colombia, Uruguay and Chile,
Petrobras reinforced the dissemination of its brand name in Latin
America. The company also maintained its support for the Brazilian
Handball Confederation (CBH) and the Brazilian national team – this
sport is the one most widely played in the country’s state schools.
Support for surfing, associated with the characteristics of youth and
energy, has also been continued. Sponsorship of the Flamengo Soccer
team also kept the Petrobras name in the spotlight. +
fruition of projects, in addition to the preservation of a permanent
Brazilian cultural legacy.
Sponsorship is structured under the Petrobras Cultural pro-
gram, which earmarks 75% of its resources for projects by public
selection and 25% for those chosen directly. In 2006, of the 4,700
projects registered in the public selection process, just 230, in the
fields of the cinema, the scenic and visual arts, cultural heritage,
artistic legacy and music, received a total of R$ 46 million in spon-
sorship. The support to another hundred projects, chosen directly,
amounted to R$ 15 million.
The fourth edition of the Petrobras Cultural Program(2006-
2007) was launched in December, with R$ 80 million in funding and
a new feature, sponsorship directed at education in the arts. The
public selection process covered action for cultural preservation,
cinema production and dissemination, the sustaining of theater and
dance groups, and the recording and distribution of popular and
classical music. The projects chosen directly include the cinema,
scenic arts, visual arts, music and the maintenance of archeological
sites, such as those at Xingó (SE) and Serra da Capivara (PI).
The company stimulates the registration of projects from all
over the country, through the Petrobras Cultural Caravan, which
visits the state capitals between September and January. In 2005, a
project workshop was added to the caravan, to help the producers
of cultural activities in the development of their proposals. In this
way, Petrobras has managed to extend the reach of its sponsorship
to all parts of the country.
SPoRtS SPoNSoRShiPPetrobras is one of Brazilian sport’s greatest partners and is the
sponsor of the XV Pan-American Games, to be held in Rio in 2007.
A total of R$ 58,19 million went into supporting sporting activities
in 2006. The company bolstered its partnership with the Brazilian
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5,000diFFeReNt SPeCieS
oF FLoRa aNd FauNa: that is the number embraced by the
activities of the petrobras environmental program, which was launched in 2003
58.19MiLLioN ReaiS
was directed into supporting sporting activities over the course of last year
76 | AnnuAl RepoRt 2006 | petRobRAs
áLvaRo heNRique aRouCa de CaStRo
Geophysicist / Manager of Geotechnology
outLook: To continue working for the company, helping to build a world that
offers a better quality of life.
“for everything that it represents, Petrobras is a fundamental agent for development in Brazil. nurturing Petrobras means nurturing the dream of a better country.”
www.petrobras.com.br | AnnuAl RepoRt 2006 | 77
Intangible Assets
The management of intangible assets is essential to the creation of value and devel-opment of a competitive edge for a business, as well as to the attainment of sustain-able results. At Petrobras, these assets are divided into four types of capital: human, organizational, relationship and technological. Petrobras took a pioneering step in the management of technological know-how, when, in 1963, it set up the Leopoldo Américo Miguez de Mello Research Center (Cenpes). The management of this asset is the basis of the company’s acknowledged technological excellence, which is reflected in its market capitalization and makes the company a sought after partner for the world’s major oil companies. The sustaining of technological quality is upheld by invest-ment in developing the employees’ technical and management skills. This constant process of up-grading, and also accelerating the learning curve of new workers, is all done at the Petrobras University. The management of organizational and relation-ship capital has gained ground in recent years. At the same time as it progresses in the control of systems and key processes, the company refines the management of its relations with clients, suppliers, partners, shareholders and the general public. The outside perception of the strength of the management of intangible assets opens up the possibility of partnerships, influences the decision making of investors and boosts the results of Petrobras.
technologicAl cApitAl 78oRgAnizAtionAl cApitAl 80
humAn cApitAl 82RelAtionship cApitAl 83
78 | AnnuAl RepoRt 2006 | petRobRAs
Cenpes: the pursuit of new technologyThe masTery of Technological know-how is a con-
sTanT challenge for PeTrobras, which has been
exPanding The insTallaTions of cenPes, on The ilha
do fundão camPus of The federal universiTy of
rio de Janeiro (ufrJ). wiTh over 1,800 emPloyees, 30
PiloT PlanTs and 137 laboraTories, in an area of
122 Thousand m2, The cenTer has been anTiciPaTing
and suPPlying The comPany’s Technological needs
since 1963. iT Plays a decisive role in The corPoraTe
sTraTegy of growTh allied wiTh social and envi-
ronmenTal resPonsibiliTy.
Research into biological fuels was the highlight of 2006. A
mixture of vegetable oils and mineral diesel oil, the H-Bio tech-
nology was tested on a pilot scale at the Gabriel Passos (Regap),
Alberto Pasqualini (Refap) and Presidente Getúlio Vargas (Repar)
refineries, with a view to starting commercial production in 2007.
Biodiesel, made with vegetable oils or oleaginous seeds, is being
produced at two experimental plants in the state of Rio Grande
do Norte, using innovative technology. Another new development
was the laboratory production of ethanol from sugar cane bagasse
(lignocellulose), which would enable an increase in the production
of alcohol without having to increase the planted area.
The technologies developed by Cenpes have also led to
improvements in the quality of the fuels. At the end of the year,
Petrobras launched Diesel Podium, a cleaner diesel fuel containing
only 200 parts per million (ppm) of sulfur, thus taking another step
forward in the innovations relating to this product, which began in
2005, with the commercialization of diesel with 500 ppm.
Intangible AssetsTeChnoLogiCAL CAPiTAL
H-Bio pilot plant at Cenpes, Rio de Janeiro
www.petrobras.com.br | AnnuAl RepoRt 2006 | 79
Another advance in the refining area was the development,
by Cenpes, of technology to optimize the use of the heavy oil from
the Campos Basin. One of these developments, which increases
the production of ethylene and propylene, will be utilized at the Rio
de Janeiro Petrochemical Complex; another, already tested on an
industrial scale, will be utilized at the Northeastern Refinery, increas-
ing the production of diesel fuel from heavy oil by 30%. The con-
ceptual designs for both the Rio de Janeiro Petrochemical Complex
and the Northeastern Refinery were completed by Cenpes.
Important technological advances helped to augment the
company’s proven reserves of oil and gas. In the Marlim field, in the
Campos Basin, the use of chemical tracers in the process of defin-
ing the reserves — the first time this has been done in deep waters
— added 500 million barrels of oil to the field’s reserves. Together
with suppliers, Cenpes also developed new equipment and new tech-
nology for separating the oil, gas and water at the maritime units.
Three basic platform designs were completed by Cenpes in
2006: Mexilhão 1 (PMXL1), to be installed in the Santos Basin;
and, for the Campos Basin, the P-55 (Roncador field) and the P-57
(Jubarte field). Another challenge that was overcome during the
year relates to the technology for drilling wells, in about 2 thou-
sand meters of water in the Santos Basin, through thick layers of
salt. The technique made it possible to identify accumulations of
light oil at a depth of over 6,400 meters.
In the area of environmental protection, Cenpes has com-
pleted the prototype of a hybrid robot, given the name Chico
Mendes, designed for environmental monitoring in the Amazon
region. A collaborator in the efforts to preserve the world’s largest
tropical forest, Petrobras, in liaison with other scientific and tech-
nological organizations, proposed to create a Petrobras Center of
Environmental Quality in the Amazon. Cenpes was also an active
participant in an international seminar on carbon sequestration
Inta
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and climate change, which brought together specialists from 17
different countries in Rio de Janeiro.
Significant advances in the development of new technol-
ogy for the reutilization of effluents and the reduction of water
consumption to a minimum have made it possible to meet the
necessary environmental requirements for the new refining proj-
ects, with a saving, in terms of water catchment and the release of
effluents, equivalent to a city of 300 thousand inhabitants.
With a view to Cenpes and the operational units work-
ing more closely with one another, Petrobras inaugurated the
Experimental Center for Renewable Energy, in the state of Rio
Grande do Norte. Two more centers should start up in 2007, one
in Ceará and the other in Minas Gerais. As part of the company’s
strategy for relations with the Brazilian scientific community,
Cenpes launched a new partnership concept, in 2006. The new
model involves the participation of 76 institutions from 18 units
of the Brazilian federation, organized into 38 thematic networks
and 7 regional centers. By 2008, Petrobras should have invested
about R$ 1 billion in this new model.
Patents Petrobras is the company that files the most patents in Brazil and
is also the Brazilian company with the most patents filed in the
USA. In 2006, a total of 14 patents were granted to the company
in Brazil. Seventy-seven new patent applications were filed during
the course of the year — among them, the company’s thousandth,
for the process of producing ethanol from vegetable waste, devel-
oped at Cenpes. Outside Brazil, in 2006, a total of 81 applications
were filed and 69 patents were obtained.
With all these technological innovations, Petrobras is con-
stantly refining its processes, so as to be able to guarantee to meet
society’s demands in a sustainable manner. +
a total of
1,000Patent aPPlICatIons Have
Been fIled By tHe ComPany
(numBeR 1,000 was foR tHe PRoduCtIon of etHanol fRom
vegetaBle waste)
80 | AnnuAl RepoRt 2006 | petRobRAs
the Petrobras brand: a strategic assetThe PeTrobras brand is managed as a sTraTegic asseT,
due To iTs imPorTance and iTs PoTenTial To enhance
The value of ProducTs and services. The markeTing
and brand commiTTee, linked To The business
commiTTee, is resPonsible for devising a manage-
menT model wiTh guidelines for The uTilizaTion of
The brand ThroughouT The PeTrobras sysTem.
The defining of the rules, allied to the legal defense of this
asset in the various markets, provides even more protection for
the Petrobras brand. The global management of this asset follows
a strategy of giving the company a higher profile and strengthen-
ing the identity of its products and services. This management is
aligned, in the corporate sphere, with the uniform appearance of
the installations and the standardization of the company’s com-
munication activities.
A survey by the international consulting firm Interbrand dem-
onstrated the success of the company’s brand management, which
is associated with technological and quality leadership and social
and environmental responsibility. In 2003, the firm calculated the
value of the Petrobras brand at US$ 286 million, which surged to US$
485 million the following year and hit US$ 554 million in 2005, an
increase of 94% in just two years. The Petrobras brand was the one
whose value increased the most in Brazil between 2003 and 2005.
management PRaCtICesIn 2006, the Management Quality Assessment Program continued
to encourage the adoption of programs for improvements at the
operational units. The assessments are guided by the Petrobras
Intangible AssetsoRgAnizATionAL CAPiTAL
technological sponsorship: the cars of the at&t williams formula 1 team run on high-tech fuel developed by Petrobras
www.petrobras.com.br | AnnuAl RepoRt 2006 | 81
Management for Quality Handbook, which combines the criteria
of the National Quality Award with the specific requirements of
the company, derived from the policies of the Strategic Plan.
Petrobras entered into a formal agreement with the National
Quality Foundation for the dissemination of the corporate model
of management quality. Among the resources developed under this
partnership are ‘quality’ notebooks and a program that simplifies
the process of self-assessment by the units, stimulating improve-
ments to be made more quickly. Petrobras participates, both in
Brazil and abroad, in various movements and bodies devoted to
management quality, productivity and competitiveness. +
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lBetween 2003 and 2005, the value of the Petrobras brand appreciated by
94%
286 million
dollars: the brand value in 2003
554 million
dollars: the brand value in 2005
tHe PetRoBRas BRand aPPReCIated moRe tHan any otHeR In BRazIl
duRIng tHe PeRIod
82 | AnnuAl RepoRt 2006 | petRobRAs
Knowledge managementin 2006, PeTrobras consolidaTed The meThodol-
ogy for PreParing knowledge managemenT Pro-
grams for The business uniTs in brazil, based on The
inTernaTional area’s Program for The inTegraTion
of knowledge. This Program sTrengThens oPera-
Tional, managemenT and Technological exPerTise,
disseminaTing knowledge and acceleraTing The
develoPmenT of new emPloyees.
In the Exploration & Production area, the Communities of
Practice Program is disseminating knowledge and best practices
in four more fields of activity. Specialists in the ‘communities’ of
reservoir definition, well engineering, naval engineering, lifting and
off-loading, water management and operational practices are all
now sharing their experience. Overcoming organizational bound-
aries, the program embraces 2.5 thousand employees at units in
Brazil and abroad.
The participation of the employees in passing on techni-
cal, cultural and business know-how is showcased in the project
“Petrobras Stories”, which collects personal narratives and case
studies. The project systematically organizes information relating
to historical milestones, thereby spreading strategic know-how, as
well as an understanding of the company’s past. The first themes
to be tackled are the backgrounds of the oil producing area of
Urucu, in the Amazon, and the Guando field, in Colombia.
As part of the ongoing improvement of the company’s rela-
tionship with general society, it has set up the Communication
area’s Collaboration Network (ReCol). This initiative highlights
good practices developed at the units, reinforcing the understand-
ing and implications of the corporate communication guidelines.
Petrobras participates in two Knowledge Management study
groups coordinated by the American Productivity & Quality Center
(APQC), with a view to refining its own internal practices in the
light of the example of world-class corporations. In the 2006 edi-
tion of the Most Admired Knowledge Enterprise (Make), an award
presented by the British institution Know Network for outstanding
achievement in the area of business knowledge, Petrobras came
fourth, among the world’s 18 largest companies in the oil sector. It
was the only Latin American company among the 55 finalists. +
Intangible AssetshUMAn CAPiTAL
Construction of part of the P-52 platform
www.petrobras.com.br | AnnuAl RepoRt 2006 | 83
Intangible AssetsReLATionshiP CAPiTAL
surveys assess outside perceptionsPetrobras carries out wide ranging opinion surveys, in order to
learn how its practices and projects are viewed and assessed by the
stakeholders. These surveys, which have provided the company
with considerable insight into the socio-economic environment
in which it operates, are based upon 18 indicators that make it pos-
sible to evaluate the perceptions regarding its management, com-
petitiveness, growth, activities abroad, vision of the future, social
support, ethics, and social and environmental responsibility.
The weighted average of the points awarded for each indicator
in the public opinion segment provides a general indicator value.
The information from the surveys is consolidated in the Corporate
Image Monitoring System (Sísmico). Using this company reputation
monitoring tool, the management can follow changes in Petrobras’
image and appropriately adjust its communication policies and
actions, as well as its management practices, in different areas.
InvestoR RelatIons At the end of 2006, the company had more than 350 thousand
shareholders and investors in funds devoted to Petrobras shares.
In order to refine its relationship with these parties, the company
has an ongoing program directed at the investors, through road
shows, open meetings, conference calls, chats, a shareholders’
newsletter, telephone and e-mail response, specialized events,
website, and other means of communication.What is more, the
* Corporate Image Monitoring System
84 | AnnuAl RepoRt 2006 | petRobRAs
company conducts an annual survey which assesses the quality
of the service and the perception of Petrobras in terms of profit-
ability, competitiveness, management, vision of the future, cor-
porate governance, ethics, technology, transparency, and social
and environmental responsibility.
RelatIonsHIP wItH suPPlIeRsIn 2006, Petrobras retained the system of listing the companies that
provide outsourced materials and services all together in a single
register of suppliers, in alignment with the corporate Health, Safety
and the Environment (HSE) and Social Responsibility guidelines. In a
process of standardizing its methodology and rationalizing its efforts,
the company refined the technical, legal-fiscal and economic-finan-
cial criteria for registration, in addition to adopting new centralized
and regional procedures for evaluation and ratification.
The new registration form also contains questions relat-
ing to social responsibility, prepared by the Ethos Institute for
Companies and Social Responsibility. The purpose of this inquiry
is to form a picture of the practices developed in this area by the
suppliers and stimulate them to give due importance to such ini-
tiatives and to show appreciation of existing efforts, as well as to
make improvements in them.
The Registration Portal was set up by the company to use the
internet as a tool for developing closer relations with suppliers.
Petrobras currently has around 5 thousand companies registered
in its database for the acquisition of goods and services for its
operations or new projects. Moreover, there are approximately 40
thousand firms, located throughout the country, that supply goods
and services on a small scale to the company’s operating units.
For the acquisition of goods, the new Terms of Materials
Supply (CFM) apply to all contracts signed since November 1,
2005. The product of liaison between Petrobras and associations
Survey of Shareholder approval ratingS(points, from 0 to 100)
89
90
92
93
88
81
79
78
95Activities abroad
View of the future
Profitability
Technology
Feeling
Competitiveness
Working conditions
Management
Ethics
Alternative energy
Environmental responsibility
Communication with shareholders
Transparency
Social support
Corporate governance
General indicator
79
80
84
78
77
76
85
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www.petrobras.com.br | AnnuAl RepoRt 2006 | 85
representing suppliers, the CFM adapted the contractual clauses
to the prevailing legislation and market practices. The company
has also adopted new terms of payment for goods that have a long
manufacturing timeframe, supplied by Brazilian companies.
Petrobras continued its partnership with the Brazilian Service
for the Support of Small and Medium-Sized Enterprises (Sebrae),
to encourage the competitive insertion of small businesses in the
production chain for oil, natural gas and electricity. The agreement
covers the 12 states that have Petrobras business units and is worth
R$ 12 million over a period of three years — R$ 6 million of which is
invested by Sebrae. Due to the enthusiastic response to this initia-
tive, the investments of the participating companies, initially put
at R$ 3 million, have risen to R$ 16.7 million.
PRoCuRementPetrobras made direct purchases of goods and services to the
sum of US$ 20.8 billion in 2006, of which US$ 4 billion was for
the acquisition of materials and US$ 16.8 billion for the hiring of
services. Of these totals, 88% of the materials purchases and 70%
of the services were acquired from suppliers located in Brazil, who
thus had a 73% overall share of the purchases made in 2006.
Part of the procurement was carried out through the on-line
trading portal Petronect, which has a total of 22,719 registered
suppliers in Brazil, Argentina, Bolivia, Colombia, Ecuador, Peru,
Singapore, the USA and Venezuela. Since October 2003, the com-
panies of the Petrobras System have completed 216 thousand
purchases, 125 direct auctions and 274 reverse auctions using
the Petronect portal.+
16937
40,000companieS in Brazil provide goodS and
ServiceS on a Small Scale to the company’S
operational unitS
trading board at the são Paulo stock exchange (Bovespa)
86 | AnnuAl RepoRt 2006 | petRobRAs
mIguel Ângelo estePHanIoterminals and pipelines engineer /
Business consultant
outlooK: the company’s example should always inspire a striving for
progress and continual improvement.
“petrobras has the capability to develop projects in various areas of the energy sector, thereby generating wealth and employment and improving the people’s quality of life.”
www.petrobras.com.br | AnnuAl RepoRt 2006 | 87
Business Management
Prices in the international oil markets were high in 2006, yet Petrobras retained the policy it had adopted in the preceding year, of avoiding passing on the oscillations in international prices to the consumer. The increase in gasoline and diesel prices, in September 2005, and the readjustment of the other oil product prices, resulted in an average domestic sales price for oil products that was 8% higher than that of 2005. The company’s good results over the course of the year were recognized by the market, with a nominal increase in its stock market quotations. The price of the company’s common stock increased by 31.94% in the year, while that of the more liquid preferred stock was up by 33.83%. Risk management, taking into account the nature of the company’s activities, is carried out in an integrated manner, seeking a balance between the twin goals of growth and return, on the one hand, and the level of exposure, on the other. In the area of corporate governance, the company adopts procedures that are compatible with the standards of the markets in which it operates, and constantly monitors the implementation and application of the practices that have been determined.
Business peRfoRmAnce 88cApitAl mARkets 91
Risk mAnAgement 96coRpoRAte goveRnAnce 99
88 | AnnuAl RepoRt 2006 | petRoBRAs
Outstanding earnings and investments Oil prices in the internatiOnal market hit extrem-
ely high levels during 2006. the Brent average (us$
65.14/Barrel) was up 19.8% in relatiOn tO the previ-
Ous year, having hit a peak mOnthly average Of us$
73.66/Barrel in July. this rise had a direct impact On
the lifting cOst Of dOmestic Oil and the cOst Of
impOrted Oil, which represented, On average, 20.5%
Of the primary thrOughput at the refineries.
The pricing policy adopted in 2005 was maintained, so as to
avoid immediately passing on to the consumer the volatility of the
international prices. The average realization price of oil products
in the domestic market was R$ 154.45/barrel — 8% higher than
in the previous year.
The main underlying reasons were the increase in gasoline and
diesel prices, in September 2005; the commercialization of Diesel S500
— of superior quality — from the beginning of 2005; and the adjust-
ment of the prices for other oil products, notably naphtha, fuel oil and
aviation fuel, in line with the fluctuations in international prices.
Petrobras’ total sales — including natural gas, alcohols,
nitrogen compounds, exports and international sales — amounted
to 3 million 48 thousand boe, a 9% increase over the 2 million 808
thousand boe sold in 2005.
The company’s sales in the domestic market were up by 3%.
Sales of natural gas increased by 7%, driven by the growth of the
market in the south/southeast, while sales of oil products rose by
3%. Electricity sales grew 8.7%, due to contracts signed in previ-
ous years coming into effect, coupled with increased sales under
contracts already in effect.
Business ManagementBuSIneSS PeRfoRmance
www.petrobras.com.br | AnnuAl RepoRt 2006 | 89
HigHer revenuesThe consolidated gross operating revenue amounted to R$
205.4 billion, while the net operating revenue was R$ 158.2 bil-
lion — amounts that exceeded the 2005 figures by 15% and 16%,
respectively. Underlying the results were the higher prices in the
domestic and international markets and the increases of 3% in
domestic sales and 19% in international sales.
In the domestic market, net revenue was up by R$ 10.9 billion
(12.3%), due mainly to higher revenue from diesel fuel (11.6%),
gasoline (18.8%) and naphtha (12.2%). Gasoline sales increased
by 7.3% (21 thousand bpd) — stimulated, above all, by the reduc-
tion, in March, of the ethanol content —, outstripping the increase
in sales of diesel fuel, up 1.1% (7 thousand bpd), and of naphtha,
up 5.1% (8 thousand bpd). The impact of the price rises was great-
est for diesel fuel, which saw an increase of 11% (R$ 0.11/liter),
while gasoline and naphtha saw respective increases of 9.1% (R$
0.08/liter) and 6.5% (R$ 0.08/liter).
The net revenue in foreign markets was up by R$ 3 billion,
led by oil exports, which increased by 29% in relation to 2005,
while the revenue from oil products declined by 2.3%.
ecOnOMic and Financial resultsThe operating profit amounted to R$ 42.2 billion — 6% higher
than that obtained in the previous year, due to the increases in
net operating revenue, production and the processing of more
domestic oil, which pushed the cost of goods and services sold
by 23%, whereas the increase in the benchmark price of Brent oil
was 19.8%. Net earnings were R$ 25.9 billion, 9% higher than the
figure for 2005.
As a result, the EBITDA (earnings before deducting interest,
taxes, amortization and depreciation) was R$ 50.9 billion, 9% higher
than in 2005. The return on capital employed (ROCE) was 23% — a
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Petrobras headquarters lit up to celebrate the self-sufficiency
milestone, rio de Janeiro
The average oil producT price in The domesTic
markeT was 154.45
reais a barrel
19%growTh in
inTernaTional sales
90 | AnnuAl RepoRt 2006 | petRoBRAs
reduction of one percentage point. The financial result for 2006
was a net expense of R$ 1.3 billion, compared to a net expense
of R$ 2.8 billion in 2005. The result was affected by the much
greater appreciation of the real against the principal currencies
with which Petrobras works than was seen in 2005.
Petrobras’ total assets amounted to R$ 210.5 billion, an increase
of 15% over the figure for 2005. The value of the company’s fixed
assets increased by 14.4%, while current assets were up by 11.6% and
long term assets by 16%. Cash and short term financial investments
alone accounted for 63% of the variation in current assets.
The corresponding change in liabilities was accounted for
mainly by net equity, which increased by 23.8%, the principal
item being a 45% increase in realized capital. With regard to the
company’s debt, the leverage (net debt to net capitalization ratio)
was reduced to 16%, from 24% in 2005.
caPital exPenditurePetrobras made investments amounting to R$ 33.7 billion — 31%
more than in 2005 —, in line with the Strategic Plan 2015. Capital
expenditure in the area of Exploration & Production came to R$
15.3 billion, with priority being given to augmenting production
and reserves. In the Downstream area, a total of R$ 4.2 billion was
invested, with the aim of adding value to the company’s oil and
natural gas. The capital expenditure in the International area, of
R$ 7.2 billion, was invested in pursuing the strategy of leadership,
as an integrated business, of the Latin American energy market.
Of the total figure, R$ 3.5 billion was invested through spe-
cific purpose companies (SPCs), which was up 47% in compari-
son with the amount invested through SPCs in 2005. +
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33.7billion
reais in capital expenditure during the year, 31% more than in 2005
15.3billion
reais went into the exploration & production area, with the prime aim of
augmenting production and reserves
7.2 billion
reais was invested in the international area, in order to attain leadership of the latin
American energy market
23%return on capital employed (Roce)
www.petrobras.com.br | AnnuAl RepoRt 2006 | 91
40% increase in share value abroadit was a gOOd year fOr petrOBras in the stOck mar-
kets. the nOminal appreciatiOn Of the cOmpany’s
shares — Of 31.94% fOr the cOmmOn stOck (petr3)
and 33.83% fOr the preferred stOck (petr4) — was
in line with the Overall perfOrmance Of the
iBOvespa (sãO paulO stOck exchange index), which
rOse By 33% in 2006. hOwever, taking intO accOunt
the dividends paid Out Over the cOurse Of the year
(in relatiOn tO the 2005 results), the appreciatiOn
Of petrOBras’ shares amOunted tO 38% (cOmmOn)
and 41% (preferred).
The company’s preferred stock showed the greatest liquid-
ity, in terms of volume traded and number of trades, with respec-
tive daily averages of R$ 282 million and 4,414. This performance
placed Petrobras at the top of the ranking, as the company with
the greatest weighting in the Ibovespa theoretical portfolio — with
13.80% for the period January-April 2007. Taking the combined
figures for common and preferred stock, the company had a daily
turnover of R$ 336 million, representing over 16% of the average
Bovespa trading volume in 2006.
At the New York Stock Exchange (NYSE), the return to
Petrobras shareholders was even greater, due to the apprecia-
tion of the real against the dollar. The receipts (ADRs) represent-
ing common shares (PBR) showed a nominal appreciation of
45%, while those for preferred shares (PBRA) were up 44%. The
Petrobras stock outperformed the major indices: the Dow Jones
(+ 16%), the US market’s leading benchmark; the Amex Oil Index
(20%), comprising major companies in the oil and gas sector; and
Business ManagementcaPITal maRkeTS
seminar promoting best practice in the disclosure of information
92 | AnnuAl RepoRt 2006 | petRoBRAs
Trading volume aT The nYse (2006 daily average – US$ million)the NYSE’s International 100 (21%), which brings together the
100 most liquid ADRs.
Petrobras was the most heavily traded non-American company
on the New York Stock Exchange, taking the combined daily average
trading volume of the two classes of receipt. The average daily NYSE
turnover of the company’s common receipts came to US$ 227 mil-
lion, and for the preferred receipts it was US$ 99 million.
In 2006, for the first time, Petrobras’ monthly average market
capitalization passed US$ 100 billion (in December), closing the
year at US$ 108 billion. This is the largest amount of any publicly
traded Latin American company, and is up by 45% in relation to
the 2005 figure (US$ 74 billion) and by 155% compared to 2004
(US$ 42 billion). In reais, the company’s market capitalization
amounted to R$ 230 billion at the end of 2006, compared to R$
174 billion in 2005 and R$ 112 billion in 2004.
Over the course of the year, the company’s Bovespa share-
holder base grew by 20%, closing 2006 with a total of 168 thousand
shareholders. This is not only the outcome of the split carried out
in 2005, which made the shares more accessible to small inves-
tors, but also a reflection of the growing confidence of investors
in Petrobras’ management model.
In April, the company listed its common and preferred shares
at the Buenos Aires stock exchange, thereby opening up the pos-
sibility for Argentinean investors to have direct access to Petrobras
shares, as well as enabling the company to broaden its shareholder
base and strengthen its brand name among the local population.
The quality of Petrobras’ corporate governance, which is
fully committed to the principles of ethics, transparency and
social and environmental responsibility, secured the company a
place on the select Dow Jones Global Sustainability Index. This is
the world’s most important sustainability index, which serves as a
parameter for socially and environmentally responsible investors.
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the trading desk at
Petrobras’ london office
212
227
232
242
172
153
105
99
326Petrobras*
BP
CVRD*
Petrobras (common)
Nokia
CVRD (common)
America Movil*
America Movil (series L)
BHP Billiton
Cemex
Total
Petrobras (preferred)
Taiwan Semiconductor
RD Shell
Elan
100
114
154
93
90
87
* Sum of all the company’s ADR programs Source: Bloomberg
www.petrobras.com.br | AnnuAl RepoRt 2006 | 93
In November, it was announced that Petrobras’ shares had also
been included in the Bovespa Corporate Sustainability Index.
sHare BuyBackA share buyback program was announced in December, which
will allow the company to repurchase up to 91.5 million preferred
shares — 4.9% of the total preferred shares in circulation — up to
December 2007. This decision reflects the management’s belief
that the company’s shares are undervalued, in view of Petrobras’
prospects for growth and profitability, and is aimed at reducing
the company’s short term financial costs.
dividendsDuring the year, Petrobras shareholders received dividends in rela-
tion to the 2005 base year equivalent to R$ 1.6562 per common or
preferred share. This represents an increase of 39% in comparison
with the dividends paid out in relation to the previous year, which
is in line with the 40% rise in the company’s net earnings. For the
2006 fiscal year, the Board of Directors proposes to pay out R$
7,897 million in dividends, equivalent to R$ 1.80 per share, which
is up 8.7%, in line with the profit increase.
cOrPOrate FinancePetrobras retained its high degree of liquidity in 2006 and obtained
more favorable terms in its fund raising, which received a boost
from the investment grade ratings assigned by Moody’s Investor
Services in October 2005 and Standard & Poor’s in January 2007.
Within this scenario, the company developed strategies for man-
aging its liabilities that included the prepayment of debt, the rene-
gotiation of contractual terms and strategic new fund raising.
With regard to the early repayment of debt, in March,
Petrobras prepaid two series of the Program for the Securitization
of Bunker Fuel and Fuel Oil, reducing the outstanding principal
to US$ 577.6 million. The company also obtained the consent of
the investors in the remaining series for the withdrawal of bun-
ker fuel from the program, a reduction in the insurance cost and
a reduction in the minimum daily average exports. The terms
of other financial contracts were also revised, resulting in lower
interest rates and the exclusion of certain insurance mechanisms
(political risk insurance and letters of credit).
In the international capital markets, operating through its
subsidiary PIFCo, the company repurchased securities in July with
a total value of US$ 888 million. Including the amount already
repurchased by Petrobras, this operation has led to the canceling
of US$ 1,215 million of the company’s debt. In February 2007, an
operation was carried out for the exchanging of five series of old
PIFCo securities for new securities maturing in 2016, with a total
face value of US$ 399,053,000.
In September, PIFCo carried out a private 10-year bond issue
in Japan, denominated in yen, for the equivalent of US$ 300 mil-
lion, at a rate of 2.15% p.a. and partially guaranteed by JBIC, with
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bovespa shareholder base
128,962
140,060
160,395
167,580Dec 31/06
Jun 30/06
Dec 31/05
Jun 30/05
94 | AnnuAl RepoRt 2006 | petRoBRAs
the objective of reopening the Japanese market and diversifying
the company’s investor base.
In October 2006, PIFCo made its first issue of Global Notes
since the company obtained its investment grade, in order to
establish a new benchmark for the group’s funding costs. The issue
represented the lowest ever cost to PIFCo for a ten year maturity
(a rate of 6.125% p.a., with a return to investors of 6.185% p.a.)
and most of the demand was high grade. Moreover, the company
introduced improvements to its covenants.
In transactions with the Brazilian Development Bank
(BNDES), Petrobras drew down US$ 314 million, through its subsid-
iary PNBV, for the construction of the P-51 and P-52 platforms.
Under lines of credit in the international banking market,
the company raised a total of US$ 2,112 million, 20% more than in
2005, 97% of which was earmarked as support for the operations
of subsidiaries, with the remainder going into the commercializa-
tion of oil and oil products.
In order to provide the company with a liquidity cushion,
PIFCo has secured, since 2004, a total of US$ 675 million in
standby facilities. These allow the company to draw down any
amount, up to the contract limit, over a period of two years, and
gives the company a year to repay the principal.
With regard to bank guarantees, the total amount under
contract to Petrobras and its subsidiaries amounted to US$ 4,126
million — 107.86% more than at the end of 2005.
structured PrOJectsThrough structured project finance operations, the company
secured funding in the Brazilian and foreign financial markets for
its undertakings in the Downstream, Exploration & Production,
and Gas & Energy areas, using Specific Purpose Companies (SPCs)
set up for each project.
In the Downstream area, Petrobras closed the project
finance contracts, in May, for the modernization of the Henrique
Lage refinery (Revap), amounting to US$ 900 million.
The ABN AMRO bridge loan on the project for the construc-
tion of the P-53 platform, to go into production in the Campos
Basin’s Marlim Leste field, was renewed in August and the syn-
dicated loan was refinanced in September. The total amount of
these operations comes to US$ 1.1 billion, of which US$ 350 mil-
lion corresponds to the bridge loan and US$ 750 million to the
syndicated loan.
In the area of Exploration & Production, the refinancing of a
syndicated commercial bank loan in relation to the Master Plan for
the Delivery and Treatment of Oil from the Campos Basin (PDET)
was concluded in September. The improvement in Petrobras’
credit rating since the original structuring of the financing, in
March 2005, enabled the company to obtain a reduced spread
and the cancellation of the political and commercial risk insur-
ance on the transaction.
In the area of Gas & Energy, two additional bridge loans for
the Southeast–Northeast Gas Pipeline Interconnection (Gasene)
were arranged with the Brazilian Development Bank (BNDES) in
December. One of the loans, amounting to R$ 1.05 billion, will be
used to purchase pipeline for the stretch between Cacimbas (ES)
and Catu (BA); the other, for R$ 312 million, will be used for the
stretch between Cabiúnas (RJ) and Vitória (ES).
In November, Petrobras Netherlands BV (PNBV) signed
a financing contract (a Co-Financing Term Loan Facility
Agreement) with the Export-Import Bank of Korea — K-Exim
(the official credit institution for South Korea) and BNP Paribas.
The contract, for US$ 360 million over a term of eight years, is to
finance Petrobras’ investment in two oil production platforms to
be constructed by the South Korean shipyards of Hyundai Heavy
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www.petrobras.com.br | AnnuAl RepoRt 2006 | 95
Industries and Daewoo Shipyard & Marine Engineering. The plat-
forms will be used in foreign oilfields in which Petrobras has a
financial stake. +
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P-52 platform deck-mating operation, angra dos reis, rio de Janeiro
Structured ProjectS
Year structured Amount (US$ million)
Marlim 1998 1,500
Albacora 2000 410
Barracuda / Caratinga 2000 3100
Cabiúnas 2000 850
Espadarte, Voador and Marimbá (EVM) 2000 1076
NovaMarlim 2001 834
Pargo, Congo, Garoupa, Cherne and Carapeba (PDCG) 2001 85,5
Pipeline networks 2003 1,000
CLEP (Oil Equipment Leasing Company) 2004 1,250
PDET (Master Plan for the Delivery & Processing of Oil from the Campos Basin) 2005 1,270 1
CRI Macaé (Certificate of Real Estate Receivables) 2005 200 2
Modernization of the REVAP refinery 2006 900Notes: 1 Due to increased costs, the total amount for the project went from US$ 910 million to US$ 1.27 billion. 2 Amount in reais (R$).
ProjectS being Structured
Amount (US$ million)
Urucu-Coari-Manaus gas pipeline and Manaus thermoelectric plant (Amazon region) 1,300
Construction of P-53 platform (Marlim Leste) 1,180
Gasene 2,000
Mexilhão 595
96 | AnnuAl RepoRt 2006 | petRoBRAs
Management aligned with corporate goalspetrOBras manages its risks in an integrated man-
ner, taking advantage Of any pOssiBle natural
fOrms Of prOtectiOn. the cOmpany seeks tO attain
a suitaBle Balance Between its gOals Of grOwth
and return On investment, On the One hand, and
its level Of expOsure tO the risks inherent tO
its OperatiOns Or stemming frOm the cOntext in
which it Operates.
By the very nature of its activities, Petrobras is subject to a
whole series of market risks, such as variations in the prices of oil
and oil products, in foreign exchange rates and in interest rates.
Through its risk management policy, aligned with its corporate
goals and objectives, the company seeks the security of its opera-
tions and the execution of its planned investments, so as to be able
to maintain its profitability and grow in a sustainable manner.
Any proposals for the management of risk are put before the
Risk Management Committee, comprising executives from the
company’s business and corporate areas. This allows an integrated
view of the issues and makes it easier for the Executive Board and
the Board of Directors to comprehend the risk exposure and take
the appropriate decisions.
In the management of oil and oil product market risks, fol-
lowing the premise of regular and systematic evaluation of the
consolidated net exposure to price risk, operations using deriva-
tives have consequently been limited to specific short term trans-
actions (up to six months), involving futures contracts, swaps and
options and utilizing control methodologies in accordance with
specific risk management guidelines, in order to safeguard the
Business ManagementRISk managemenT
natural gas processing unit at the urucu industrial complex, amazonas
www.petrobras.com.br | AnnuAl RepoRt 2006 | 97
results of its physical operations.
credit riskIn line with the recent alterations in the country’s regulatory envi-
ronment, Petrobras has adapted its credit policy to the new market
circumstances. This has preserved the attractiveness of sales on
credit, without unnecessarily raising the company’s exposure to
credit risk.
In order to analyze these operations, in 2006, the company
set up the Petrochemicals Area Credit Committee, following the
model of the committees for the Downstream and Gas & Energy
areas, set up in 2004, when a system of credit flow analysis was
also introduced.
Outside Brazil, in line with Petrobras’ growing sales, the
processes for analyzing and conceding credit to clients (exports
and the provisioning of vessels) were standardized and central-
ized in 2006.
insuranceIn 2006, the final premium on the company’s principal insurance
policies — major fire/operational risk and petroleum risk — was
raised to US$ 34.5 million, from US$ 29.4 million in 2005, an increase
of 17%. On the other hand, the value of the company’s insured assets
increased by 32%, from US$ 32.7 billion to US$ 43.2 billion.
Most of Petrobras’ risk is reinsured in the international
market. The company has a fixed policy of publicizing its risk
management practices, in Brazil and abroad. Pertinent informa-
tion regarding losses and improvements made are promptly and
candidly passed on to the insurance market.
Like other large oil companies, Petrobras bears a significant
portion of the risk, with insurance exemptions as high as US$ 40 mil-
lion. The company does not insure against lost profits and wellhead
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The companY’s asseTs are
insured for
43.2 billion
dollars
98 | AnnuAl RepoRt 2006 | petRoBRAs
controls in Brazil, nor does it insure its pipeline network.
Platforms, refineries and other installations have insurance
cover against major fire/operational risk and petroleum risk. The
movement of cargoes is covered by transportation insurance poli-
cies and the vessels are covered by hull and machinery insurance.
Civil liability and environmental risks are covered by one or more
policies, according to the circumstances. Projects and installations
under construction, where the maximum likely damages would
exceed US$ 40 million, are covered against engineering risks under
a policy taken out by Petrobras or by the contractors.
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For insurance purposes, the company’s assets are valued at
replacement cost. Based on the maximum likely damages at each
installation, the maximum indemnity in the major fire/operational
risks policy has been fixed at US$ 600 million.
Most of the company’s activities abroad are insured or rein-
sured by the Bear Insurance Co. Ltd., based in Bermuda. As a cap-
tive insurance company, Bear retains none of the risk, but passes
it on in full to the market. +
The greater part of Petrobras’ risk exposure is reinsured in the international market and the company has a policy of disclosing its risk management practices.
insurance
Amount Insured (US$ b) Premium (US$ m) Rate (%)
50
40
30
20
10
0
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0 1999 2000 2001 2002 2003 2004 2005 2006
www.petrobras.com.br | AnnuAl RepoRt 2006 | 99
Practices are constantly reviewedpetrOBras is cOnstantly striving tO perfect its
cOrpOrate gOvernance practices and relatiOns
with sharehOlders, custOmers, suppliers, emplOy-
ees and Other stakehOlders. the cOmpany adOpts
management prOcedures that are cOmpatiBle
with the regulatiOns gOverning the markets in
which it Operates and cOntinually mOnitOrs the
applicatiOn Of these prOcedures.
In Brazil, Petrobras is subject to the rules of the Brazilian
Securities Commission (CVM) and the São Paulo stock exchange
(Bovespa). Outside Brazil, it obeys the rules of the Securities and
Exchange Commission (SEC) and the New York Stock Exchange
(NYSE), in the USA, and of the Madrid stock exchange (Latibex),
in Spain. As from 2006, with its listing in Argentina, the company is
also subject to the rules of the Argentinean Securities Commission
(CNV) and the Buenos Aires stock exchange.
Petrobras is studying the process for formally adhering to
the Bovespa’s differentiated levels of corporate governance and,
since changes were made to its by laws, in 2002, the company
has been in full compliance with the practices and regulations
defined therein.
The training program in corporate governance for executives
and staff whose functions are directly linked to relations with the
companies of the Petrobras System, which continued through
2006, fosters awareness of the importance of this topic and dis-
seminates the best practices adopted in Brazil and abroad.
The process of reviewing the Petrobras Code of Ethics, which
involved the participation of the employees, was concluded in 2006.
Business ManagementcoRPoRaTe goveRnance
The aim of the process was to update this instrument and bring it
into alignment with the requirements of the Sarbanes-Oxley Law
(SOX) regarding specific items in the Codes of Ethics of companies
listed with the New York Stock Exchange.
In compliance with SOX requirements, Petrobras discloses
in Form 20-F (the Annual Report, an SEC requirement) that one of
the nine members of its Board of Directors, elected at an Ordinary
General Shareholder’s Meeting held on April 3, 2006, is a financial
specialist. +
k in its annual report 2006, filed with the SeC, Petrobras attests
to the effectiveness of its internal controls, in compliance
with SoX section 404.
k a review of the Petrobras code of ethics has been
completed, with the participation of the employees, bringing it up to date and into line with most
recent legal requirements.
100 | AnnuAl RepoRt 2006 | petRoBRAs
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corporaTe governance sTrucTure
Petrobras’ corporate governance structure comprises the Board of Directors and its advisory committees, the Executive Board, the Fiscal Council, the Internal Auditors, the General Ombudsman, the Business Committee and the Management Committees.
BOard OF directOrsAn independent collegial body with powers and responsibilities laid down in the law and in the company’s by laws, whose main duties are to define the company’s strategic guidelines and supervise the actions of the Executive Board. There are nine board members, elected at a General Shareholders’ Meeting for a term of one year, with the possibility of reelection. Seven of the board members represent the controlling shareholder; one represents the minority common shareholders; and one represents the preferred shareholders.
executive BOardThe Executive Board runs the business, in line with the mission, objectives, strategies and guidelines defined by the Board of Directors. The Executive Board consists of a CEO and six directors chosen by the Board of Directors for a term of three years, with the possibility of reelection, who may be removed at any time. Only the CEO is a member of the Board of Directors, but may not preside over that body.
Fiscal cOuncilA permanent body, independent of the company’s management, as laid down in Brazilian Corporate Law, the Fiscal Council com-prises five members, with terms of one year, with the possibil-ity of reelection. One of the members represents the minority shareholders; another represents the preferred shareholders; and three act in the name of the federal government — one of these is appointed by the Finance Minister, as the representative of the National Treasury. It is incumbent on the Fiscal Council to represent the shareholders in a supervisory capacity, monitoring the actions of the company’s management to verify compliance with their legal and statutory obligations, as well as defending the interests of the company and its shareholders.
internal auditOrsThe Internal Auditors plan, execute and evaluate the company’s internal auditing procedures and assist the senior management and external control bodies. The company also has outside audi-tors, appointed by the Board of Directors, who are restricted as to the consulting services they may provide. It is mandatory that the outside auditors be changed every five years, on a rotation basis.
general OMBudsManThe Ombudsman, directly linked to the Board of Directors, plans, guides, coordinates and evaluates activities aimed at gath-ering the opinions, suggestions, criticism, complaints and accu-sations of interested parties having some form of relationship with the company, and arranges for investigations to be carried out and appropriate steps to be taken. In compliance with the requirements of the Sarbanes-Oxley Law, this office must also serve as a channel to receive and process accusations regarding accounting, internal control and auditing issues, including confi-dential and anonymous tip-offs from employees.
BOard advisOry cOMMittees There are three Advisory Committees: for Auditing; the Environment; and Remuneration and Succession. Their mem-bers belong to the Board of Directors and assist the Board in carrying out its responsibility to provide the company with high level guidance and direction.
audit committee In full compliance with the requirements of the Sarbanes-Oxley Law, this committee comprises three independent Board mem-bers and its president needs to be a financial specialist — in accor-dance with SEC definitions. The committee’s function is to analyze questions regarding the integrity of the company’s US GAAP financial reports and the effectiveness of its internal controls, as well as supervising Petrobras’ outside and internal auditors.
Business cOMMitteeThis committee is a forum for integration, seeking to align busi-ness development, management of the company and the guide-lines of the Strategic Plan, in support of the senior management’s decision making process.
ManageMent cOMMitteesThese are forums for delving deeper into issues that are to be presented to the Business Committee, with which it liaises. Such integration also exists between the Management Committees themselves and in their relations with the Board Advisory Committees.
At present, the company has the following Management Committees: Exploration & Production; Downstream; Gas & Energy; Human Resources; Health, Safety & the Environment; Organization and Management Analysis; Information Technology; Internal Controls; Risk; Petrobras Technology; Social and Environmental Responsibility; and Marketing & Brands.
internal cOntrOlsThe Program of Integrated Internal Control Systems and Methods
(Prisma), included in Petrobras’ strategic agenda and currently
assimilated in the company’s General Management of Internal
Controls, concluded the work for compliance with the require-
ments of Section 404 of the Sarbanes-Oxley Law.
The activities carried out in 2006, under the guidance of
the Committee for the Management of Internal Controls and
monitored by the Audit Committee, consisted of completion of
the charting, documenting and maintenance of the internal con-
trol structure for the mitigation of risks relating to the Petrobras
System’s consolidated financial reports.
Petrobras’ General Management of Internal Controls, basi-
cally following the guidelines of the Public Company Accounting
O versight Board (PCAOB), the Committee of Sponsoring
Organizations of the Treadway Commission (Coso) and the
Control Objectives for Information and Related Technology
(Cobit), continued to implement the best practices in corporate
governance and the control over the business, service, financial
and information technology processes.
Petrobras, along with the independent auditors, endorsed
the design of the processes and controls that have a substantial
impact on the Consolidated Financial Reports. All shortcomings
that could significantly or materially jeopardize the certification
of the company’s internal controls were rectified. The System’s
Internal Auditors, directly linked to the Boards of Directors, con-
ducted further tests of the effectiveness of the controls, and no
problems were found that might compromise the evaluation of
the company’s control structure, both in terms of the whole entity
and in terms of processes and information technology.
Documentation of the design of the processes, controls and
tests is being regularly stored in an integrated system of internal
www.petrobras.com.br | AnnuAl RepoRt 2006 | 101
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corporaTe governance sTrucTure
Petrobras’ corporate governance structure comprises the Board of Directors and its advisory committees, the Executive Board, the Fiscal Council, the Internal Auditors, the General Ombudsman, the Business Committee and the Management Committees.
BOard OF directOrsAn independent collegial body with powers and responsibilities laid down in the law and in the company’s by laws, whose main duties are to define the company’s strategic guidelines and supervise the actions of the Executive Board. There are nine board members, elected at a General Shareholders’ Meeting for a term of one year, with the possibility of reelection. Seven of the board members represent the controlling shareholder; one represents the minority common shareholders; and one represents the preferred shareholders.
executive BOardThe Executive Board runs the business, in line with the mission, objectives, strategies and guidelines defined by the Board of Directors. The Executive Board consists of a CEO and six directors chosen by the Board of Directors for a term of three years, with the possibility of reelection, who may be removed at any time. Only the CEO is a member of the Board of Directors, but may not preside over that body.
Fiscal cOuncilA permanent body, independent of the company’s management, as laid down in Brazilian Corporate Law, the Fiscal Council com-prises five members, with terms of one year, with the possibil-ity of reelection. One of the members represents the minority shareholders; another represents the preferred shareholders; and three act in the name of the federal government — one of these is appointed by the Finance Minister, as the representative of the National Treasury. It is incumbent on the Fiscal Council to represent the shareholders in a supervisory capacity, monitoring the actions of the company’s management to verify compliance with their legal and statutory obligations, as well as defending the interests of the company and its shareholders.
internal auditOrsThe Internal Auditors plan, execute and evaluate the company’s internal auditing procedures and assist the senior management and external control bodies. The company also has outside audi-tors, appointed by the Board of Directors, who are restricted as to the consulting services they may provide. It is mandatory that the outside auditors be changed every five years, on a rotation basis.
general OMBudsManThe Ombudsman, directly linked to the Board of Directors, plans, guides, coordinates and evaluates activities aimed at gath-ering the opinions, suggestions, criticism, complaints and accu-sations of interested parties having some form of relationship with the company, and arranges for investigations to be carried out and appropriate steps to be taken. In compliance with the requirements of the Sarbanes-Oxley Law, this office must also serve as a channel to receive and process accusations regarding accounting, internal control and auditing issues, including confi-dential and anonymous tip-offs from employees.
BOard advisOry cOMMittees There are three Advisory Committees: for Auditing; the Environment; and Remuneration and Succession. Their mem-bers belong to the Board of Directors and assist the Board in carrying out its responsibility to provide the company with high level guidance and direction.
audit committee In full compliance with the requirements of the Sarbanes-Oxley Law, this committee comprises three independent Board mem-bers and its president needs to be a financial specialist — in accor-dance with SEC definitions. The committee’s function is to analyze questions regarding the integrity of the company’s US GAAP financial reports and the effectiveness of its internal controls, as well as supervising Petrobras’ outside and internal auditors.
Business cOMMitteeThis committee is a forum for integration, seeking to align busi-ness development, management of the company and the guide-lines of the Strategic Plan, in support of the senior management’s decision making process.
ManageMent cOMMitteesThese are forums for delving deeper into issues that are to be presented to the Business Committee, with which it liaises. Such integration also exists between the Management Committees themselves and in their relations with the Board Advisory Committees.
At present, the company has the following Management Committees: Exploration & Production; Downstream; Gas & Energy; Human Resources; Health, Safety & the Environment; Organization and Management Analysis; Information Technology; Internal Controls; Risk; Petrobras Technology; Social and Environmental Responsibility; and Marketing & Brands.
asphalt emulsion plant in são José dos
campos, são Paulo
102 | AnnuAl RepoRt 2006 | petRoBRAs
control management, which automatically monitors the chang-
ing roles and responsibilities, making it possible to visualize the
internal control structure, from the managers who are directly
responsible for the controls all the way up to the senior levels,
even to the CFO and the CEO of Petrobras. Hence, the manag-
ers, the General Management of Internal Controls, the Internal
Auditors, senior management and the Audit Committee can see,
at any given moment, an up-to-date analysis of the position of the
Petrobras System’s internal controls.
inFOrMatiOn disclOsureIn line with its policy of transparency in its relationship with the
capital markets, the company holds quarterly open meetings at
which it announces its results and releases its quarterly BR GAAP
and US GAAP balance sheets. Due to the listing of the company’s
shares in Argentina, as of the year end 2006, Petrobras will now
also disclose its annual US GAAP balance sheet reconciled to the
Argentinean standard.
Petrobras has an internal document formally defining the
controls and procedures for the disclosing of information, that
is to be followed by all the company’s staff. This ensures that the
information released to the market has been recorded, processed,
developed and made available in compliance with the legal rules
and time limits. +
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The Petrobras organization model, ratified by the Board of Directors
in October 2000, is constantly being refined in order to tailor it to
the Strategic Plan. Changes in the company’s organizational struc-
ture in 2006 resulted in, among other things, the reorganization of
the Gas & Energy business area and the setting up of the Santos
Petrobras Organization Model Basin Exploration & Production business unit. Furthermore,
reviews were carried out of the organization and management
model for the International business area and of some business
unit structures abroad, in addition to the implementation of a new
organizational structure for the Financial area. +
104 | AnnuAl RepoRt 2006 | petRoBRAs
JOsé sergiO gaBrielli de azevedO ceo
coRpoRAte AReA
General Ombudsman Office Maria augusta carneirO riBeirO
Internal Auditors gersOn luiz gOnçalves
Petrobras General Secretary HéliO sHiguenOBu FuJikaWa
CEO’s Cabinet arMandO raMOs triPOdi
Business Strategy &Performance celsO FernandO luccHesi
Management System Development antOniO sergiO Oliveira santana
New Business rOgeriO gOncalves MattOs
Institutional Communications WilsOn santarOsa
Legal niltOn antOniO de alMeida Maia
Human Resources diegO Hernandes
finAnciAl AReA
alMir guilHerMe BarBassa cfo
Corporate daniel liMa de Oliveira
Finance PedrO augustO BOnésiO
Financial Planning & Risk Management JOrge JOsé naHas netO
Accounting MarcOs antOniO silva Menezes
Taxation Maria alice Ferreira descHaMPs cavalcanti
Investor Relations raul adalBertO de caMPOs
gAs & eneRgy AReA
ildO luís sauer Director
Corporate antOniO eduardO MOnteirO de castrO
Energy Development MOzart scHMitt de QueirOz Marketing & Sales luiz antOniO cOsta Pereira Energy Operations & Stakeholdings FernandO JOsé cunHa
Natural Gas Logistics & Stakeholdings sydney granJa aFFOnsO
Business ManagementexecuTIve BoaRD
www.petrobras.com.br | AnnuAl RepoRt 2006 | 105
Board of directors
ChairwomandilMa vana rOusseFF
Board Memberssilas rOndeau cavalcanti silvaguidO MantegaJOsé sergiO gaBrielli de azevedOgleuBer vieira*artHur antOniO sendasrOger agnelliFáBiO cOlletti BarBOsaJOrge gerdau JOHannPeter* Replaced by Francisco Roberto de Albuquerque as from April 2, 2007
Bus
ines
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an
ag
em
en
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ex
ec
ut
ive
Bo
AR
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fiscal council
MembersMaria lúcia de Oliveira Falcón nelsOn rOcHa augustO túliO luiz zaMin erenice alves guerraMarcus Pereira aucéliO
Substitute memberscelsO BarretO netOMaria auxiliadOra alves da silvaMarcelO cruzedisOn Freitas de OliveiraeduardO cOutinHO guerra
exploRAtion & pRoDuction AReA
guilHerMe de Oliveira estrella Director
Corporate FranciscO nePOMucenO FilHO
North-Northeast sOlange da silva guedes
South-Southeast JOsé antOniO de FigueiredO
Production Engineering JOsé Miranda FOrMigli FilHO
Exploration PaulO Manuel Mendes de MendOnça
Services erardO gOMes BarBOsa FilHO
DoWnstReAm AReA
PaulO rOBertO cOsta Director
Corporate venina velOsa da FOnseca
Logistics PaulO MauríciO cavalcanti gOnçalves Refining alan kardec PintO
Marketing & Sales nilO carvalHO vieira FilHO
Petrochemicals & Fertilizers JOsé liMa de andrade netO
inteRnAtionAl AReA
nestOr cuñat cerveró Director
Corporate cláudiO casteJOn
Southern Cone Region déciO FaBríciO OddOne da cOsta
Business Development luís carlOs MOreira da silva
Business Technical Support aBíliO PaulO PinHeirO raMOs
Americas, Africa & Eurasia saMir PassOs aWad
seRvices AReA
renatO de sOuza duQue Director
Health, Safety, & the Environment ricardO santOs azevedO
Materials MarcO aureliO da rOsa raMOs
Cenpes carlOs tadeu da cOsta Fraga
Engineering PedrO JOsé BaruscO FilHO
Information Technology WasHingtOn luiz Faria salles
Shared Services ricardO antOniO aBreu ianda
106 | AnnuAl RepoRt 2006 | petRoBRAs
gloSSaRY
adrs - aMerican dePOsitary receiPts | Certificates represent-
ing one or more shares in a foreign company, that are traded in the
United States. An American depositary bank will issue ADRs against
underlying shares deposited with a custodian in the country of
origin of those shares. In the case of Petrobras, in 2006, each ADR
represented four underlying shares.
anP - natiOnal agency FOr Oil, natural gas & BiOFuels | The
Brazilian regulatory body for the oil and gas sector.
aPi degree (0aPi) | A scale developed by the American Petroleum
Institute to indicate the relative density of an oil or a by-product.
The API scale, measured in degrees, varies inversely with differ-
ences in the relative density, i.e. the greater the relative density, the
lower the API degree. Conversely, the lighter the oil, the higher the
API degree. Oils with an API of more than 30o are considered light;
between 22o and 30o are medium; lower than 22o are heavy; while
an API equal to or lower than 10o indicates an extra-heavy oil. The
higher the API degree, the greater the product’s market value.
assOciated natural gas | Natural gas produced along with oil.
A petroleum reservoir usually contains oil, gas and water. This gas
is obtained once the liquid oil fraction has been separated. There
is also non-associated gas, produced from gas reservoirs without
the need for separation. In the case of both types, however, the gas
is processed before it is sold, in order to ensure that it meets the
required quality standards.
BiOdiesel | A renewable and biodegradable alternative to diesel
fuel, obtained from the chemical reaction of animal or vegetable
oils and alcohol in the presence of a catalyst, a process known as
transesterification. It can also be obtained through the processes
of cracking and esterification.
BlOck | A small portion of a sedimentary basin where oil and natural
gas exploration and production is carried out.
BOOk value | The value of a company’s net equity or sharehold-
ers’ equity.
Brent | Oils extracted from the Brent and Ninian systems, in the
North Sea, with an API of 39.4o and 0.34% sulfur content.
Br gaaP | The Generally Accepted Accounting Principles in Brazil.
Bunker Fuel | Fuel for a vessel. The bunker is the place where it
is stored.
catalytic cracking | Refining process whereby heavier distilled
oils are converted into lighter fractions of greater commercial value,
such as gasoline, liquefied petroleum gas (LPG) and naphtha.
cO-generatiOn | The simultaneous generation of electricity and
thermal energy (heat and steam from the process), through the
sequential and efficient use of quantities of energy from the same
source. This increases the thermal efficiency of the entire thermo-
dynamic system.
cOndensate | Usually produced with natural gas and recovered
from an underground reservoir in the normal process of separa-
tion. It is gaseous in its reservoir state but becomes liquid under
the normal surface pressure and temperature conditions at which
it is subsequently kept.
www.petrobras.com.br | AnnuAl RepoRt 2006 | 107
cOnFerence call | A telephone conference wherein company rep-
resentatives talk to analysts and institutional and individual inves-
tors, normally held when the company is disclosing its most recent
quarterly financial results. The company representatives will usually
also provide information relating to its outlook for the future.
cOrPOrate gOvernance | The relationship between economic
agents (shareholders, executives, board members), which can influ-
ence or determine the course and performance of a company. Good
corporate governance provides the shareholders with an assurance
of equitable treatment, transparency and responsibility for the
company’s results.
crude Oil | The primary feedstock at a processing plant.
derivative | A contract or security whose value is related to the
changes in the price of another security, financial instrument or
underlying index. Consequently, it can be used as a hedge.
dJsi | The Dow Jones Sustainability Index, which reflects the return
on a hypothetical portfolio of companies listed at the New York stock
exchange (NYSE) that have the best performance in all aspects of
business sustainability. Considered to be the world’s premier sus-
tainability index, it is used as a parameter by socially and environ-
mentally responsible investors.
dOWnstreaM | Collective term for the activities of refining crude
oil, treating natural gas and transporting and commercializing/dis-
tributing the oil products.
eBitda | Earnings before interest, taxes, depreciation & amortiza-
tion expenses.
eBitda Margin | Informs how much net revenues contribute
towards the EBITDA.
e&P | Exploration and production of oil and natural gas.
etHene Or etHylene | A basic petrochemical product (C2H4) of
the light olefin family, produced from naphtha or ethane.
exPlOratOry success rate | The number of exploratory wells with
commercially viable oil and/or gas, as a proportion of the total num-
ber of exploratory wells drilled and evaluated in that same year.
Field | A geographical area encompassing a group of one or more
underground oil or natural gas reservoirs, possibly at variable depths,
and the production infrastructure (facilities and equipment).
FPsO (FlOating, PrOductiOn, stOrage & OFFlOading) | A float-
ing unit for the production, storage and transfer of petroleum, using
a ship as a platform.
FrOntier areas | Basins or parts of basins in which there has been
little exploration.
Fuel Oil | The heavier fractions from the atmospheric distillation of
petroleum, widely used as an industrial fuel in boilers, furnaces, etc.
grOss Margin | Gross profit divided by net revenue.
Hedge | A financial position or combination of positions, taken out
for the purpose of reducing some kind of risk.
iBOvesPa (BOvesPa index) | Indicator of the price changes of a
hypothetical share portfolio that is defined periodically by the São
Paulo stock exchange (Bovespa).
installed caPacity | A plant’s processing capacity, as authorized
by the ANP.
investMent grade | A level of risk classification indicating that the
company is considered to be a low credit risk and that its shares may
therefore be acquired by more conservative investors.
ise (BOvesPa cOrPOrate sustainaBility index) | The Corporate
Sustainability Index reflects the return on a hypothetical portfolio of
companies listed at the São Paulo stock exchange (Bovespa) that have
the best performance in all aspects of business sustainability. The 34
companies, whose 43 shares (common and preferred) comprise the
index, were chosen for their policies, management practices, perfor-
mance and compliance with legal obligations regarding economic
efficiency, environmental equilibrium, social justice, product charac-
teristics and corporate governance. The ISE is a pioneering initiative in
Latin America that seeks to create an investment environment com-
patible with the demands of sustainable development in modern day
society, as well as to encourage corporate ethics and responsibility.
isO 14001 | Prepared and run by the International Organization for
Standardization, it specifies the requirements for the certification
of environmental management systems.
liQueFied natural gas (lng) | Supercooled natural gas that is
maintained as a liquid, at -160° Celsius or less, for the purpose of
storage and transportation.
liQueFied PetrOleuM gas (lPg) | A mixture of hydrocarbons and
high-pressure steam, obtained from natural gas at special process-
108 | AnnuAl RepoRt 2006 | petRoBRAs
ing units, which is kept in a liquid state by pressure or cooling, to
facilitate storage, transport and handling.
Market sHare | The proportion of total market sales represented
by a specific company or product.
Market value | The value of a company, as measured by the market
price of its shares, multiplied by the number of shares issued.
MercHant POWer statiOn | A commercial power station that normally
produces power for the spot market. Petrobras’ contracts with three
merchant power stations were signed at the time of electricity rationing,
during the Brazilian energy crisis of 2001/2002, and provide for the pay-
ment of contingency contributions in the event that their sales revenues
are not sufficient to cover the costs of running the plants.
naPHtHa | A petroleum by-product, mainly used as a feedstock by
the petrochemical industry, to produce ethylene and propylene, along
with other liquid fractions such as benzene, toluene and xylene.
natural gas | Refers to all hydrocarbons or hydrocarbon mixtures
that remain in a gaseous state under normal atmospheric conditions,
extracted directly from reservoirs of petroleum or gas. The term
embraces moist, dry, residual and rare gases, predominantly methane
and ethane, used for industrial, domestic and automotive fuel.
natural gas liQuids (ngl) | Refers to the portion of natural gas
that is found in its liquid state under a determined surface pressure
and temperature, obtained during natural gas production through
field separation processes, in natural gas processing units or in gas
pipeline transfer operations.
natural gasOline | A liquid with a steam pressure halfway between
those of condensate and LPG, obtained from natural gas through a
process of compression, distillation and absorption.
net Margin | Net earnings divided by net revenue.
OFFsHOre/ OnsHOre | Located, respectively, at sea or on land.
OHsas 18001 | An international standard, prepared and run by BSI
Management Systems, it specifies the requirements for the certifica-
tion of health and work safety management systems.
Oil | The portion of petroleum that exists in a liquid state under
original reservoir conditions and remains liquid under surface pres-
sure and temperature conditions.
OPec Basket | A basket of oils representing the production of the
members of the Organization of Petroleum Exporting Countries:
Saharan Blend (Algeria); Minas (Indonesia); Iranian Heavy (Iran);
Basrah (Iraq); Kuwait Crude (Kuwait); Es Sider (Libya); Bonny Light
(Nigeria); Dukhan (Quatar); Arab Light (Saudi Arabia); Murban
(UAE) and BCF-17 (Venezuela), used as a base of reference.
OPerating Margin | Operating profit divided by net revenue.
PetrOleuM | Any liquid hydrocarbon in its natural state, such as
crude oil and condensate.
POlyetHylene | A petrochemical product used to make objects
such as casks, receptacles, film containers, plastic packaging for
clothing and lightweight objects.
POlyPrOPylene | A petrochemical product with uses similar to
those of high-density polyethylene, such as film, drink crates and
packaging.
PriMary PrOcessed tHrOugHPut | The quantity of crude oil
processed at the distillation plants.
PrOcessed tHrOugHPut | Total amount of crude oil plus reprocess-
ing and intermediate products processed at the distillation plants.
PrOPene Or PrOPylene | A basic petrochemical product, pro-
duced from naphtha or propane, that serves as feedstock for making
polypropylene.
PrOven reserves | Reserves of petroleum and/or natural gas that,
based upon analysis of geological and engineering data, are esti-
mated to be profitably recoverable from reservoirs discovered and
evaluated, to a high degree of certainty, taking into account the
prevailing economic circumstances, feasible operational methods
and petroleum and tax regulations.
rating | Classification or evaluation of risk.
recOveraBle vOluMe | The volume of petroleum that can be
removed from a reservoir, from start-up to abandonment, using the
best current technology, as determined through technical-economic
studies carried out up to the time of the evaluation. Recoverable
volume = original volume x recovery factor.
reserve | Discovered oil and/or natural gas resources that are com-
mercially recoverable as of a given date.
reserve rePlaceMent index (rri) | The ratio between the volume
of reserves incorporated during any given year and the total produc-
www.petrobras.com.br | AnnuAl RepoRt 2006 | 109
tion volume over the course of that same year.
retarded cOking | The most severe form of thermal cracking,
that transforms vacuum residue into lighter products, as well as
producing coke.
rOce – return On caPital eMPlOyed | Calculated using the equa-
tion: net earnings — financial income (net of income taxes) / aver-
age borrowing (loans and financing) + average stockholders’ equity
— financial investments.
sec – securities and excHange cOMMissiOn | The regulatory
body that oversees the US capital market. The Brazilian equivalent
is the CVM - Comissão de Valores Mobiliários.
sPe | Society of Petroleum Engineers.
sWaP | Contract between two parties to exchange flows of payments.
A typical oil swap consists of a contract in which one party buys at a
certain set price and sells at a future floating price.
uPstreaM | Collective term for the activities of exploration and
production.
us gaaP | The acronym for Generally Accepted Accounting Principles
in the United States of America. It is the US accounting standard.
vOlatility | Statistical measurement of the changes in a price or rate
over time, usually expressed as a standard deviation from a norm.
The greater the volatility, the wider is the variation from the mean.
WOrk-related illness | An illness acquired or caused as a result of
the special conditions under which a job is performed and to which
it is directly related.
Wti | West Texas Intermediate is an oil with an API of between
38º and 40º and a sulfur content of around 0.3%, whose daily spot
market quotation represents the price of barrels of oil in Cushing,
Oklahoma, in the USA.
cOnversiOn taBle
a) Cubic meters (m3) into barrels (b):
b = m3 0.158984
B) Barrels (b) into cubic meters (m3):
m3 = b x 0.158984
c) Cubic meters (m3) into tons (t):
t = m3 x D
d) Tons (t) into cubics meters (m3):
m3 =
t
D
e) Barrels (b) into tons (t):
t = b x 0.158984 x D
F) Tons (t) into barrels (b):
b = t D x 0.158984
g) 1 m3 = 1,000 liters = 6.28994113 b
H) 1 b = 158.984 liters = 0.158984 m3
i) 1,000 m3 natural gas = 1 m3 oil (approximately)
J) D = M , where V
D = Density, M = Mass, V = Volume
aBBreviatiOns
BOe | Barrels of oil equivalent. Normally used to express volumes of oil and
natural gas in the same unit of measurement (barrels) by converting Brazilian
gas at the rate of 1,000 m3 of gas to 1 m3 of oil. As an international standard,
one barrel of oil equivalent equals approximately 6,000 cubic feet of natural
gas (1 m3 = 35.31 ft3).
BOed | Barrels of oil equivalent per day.
BPd | Barrels per day.
110 | AnnuAl RepoRt 2006 | petRoBRAs
Head OFFice
PetróleO BrasileirO s.a. – PetrOBras
Av. República do Chile, 65 – Centro
20031-912 – Rio de Janeiro – RJ
Tel.: (++55) 21 3224-4477
lOcal rePresentatiOn
Brasília
Setor de Autarquias Norte – SAN
Quadra 1, bloco D, Edifício PETROBRAS - 2º andar
70040-901 – Brasília – DF
Tel.: (++55) 61 3429-7131
Fax: (++55) 61 3226-6341
sãO PaulO
Avenida Paulista, nº 901 – 11º andar - Cerqueira César
01311-100 – São Paulo – SP
Tel.: (++55) 11 3523-6501
Fax: (++55) 11 3523-6488
salvadOr
Avenida Antônio Carlos Magalhães, nº 1113 - sala 112 - Pituba
41825-903 – Salvador – BA
Tel.: (++55) 71 3350-3700
Fax: (++55) 71 3350-3080
rePresentatiOn aBrOad
neW yOrk
570, Lexington Avenue – 43rd Floor
10022-6837 New York – NY – USA
Tel.: (++1) 212 829-1517
Fax: (++1) 212 832-5300
tOkyO
Togin Building – 5th Floor, Room 508
4-2 Marunouchi 1 – Chome – Chiyoda-Ku
Tokyo 100-0005 – Japan
Tel.: (++81) 3 5208-5285
Fax: (++81) 3 5208-5288
cHina
Petrobras Beijing Representative Office
China World Trade Center – Tower 1 – Units 1221-1225
No1, Jian Guo Men Wai Avenue – Chao Yang District
Beijing 100004 – P. R. China
Tel.: (++86) 10 6505-9838
Fax: (++86) 10 6505-9850
singaPOre
435 Orchard Road - Room 19-05/06 - Wisma Atra
Singapore – 238877
Tel.: (++65) 6550-5080
Fax: (++65) 6734-9081
aDDReSSeS
www.petrobras.com.br | AnnuAl RepoRt 2006 | 111
sHareHOlder services
PetróleO BrasileirO s.a. – PetrOBras
Shareholder Support
Tel.: (++55) 21 3224-1524 or 3224-1550
0800-2821540
Fax: (++55) 2262-3678
Av. República do Chile, 65 – sala 2202-B
CEP 20031-912 – Centro – Rio de Janeiro – RJ
e-mail: acionistas@petrobras.com.br
dePOsitOry Banks
BancO dO Brasil s.a.
Shareholder Services
Tel.: (++55) 21 4004-0001 State capitals and metropolitan areas
0800 72 99 001 Other locations
Capital Market & Investment Area
Asset Accounting Department
Rua Lélio Gama, 105 - 260º andar
CEP 20031-201 – Centro – Rio de Janeiro – RJ
e-mail: aescriturais@bb.com.br
Obs.: Shareholder services are provided throughout the bank’s branch network.
adrs
JP Morgan Chase Bank
Tel.: (++1) 201 680-6630
Fax: (++1) 212 623-0079
PO BOX 3408
South Hackensack – 07606-3408 – NJ – USA
e-mail: adr@jpmorgan.com
website: www.adr.com
dePartMent FOr latin aMerica relatiOns
Tel.: (++55) 3048-3507
Av. Brigadeiro Faria Lima, 3729 – 14º andar
04538-000 – São Paulo, SP
investOr services
PetróleO BrasileirO s.a. – PetrOBras
Investor Relations Area
Tel.: (++55) 21 3224-1510 or 3224-9947
Fax: (++55) 21 3224-6055
Avenida República do Chile, 65 – sala 2202-B
CEP 20031-912 – Centro – Rio de Janeiro – RJ
e-mail: petroinvest@petrobras.com.br
WeBsite
The address of the Petrobras internet website is www.petrobras.
com.br. There you can find general information about the com-
pany and there is a section devoted specifically to investor rela-
tions, with details about the company’s results, financial state-
ments (BR GAAP and US GAAP), annual reports, recordings and
transcripts of presentations to investors, the bylaws, share prices,
information for shareholders, etc.
annual general Meeting
Annual General Meetings – AGMs are held within the first four
months immediately after the end of the financial year, in accordance
with article 39 of the bylaws, at the company’s head office, located
at Avenida República do Chile, 65 – Centro, Rio de Janeiro.
112 | AnnuAl RepoRt 2006 | petRoBRAs
Overall cOOrdinatiOn, PrOductiOn and editing:
Investor Relations and Institutional Communication
design:
Tabaruba Design
editOrial cOOrdinatiOn:
Flávia Cavalcanti
text editing:
Vania Mezzonato
text:
Francisco Noel
englisH translatiOn and PrOOFreading:
Bruce L. Rodger
Printing:
RR Donnelley Moore
PHOtOgraPHs:
Petrobras Picture Database, Bruno Veiga, Estefano Lessa, Felipe Goifman, Geraldo Falcão, J. Valpereiro, José Caldas, Juarez Cavalcanti, Roberto Rosa, Rogério Reis, Segundo Luchia Puig, Thelma Vidalescover: P-52 platform deck-mating operation, Angra dos Reis, Rio de Janeiro (Felipe Goifman)Page 10: Petrobras president and CEO José Sergio Gabrielli at the company headquarters, Rio de Janeiro (Rogério Reis)Page 18: Supply terminal at Betim, Minas Gerais (Bruno Veiga) Page 44: Puerto General San Martin plant, Santa Fé province, Argentina (Segundo Luchia Puig)Page 56: Environmental Protection Center (CDA) at Reduc, Rio de Janeiro (Rogério Reis)Page 76: E&P Area Virtual Reality Center, Rio de Janeiro (Geraldo Falcão)Page 86: Downstream trading room, Rio de Janeiro (Geraldo Falcão)
PaPer:
This Petrobras Annual Report 2006 was printed on recycled paper (Reciclato, by Suzano)
nOte tO tHe reader
This document contains forward-looking statements that merely reflect the expectations of the company’s manage-ment. Such forward-looking statements clearly involve risks or uncertainties that may or may not have been fore-seen by the company. Consequently, the future results of the company’s operations may differ from current expecta-tions, and the reader is advised not to base his or her own expectations or investment decisions exclusively upon the information presented herein. The company is under no obligation to update these forecasts in the light of new information or future developments.
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