"latin america perspectives and opportunities"

Latin America Perspectives and Opportunities

Raul Adalberto de CamposInvestor Relations Executive ManagerApril, 2007

PETROBRAS IS A MARKET ORIENTED AND PROFIT DRIVEN ENTERPRISE…

Top ADR: turnover (traded volume) in NYSE 2006 American Depositary

Receipts (US$ billion)TOP

VOLUMEADR

IN NYSE

Petrobras* BP Nokia AmericaMovil*

BHP Billiton

Cemex Total RD Shell*

81,9

60,653,2

38,628,5 26,3 25,0 22,6

PETROBRAS IS CONTROLLED BY THE GOVERNMENT OF BRAZIL BUT.........

Most of NOC´S•Control over their home market•Produce in home country only•Are endowed with prodigious quantities of “easy” oil

• Little technological exchange

PETROBRAS –•Exposed to Competition•Operates internationally•Develops and applies advanced technologies•Engage in joint-ventures•Highly committed with corporate governance rules

PETROBRAS COMPLIES WITH ALL SARBANES-OXLEY PROVISIONS

INVESTMENT GRADE S&P AND MOODY’S

Integration of the Company´s Activities

Energy

Industry

Imported OilProducts

ImportedOil

Imported Gas

International OilProduction

H - Bio

DomesticNatural GasProduction

Biodiesel Oil Productssold in Brazil

InternationalSales

OtherRenewables

Infrastructure

Petrochemical Plants

Brazilian OilProduction

Throughputin Brazil

InternationalRefining

Ethanol

PRODUCTION X DEMAND X REFINING CAPACITY: REACHING SELF-SUFFICIENCY

112,197,670,449,355,356,216,719,532,228,430,53,0

2011F20062000199519901985198019751970196519601955Production/ Consumption

(%)

1954 1960 1970 1980 1990 2000 2006 2011

THO

USA

ND

BPD

0

500

1000

1500

2000

2500

Production

Consumption

Refining

Brazil: first major market to shiftfrom import dependency to selfsufficiency since first oil fromNorth Sea in 1971 began to shifteuropean balance

Proj.

PETROBRAS Investment Plan 2007-2011

• Heavy oil production technology development will expand LA reserve growth possibilities;

• Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities andincrease agricultural productivity considering comparative advantages;

• Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL;

• Further progress in regional integration.

Note: Includes International area

Upstream Downstream G&EPetrochemical Distribution Corporate

9%4%

3% 26%

56%

3%

US$ 87.1 billion

49,3

23,07,5

3,32,31,8

Business Plan 2007-2011 - Total Production – Oil, NGL’s and Natural Gas





1 . 6 8 4 1 . 8 8 01 . 5 4 0 1 . 4 9 3

2 5 0 2 6 5 2 7 4

2 8 91 3 3

1 6 1 1 6 81 6 3

8 51 0 1

9 49 6

2 0 0 3 2 0 0 4 2 0 0 5 M e t a 2 0 0 6

Ól e o + L G N B r a s i l G ás N a t u r a l B r a s i l

Ól e o + L G N I n t e r n a c i o n a l G ás N a t u r a l I n t e r n a c i o n a l

2.036

2 . 3 7 42 . 8 1 2

5 5 1

7 2 4

7 4 2

1 8 5

2 7 8

3 8 3

M e t a

2 0 1 1

M e t a

2 0 1 5

2,0202,217

2,403

3,493

4,556Thousand boed

7.8% p.a.

7.5% p.a.

Investment in E&P ofUS$ 49.3 billion in

2007-2011

Oil + NGL International International Natural GasNatural Gas Brazil

,

Target Target 2011 Forecast 2015

Oil + NGL Brazil

1984 1994 2004

Total762 billion barrels

Total1,017 billion barrels

Total1,194 billion barrels

In 20 years, Latin America proven reserves increased from 36.6 billion barrels (1984) to 103 billion.Source: BP Statistical Review of World Energy

R/P* = 26.77 R/P* = 41.78 R/P* = 41.84

* Reserves/Production Latin America (years)

12.7%

7.6%

13.4%

5.0%

4.8%

56.5%

Middle Orient Europe & Eurasia AfricaNorth America Pacific Asia Latin America

7.9%

6.4%

8.8%

3.8%

8.0%

65.1%11.7%

9.4%

5.1%

3.5%

8.5%

61.8%

7

Latin American Share of Oil World Reserves Latin American oil reserves are becoming increasingly important

Source: Internacional Energy Agency Reference Scenario

Net Oil and Oil Products Availability (excluding OPEC countries)

Mbpd

Latin America (including Venezuela)

Russia

AsiaUnited StatesOECD(- Mexico)

Projected growth in oilproduction anddemand suggestsbalance andindependence of supply from politicallyunstable regions

8

Ability to produce non-conventional heavy oil will play an increasing role in LA

Source: Cambridge Energy Research Associates.

Gas Rich Region with limited infrastructureProven Reserves as of January 1, 2005

14.5 Tcf

10.9 Tcf

Brazil

Argentina

Perú

Mexico

Venezuela

26.1 TcfBolivia

11.7 Tcf

17.7Tcf

151.9 Tcf 19.4 Tcf

Trinidad

2005 GasProven ReservesWorld:179,8 T m3 / 6,350 TcfSouth and Central America:7,02 T m3 / 247,9 Tcf

9

0.41 T m3

4.3 T m30.55 T m3

0.31 T m3

0.33 T m3

0.74 T m3

0.50 T m3But:::: Will require increasing energy

integration and::: Substantial investments in

infrastructure covering great distances and environmentally sensitive regions

Ample gas reserves will allow for:::: Regional growth in consumption

substituting some demand for oil::: Higher exports of liquids

Consumption of oil as % of Production 2005

Source: BP Statistical Review 2006; EIA; INE/BO; Superintendence de Hidrocarburos de Bolivia

15%18%

80%

58% 53%42%

27%

106%

Brazil Bolivia Oil Argentina Mexico Colombia Ecuador Venezuela Bolivia Gas

10

Relative importance of oil sector varies widely among the main players in the region affecting legislation, pricing and curbing integration prospects

International prices affect each country's trade balance differently

11

87%

60%

36%

26%

15%

9%7%

Venezuela Ecuador Bolívia (gas) Colômbia México Argentina Brasil

Exports of oil as % of total Goods Exports 2005 (in US$)

11

Bolívia (oil)

11%

Source: BP Review 2006; EIA; INE/BO

• Countries that have recently changedor have manifested a desire to change legislation towards higher Government Participation in production and revenues: Venezuela, Ecuador, Bolivia

• Countries that are in the process of liberalizing legislation to encourage foreign participation: Colombia & Peru

• Countries that have consolidated reforms: Argentina (w/ price controls) & Brazil (w/o price controls);

• Mexico remains the most closed oil economy but there are indications that a move towards opening to investment is possible.

Regulatory Challenges – Recent Trends

12

Latin America offers excellent resources to expand agricultural production

Africa Latin America Asia OCDE World

More than 3 times the average world per capita water availability

3,966 4,050

24,973

11,1967,055

Nearly half world sugar cane production Nearly 1/3 world main oil seed production

Availability per capita (m3/year)

Higher Potable Water availability per capita

Million Metric Tons

World South and Central Americaand Caribbean

Soybeans, Groundnuts, Sunflower, Rape Seed, Cotton Seed

95

359

World South and Central Americaand Caribbean

631

1,328

Sugar cane production

Million Metric Tons

13

Bio-fuel usage in OECD Countries will benefit LA

Global warming, energy security and/or cost effectiveness are

encouraging renewable fuels with two important initiatives: (i) ethanol and (ii) biodiesel. Both can be

produced and consumed in Latin America advantageously.

Production of biofuels in LA will also contribute to displace production of liquids increasing export availability.

14

Ethanol Production

Growth: sales of ethanolpoweredcars Stagnation:

discredit;low HP vehicles;preference for sugar;importedautomobiles

Stagnation:discredit;low HP vehicles;preference for sugar;importedautomobiles

Retrench:Increase in legal ethanol in gasoholraised to 24%

Retrench:Increase in legal ethanol in gasoholraised to 24%

Currentphase:Growth in sales of flexfule vehicles

Currentphase:Growth in sales of flexfule vehicles

Program went through four phases as a result of prices, legislation, consumer preferences and technology

0

2.000

6.000

10.000

14.000

18.000

80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07

Crop Year

thou

sand

(m³/t

on)

Anhydrous Hydrated Total 2006/07Estimates

2006/07Estimates

2006/07Estimates

Original drivers were energy security and economic attractiveness;

Today environmental benefits are also a consideration.

CNG

ETHANOL

GASOLINE

Source: MME, BEN 2006

120000

140000

1976 1980 1984 1988 1992 1996 2000 2004

In this period, ethanol utilization avoided 644 million tons CO2 emissions

1972

Brazil is the 1st country to reap benefits from Ethanol

Fuel demand for Otto Cycle Vehicles

160000

10000

80000

60000

40000

20000

01000

BEP

16

Accumulated effective economy:1 Billion boe ~US$ 52 bi

Ethanol motivated and boosted greater land productivity

46,557,0

63,2 61,566,6 67,6 72,8

1975 1980 1985 1990 1995 2000 2005

Brazillian Productivity

53,8 55,3 58,561,6 62,8 64,2 65,6

1975 1980 1985 1990 1995 2000 2005

World Average Productivity

+ 57%

+ 22%

+11%-14%

MTper Ha

Importing States

Exporting States

INTERSTATE TRADE REPRESENTS 33% OF CONSUMPTION

DISTRIBUTION AND REGIONALIZATION

ETHANOL DISTRIBUTION

PRO

DU

CIN

G S

TATE

S

CONSUMING STATES

33% OF PRODUCTION EXPORTED FROM PRODUCING TO CONSUMING STATES

21 Importes States 6 Self-Suficient States

Primary Base

Ethanol Logistics System

Secondary BaseCollection Centers

RailwaysInland Navigation

RoadMulti product pipelines

Large scale marine terminals improveefficiencyLarge storage capacitynecessary to regulatesupplyPipelines reducetransport costs; improveenergy efficiency

Ethanol collection, storage and

distribution centersare spread out

through producingand consuming

regions

Petrobras in 2006 received the American Society of Mechanical Engineersaward for technological advances in pipeline technology

Industrial Plants





But the main hurdles and challenges are:

BA

MG

CE

Montes Claros

semi-arid region

3 Projects Being Implemented

Capacity: 171 thousand m3/year

Investments: ~ US$ 60 million

Jobs Generations: Construction: 1,200 direct and 400 indirectOperation: 105 directRaw material production:70,000 families

Start up: 4 Q/2007

InputsFamily Agriculture: castor, cotton, and palm.Complementary: soy.

All Petrobras Biodiesel has Social Fuel Seal

Ethanol

EthanolMultiproduct

pipeline

REFINARYTERMINAL

Distribuitionbases

MARITIME TERMINAL

GasolineEthanol

Multiproduct pipelines

Ethanol and gasohol

REFINARY

EthanolSERVICE STATIONS

MARITIME TRANSPORT

Ethanol

MARITIME TRANSPORT

Transport facilities are fully integrated with refineriesand blenders

Brazilian New Car Sales by Fuel

0

400

800

1.200

1.600

Num

bero

f Veh

icles

x1.00

0

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06

ETHANOL GASOHOL FLEX - FUEL

Year

Raw Material Energy output / energy input

Tomorrow: Lignocelluloses Biomass technology will double ethanol per ha. yield

1 metric ton of sugar cane

Molasses yields only 85 L of ethanol,

But

Cane bagasse yields 185 L of ethanolBase calculation

23

Global ethanol market totals 46.5 Billion LitersFuel Ethanol represents 30.6 Billion Liters, 67% of total ethanol production

Today global ethanol consumption is 2,6% of gasoline fuel marketIncreasing ethanol to 10% of gasoline will represent 118 Billion Liters

Rio de Janeiro(REFINERY)

150 km 370 kmTaubaté City

Existing Pipelines

Future Pipelines

Paulínia(REFINERY)

Export Capacity 18 Millions Kl/year

Ilha D’ÁguaMarine Terminal

GuararemaTerminal

130,000 dwt

15km

4 Millons Kl/ano

Regions:PiracicabaS.J.Rio PretoBauruAraçatubaMSMT

ConchasRiver

Terminal

90 km

200 k

m

Ribeirão PretoCollect Center

São SebastiãoMarine Terminal

300,000 dwt

90 km

4 Millons Kl/ano

Ethanol Exportation in Brazil - Future

Tietê River(Waterway

)

Senador CanedoTerminal

800 kmIncludes 800 Km exclusive ethanol

pipeline

TIETÊ – PARANÁ INLAND WATERWAY

REPLAN

REPAR 4 or 5 river terminalsand a 90km pipeline

Possible integration with REPAR-Cuiabapipeline

INVESTMENTS: US$ 160 M

(2008 a 2010)

Petrobras is also integratingwaterways with pipelines

H-BIO and BIODIESEL – Complementary Processes






Complementary and not competitive processes

H-BIO Process in Refinery

OIL

FCC

DIESEL DD

DIESEL COKE

DIESEL FCC

Existing HDT

OTHER FRACTIONS OF DIESEL

DIESELGasoil

VacuumResidue

VEGETABLE OIL

Process HBIO

ATMOSPHERIC DISTILLATION

VACUUMDISTILLATION

DELAYED COKING

atmosphericresidue

Potential Capacity of H-BIO

Short Term

2007

Medium Term

2008

Long Term

2011

n/a25%15%Equivalent Volume of Diesel Imports

1,050,000 cu.m/year425,000 cu.m/year256,000 cu.m/yearVegetable Oil

Consumption

1054Refineries

H-BIO






Castor-Oil Plant Sunflower African Oil PalmSoy Cotton

• HBIO is a HBIO is a processprocess of:of:

– Oil refining that utilizes vegetable oils as rawmaterial in order to obtain diesel oil

– Hydrogenation of a blend of diesel and vegetableoils

Principal Conclusions, Hurdles and Challenges

• Latin America is in a privileged position regarding oil reserves, and energy independence;

• Use of natural gas prospects are encouraging and should contributeto increase liquid fossil fuel exports availability but integration and financial issues are a main concern;

• Land, water and human resource availability and biodiversity place Central and South America and Caribbean in a privileged position to use and supply OECD countries with renewable fuels, and also further liberating liquid fossil fuels for export.






Latin America Perspectives and Opportunities

"latin america perspectives and opportunities"

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