"Latin America Perspectives and Opportunities"
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1) Petrobras is Brazil's state-controlled oil company that is market-oriented and profitable. It had the highest trading volume on the NYSE of any company in 2006. 2) While controlled by the Brazilian government, Petrobras complies with international governance standards and operates internationally, using advanced technologies. 3) Petrobras' investment plan from 2007-2011 is $87.1 billion, with 56% going to upstream oil and gas production as Brazil aims to become self-sufficient in oil.
"Latin America Perspectives and Opportunities"
- 1. Raul Adalberto de Campos Latin America Investor Relations Executive Manager Perspectives and April, 2007 Opportunities
- 2. INVESTMENT GRADE S&P AND MOODY’S PETROBRAS IS A MARKET ORIENTED AND PROFIT DRIVEN ENTERPRISE… 81,9 Top ADR: turnover (traded volume) in TOP NYSE 2006 American Depositary 60,6 VOLUME 53,2 Receipts (US$ billion) 38,6 ADR 28,5 26,3 25,0 22,6 IN NYSE Petrobras* BP Nokia America BHP Cemex Total RD Shell* Movil* Billiton PETROBRAS IS CONTROLLED BY THE GOVERNMENT OF BRAZIL BUT......... PETROBRAS COMPLIES WITH ALL SARBANES-OXLEY PROVISIONS Most of NOC´S PETROBRAS – • Control over their home market • Exposed to Competition • Produce in home country only • Operates internationally • Are endowed with prodigious • Develops and applies advanced technologies quantities of “easy” oil • Engage in joint-ventures • Little technological exchange • Highly committed with corporate governance rules
- 3. Integration of the Company´s Activities Petrochemical Imported Imported Oil Plants H - Bio Oil Products Biodiesel Oil Products Throughput Brazilian Oil sold in Brazil in Brazil Production Ethanol International Oil International International Production Refining Sales Domestic Natural Gas Other Production Energy Renewables Imported Gas Infrastructure Industry
- 4. PRODUCTION X DEMAND X REFINING CAPACITY: REACHING SELF-SUFFICIENCY Production/ 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 2011F Consumption (%) 3,0 30,5 28,4 32,2 19,5 16,7 56,2 55,3 49,3 70,4 97,6 112,1 Brazil: first major market to shift from import dependency to self sufficiency since first oil from Proj. 2500 North Sea in 1971 began to shift european balance 2000 Production THOUSAND BPD Consumption 1500 Refining 1000 500 0 1954 1960 1970 1980 1990 2000 2006 2011
- 5. PETROBRAS Investment Plan 2007-2011 US$ 87.1 billion 56% 49,3 • Heavy oil production technology development will expand LA reserve growth possibilities; • Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities and 1,8 2,3 increase agricultural productivity 23,0 3,3 3% 7,5 considering comparative advantages; 26% 3% 4% • Technological breakthroughs in 9% enzyme technology for the use of Lignocelluloses biomass and BTL; Upstream Downstream G&E • Further progress in regional Petrochemical Distribution Corporate integration. Note: Includes International area
- 6. Business Plan 2007-2011 - Total Production – Oil, NGL’s and Natural Gas 7.5% p.a. 4,556 Thousand boed 278 Investment in E&P of 7.8% p.a. 742 US$ 49.3 billion in 3,493 2007-2011 • Heavy8oil production technology 1 5 2,403 development will expand LA 4 383 72 reserve 2,217 growth5 possibilities; 5 1 2.036 , 2,020 101 85 94 96 133 • Successful Doha Round Negotiations 161 168 163 289 are essential to permit greater 250 265 274 trade of agricultural commodities and 2. 812 increase agricultural productivity 2. 374 1.540 1. 493 1.684 1. 880 considering comparative advantages; • Technological breakthroughs in enzyme technology for the use of 2003 2004 2005 Target a M et 2006 Lignocelluloses biomass e 2015BTL; Targete2011 M ta M and Forecast t a 2011 2015 Ól e o + L G NBrazils i l Oil + NGL B r a • Further progress in regional G ás N a t u r a l Brazil i l Natural Gas B r a s Ól e o + L G NInternationalo n a l Oil + NGL I n t e r n a c i integration. G ás N a t u r a l Natural a c i o n a l International I n t e r n Gas
- 7. Latin American Share of Oil World Reserves Latin American oil reserves are becoming increasingly important 1984 1994 2004 R/P* = 26.77 R/P* = 41.78 R/P* = 41.84 4.8% 8.0% 8.5% 5.0% 3.8% 3.5% 8.8% 5.1% 13.4% 9.4% 6.4% 7.6% 56.5% 65.1% 61.8% 7.9% 11.7% 12.7% Total Total Total 762 billion barrels 1,017 billion barrels 1,194 billion barrels Middle Orient Europe & Eurasia Africa North America Pacific Asia Latin America In 20 years, Latin America proven reserves increased from 36.6 billion barrels (1984) to 103 billion. Source: BP Statistical Review of World Energy * Reserves/Production Latin America (years) 7
- 8. Net Oil and Oil Products Availability (excluding OPEC countries) Ability to produce non-conventional heavy oil will play Latin America (including Venezuela) an increasing role in LA Mbpd Russia Asia United States OECD(- Mexico) Projected growth in oil production and demand suggests balance and independence of supply from politically unstable regions Source: Internacional Energy Agency Reference Scenario 8
- 9. Gas Rich Region with limited infrastructure Proven Reserves as of January 1, 2005 4.3 T m3 Ample gas reserves will allow for: 0.55 T m3 151.9 Tcf 19.4 Tcf ::: Regional growth in consumption 0.41 T m3 substituting some demand for oil 14.5 Tcf Venezuela Trinidad ::: Higher exports of liquids Mexico 0.33 T m3 Brazil 11.7 Tcf Perú 0.31 T m3 10.9 Tcf But: ::: Will require increasing energy 2005 Gas Bolivia 0.50 T m3 Proven Reserves 26.1 Tcf 17.7Tcf integration and World: 0.74 T m3 ::: Substantial investments in 179,8 T m3 / 6,350 Tcf South and Central America: Argentina infrastructure covering great 7,02 T m3 / 247,9 Tcf distances and environmentally sensitive regions Source: Cambridge Energy Research Associates. 9
- 10. Relative importance of oil sector varies widely among the main players in the region affecting legislation, pricing and curbing integration prospects 106% Consumption of oil as % of Production 2005 80% 58% 53% 42% 27% 18% 15% Brazil Bolivia Oil Argentina Mexico Colombia Ecuador Venezuela Bolivia Gas Source: BP Statistical Review 2006; EIA; INE/BO; Superintendence de Hidrocarburos de Bolivia 10
- 11. International prices affect each country's trade balance differently % Exports of oil as % of total Goods 87 Exports 2005 (in US$) % 60 % 36 % 26 % 15 % 11 9% 7% Venezuela Ecuador Bolívia (gas) Colômbia México Bolívia (oil) Argentina Brasil Source: BP Review 2006; EIA; INE/BO 11
- 12. Regulatory Challenges – Recent Trends • Countries that have recently changed or 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. 12
- 13. Latin America offers excellent resources to expand agricultural production More than 3 times the average world per capita water availability Higher Potable Water availability per capita 24,973 11,196 7,055 4,050 3,966 Africa Latin America Asia OCDE World Availability per capita (m3/year) Nearly half world sugar cane production Nearly 1/3 world main oil seed production Million Metric Tons Million Metric Tons 1,328 359 Sugar cane production Soybeans, Groundnuts, Sunflower, 631 Rape Seed, Cotton Seed 95 World South and Central America World South and Central America and Caribbean and Caribbean 13
- 14. 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
- 15. Ethanol Production Program went through four phases as a result of prices, legislation, consumer preferences and technology 18.000 Anhydrous Hydrated Total 2006/07 Estimates Growth: 14.000 sales of ethanol Retrench: powered Increase in thousand (m³/ton) 10.000 cars legal 2006/07 Stagnation: Estimates discredit; ethanol in Current low HP gasohol phase: 2006/07 raised to Growth in Estimates 6.000 vehicles; 24% sales of flex preference for fule vehicles sugar; 2.000 imported automobiles 0 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
- 16. Brazil is the 1st country to reap benefits from Ethanol Original drivers were energy security and CNG economic attractiveness; ETHANOL Today environmental benefits are also a GASOLINE consideration. 160000 Fuel demand for Otto Cycle 140000 Vehicles 120000 10000 80000 60000 40000 Accumulated effective 20000 economy: 1 Billion boe ~US$ 52 bi 1000 BEP Source: MME, BEN 2006 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 In this period, ethanol utilization avoided 644 million tons CO2 emissions 16
- 17. Ethanol motivated and boosted greater land productivity Brazillian Productivity MTper Ha + 57% 72,8 66,6 67,6 63,2 61,5 57,0 46,5 -14% +11% World Average Productivity + 22% 64,2 65,6 61,6 62,8 1975 53,8 1980 55,3 1985 58,5 1990 1995 2000 2005 1975 1980 1985 1990 1995 2000 2005
- 18. ETHANOL DISTRIBUTION INTERSTATE TRADE REPRESENTS 33% OF CONSUMPTION DISTRIBUTION AND REGIONALIZATION 33% OF PRODUCTION EXPORTED FROM PRODUCING TO CONSUMING STATES PRODUCING STATES CONSUMING STATES Importing States Exporting States 21 Importes States 6 Self-Suficient States
- 19. Ethanol Logistics System Petrobras in 2006 received the American Society of Mechanical Engineers award for technological advances in pipeline technology Ethanol collection, storage and distribution centers are spread out Large scale marine terminals improve through producing efficiency and consuming regions Large storage capacity necessary to regulate supply Primary Base Secondary Base Pipelines reduce Collection Centers transport costs; improve Inland Navigation energy efficiency Railways Road Multi product pipelines
- 20. Industrial Plants 3 Projects Being Implemented But the main hurdles Capacity: 171 thousand m3/year and challenges are: CE Investments: ~ US$ 60 million • Heavy oil production technology development will expand LA reserve Inputs growth possibilities; Family Agriculture: castor, cotton, and palm.• Successful Doha Round Negotiations Complementary: soy. are essential to permit greater BA trade of agricultural commodities and increase agricultural productivity Jobs Generations: considering comparative advantages; Construction: 1,200 direct and 400 indirect Operation: 105 direct • Technological breakthroughs inMontes MG Raw material production:70,000 families enzyme technology for the use Claros of Lignocelluloses biomass and BTL; Start up: 4 Q/2007 semi-arid region • Further progress in regional integration. All Petrobras Biodiesel has Social Fuel Seal
- 21. Transport facilities are fully integrated with refineries and blenders Ethanol t duc MARITIME i pro ne TRANSPORT ult eli M ip p Ethanol Ethanol REFINARY TERMINAL REFINARY Mu MARITIME ltip Eth rod TRANSPORT ano uct l an pip d g elin aso es hol MARITIME SERVICE STATIONS TERMINAL Ethanol Distribuition bases Gasoline Ethanol
- 22. Brazilian New Car Sales by Fuel 1.600 ETHANOL GASOHOL FLEX - FUEL Number of Vehiclesx 1.000 1.200 800 400 0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 Year
- 23. Global ethanol market totals 46.5 Billion Liters Fuel Ethanol represents 30.6 Billion Liters, 67% of total ethanol production Raw Material Energy output / energy input Today global ethanol consumption is 2,6% of gasoline fuel market Increasing ethanol to 10% of gasoline will represent 118 Billion Liters Tomorrow: Lignocelluloses Biomass technology will double ethanol per ha. yield Molasses yields only 85 L of ethanol, 1 metric ton of sugar cane But Cane bagasse yields 185 L of ethanol Base calculation 23
- 24. Ethanol Exportation in Brazil - Future Includes 800 Km 800 km Senador Canedo exclusive ethanol Terminal pipeline Tietê River (Waterway Ribeirão Preto Export Capacity 18 Millions Kl/year ) Collect Center Conchas 200 km River Terminal Regions: 90 Piracicaba Paulínia Guararema Rio de Janeiro km (REFINERY) 150 km Taubaté City 370 km S.J.Rio Preto Terminal (REFINERY) Bauru Araçatuba MS 90 km MT 15km São Sebastião Ilha D’Água Future Marine Terminal Marine Terminal Pipelines Existing 4 Millons Kl/ano 4 Millons Kl/ano Pipelines 300,000 dwt 130,000 dwt
- 25. TIETÊ – PARANÁ INLAND WATERWAY INVESTMENTS: US$ 160 M Petrobras is also integrating (2008 a 2010) waterways with pipelines REPLAN REPAR 4 or 5 river terminals and a 90km pipeline Possible integration with REPAR-Cuiaba pipeline
- 26. H-BIO and BIODIESEL – Complementary Processes Complementary and not competitive processes But the main hurdles and challenges are: • Heavy oil production technology development will expand LA reserve growth possibilities; • Successful Doha Round Negotiations are essential to permit greater trade of agricultural commodities and increase agricultural productivity considering comparative advantages; • Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL; • Further progress in regional integration.
- 27. H-BIO Process in Refinery VEGETABLE OTHER DIESEL DD FRACTIONS OIL ATMOSPHERIC OIL OF DIESEL DISTILLATION atmospheric residue Existing HDT VACUUM Gasoil DIESEL FCC FCC DIESEL DISTILLATION Process HBIO Vacuum Residue DELAYED DIESEL COKE COKING
- 28. Potential Capacity of H-BIO Short Term Medium Term Long Term 2007 2008 2011 Refineries 4 5 10 Vegetable Oil 1,050,000 Consumption 256,000 cu.m/year 425,000 cu.m/year cu.m/year Equivalent Volume of 15% 25% n/a Diesel Imports
- 29. H-BIO • HBIO is a process of: But the main hurdles and challenges are: – Oil refining that utilizes vegetable oils as raw material in order to obtain diesel oil production technology • Heavy oil development will expand LA reserve growth possibilities; – Hydrogenation of a blend of diesel and vegetable • Successful Doha Round Negotiations oils are essential to permit greater trade of agricultural commodities and Castor-Oil Plant Sunflower Soy increase Oil Palm African agricultural productivity Cotton considering comparative advantages; • Technological breakthroughs in enzyme technology for the use of Lignocelluloses biomass and BTL; • Further progress in regional integration.
- 30. Principal Conclusions, Hurdles and Challenges • Latin America is in a privileged position regarding oil reserves, and But the main hurdles energy independence; and challenges are: • Use of natural gas prospects are • Heavy oil production technology encouraging and should contribute development will expand LA reserve to increase liquid fossil fuel exports growth possibilities; availability but integration and • Successful Doha Round Negotiations financial issues are a main are essential to permit greater concern; trade of agricultural commodities and • Land, water and human resource increase agricultural productivity availability and biodiversity place considering comparative advantages; Central and South America and • Technological breakthroughs in Caribbean in a privileged position to enzyme technology for the use of use and supply OECD countries Lignocelluloses biomass and BTL; with renewable fuels, and also further liberating liquid fossil fuels • Further progress in regional for export. integration.