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Downstream Expansion
in Latin America
The presentation may contain forecasts about future events. Such forecasts
merely reflect the expectations of the Company's management. Such terms
as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project",
"should“ and "seek", along with similar or analogous expressions, are used to
identify such forecasts. These predictions evidently involve risks and
uncertainties, whether foreseen or not by the Company. Therefore, the future
results of operations may differ from current expectations, and readers must
not base their expectations exclusively on the information presented herein.
The Company is not obliged to update the presentation/such forecasts
in light of new information or future developments.
2
Overview of Latin America
macroeconomic indicators
Brazil & Latin America: Real GDP Growth (Y-on-Y; % Change)
8.00
Forecast
6.00
4.00
%
2.00
0.00
-2.00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
The Brazilian Economy has weathered the global economic slowdown with remarkable
resiliency.
It is expected to rebound strongly in 2010.
Source: Global Insight
4
Brazil’s Consumer Confidence Index (2005 = 100)
130.00
120.00
110.00
100.00
Consumer Confidence Index Re E
co c on
90.00 ve o
ry mi
St c
ar
ts
80.00
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Consumer confidence signaled an economic turning point for the Brazilian economy in
April/2009.
The index shows how Brazilian consumers have been perceiving the country
performance with respect to the current world economic crisis.
Source: FGV (Brazil)
5
Development of downstream
markets: key strategies
Oil and Liquids Production, Proved Reserves
and Consumption
Oil: Consumption - 2009 Oil: Proved Reserves - 2009 Oil: Production - 2009
100% 100%
100% 4% 10% 12%
7%
8% 15% 8%
75% 75%
75%
23% 30%
12 0 %
10 0 %
Total Asia Pacific Total North America
80%
0%
The geography of oil: consumers, producers, and reserve owners.
9,8 10,1
210,6
14,16
2009 2014
2009
Latin America Brazil Latin America Brazil
2,7
2,0 2,4
1,9
2009 2014*
2009 2014
Latin America Brazil * Firm + Probable Latin America Brazil
*Proved Reserves of Crude Oil and NGL
100%
13%
20% 19% 21% 19% 20% 18%
90%
27%
5%
80% 3%
10% 14% 10% 14%
70% 8%
25%
28%
60%
31% 54%
50% 36%
50% 44% 38%
40% 32%
30%
49%
20% 38%
32%
28% 28%
22% 22% 23%
10%
0%
US Europe Middle Africa China Japan Latin Brazil*
East America
Light distillates Middle distillates Fuel oil Others
During the last 3 years, gasoline market in Brazil have been contested by ethanol and
vehicular natural gas.
The Brazilian investment program, focused on increasing conversion, aims to reduce
fuel oil production and reduce middle distillates deficit.
Source: BP Statistical Review 2010 and Brazil's National Petroleum Agency (ANP)
9
Latin America Oil Demand by Product
7000
6000
5000
4000
3000
2000
1000
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Gasoline Naphta Jet Diesel/Gasoil Fuel Oil LPG Other
Over the next 5 years, total demand for oil products in Latin America will increase
2,31% p.y., while diesel demand will rise by 3,41% p.y. and jet by 2.85% p.y..
Gasoline demand is expected to increase by 2,18% p.y. between 2009 and 2014.
10
Evolution of Unit Sales of Vehicles – By Fuel In Brazil
DIESEL
3,500 Thousand Cars ETHANOL
3,000 FLEX FUEL
GASOLINE
2,500
2,000
1,500
1,000
500
0
2005 2006 2007 2008 2009 2010(*)
Gasoline or Ethanol or both? The decision lies in consumer choice.
High flex‐fuel share in total vehicle sales show the huge potential for competition
between ethanol and mogas in the near future.
Source: ANFAVEA
11
Brazilian Vehicular Fuel Matrix
Gasoline C:
Gasoline + Anhydrous Ethanol
23.3 + 8.2 = 31.5%
23,3% Diesel (Total)
50.9 + 0.5 = 51.4%
50,9%
8,2%
Pure Gasoline
Anhydrous Ethanol
13,7%
Hydrated Ethanol
3,4% Natural Gas
Ethanol (Total) Biodiesel
8.2 + 13.7 = 21.9% Diesel
0,5%
Despite the competition between gasoline and ethanol, diesel has by far the highest
market share among oil products for vehicular use.
With higher economic growth expected over the next few years, the demand for diesel
will increase, driven mainly by the transport sector.
Source: Brazil's National Petroleum Agency (ANP)
12
Evolution of Brazilian Oil Products Balances
k bpd
GASOLINE
GASOLINE DIESEL
DIESEL
99 112 109 89
99 112 109 64 70 89
34 51 56 43 34 48
34 51 56 43
46 64
34 48 46
64 45
45 43
43 64 45
45 36
36
51
51 70 28
40
20002001
2000 20012002
20022003
20032004
20042005
2005 2006
2006 2007
2007 2008
2008 2009*
2009 2000
20002001
20012002
20022003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009*
2009
JET
JET FUEL
FUELOIL
OIL
109 126
126 98 113
109 102 98 113 91
84
84 102 91 85
85 70
74
25 21 29
15 20
15 20 17
17 66 22 66 12 15 25
12 15 19 29
2000 2001
2001 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009
2000 * 20002001
2000 2001 2002
2002 2003
2003 2004
2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009*
Surplus Deficit
Gasoline exports occur largely because ethanol and vehicular natural gas provide a
substantial share of Brazil's light vehicle transportation fuels.
The Brazilian investment program, focused on increasing conversion, aims to reduce
fuel oil production and reduce middle distillates deficit.
Source: Brazil's National Petroleum Agency (ANP)
13
Fast Growing Domestic Demand
(000 b/d)
Others
3.4% p.a.
FO
2,794 Diesel
4,1% p.a. QAV
2,356 325 Naphta
166 Gasoline
1,944 276
1,814 1,907 1,933 126 LPG
1,784 1,776 182 197 195
141 155 155 119 109 103 1187
189 117 108 937
628 687 685 738 782 770
136 170
80 73 76 84 89 94 252 252
241 237 237 250 220 223
315 332 334 403 452
314 314 326
220 201 201 208 215 213 226 242
Strong market growth for basic products in 2009‐2020.
Higher profitability and lower demand risk in comparison to Latin America.
14
Potential Market of Otto Cycle Fuels
95.000
90.000 4,1
85.000
80.000 %
Gasoline C Flex-fuel Hydrous Ethanol CNG
75.000
Thous. cu.m of gasoline equivalente
70.000
65.000
60.000
55.000
50.000 83,7
45.000 %
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
Consumption of each fuel per motor type (includes motorcycles) 12,2
0 Gasoline C: 25% Ethanol %
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Vehicle sales in Brazil are being increasingly driven by fuel flexibility, following the
introduction of Flex Fuel units in 2003.
The fast increase in flex‐fuel share in total sales in 2005‐2009 points out a strong
competition between mogas and ethanol, followed by natural gas, over the next years.
15
Refinery Utilization – Latin America and Brazil
90%
80%
70%
60%
50%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Better margins and stronger domestic market led to higher refinery utilization rate in
Brazil.
It means higher profitability and lower demand risk to refining projects in Brazil when
compared to Latin America.
Source: Pira and Brazil's National Petroleum Agency (ANP)
16
Vertically Integrated System to Capture Synergies
within the Value Chain
17
Enhancing Reserves
18
Pursuing New Projects while Maximizing Production
from Existing Assets
5.382
7,1% p.y.
120
3.907 203
2002 2003 2004 2005 2006 2007 2008 2009 2010 2014 2020
Oil Production Brazil Gas Production Brazil Oil Production International Gas Production International
215 192
140
274
451 555
426
347
100 126
Positive net exports by higher oil production, improvements in our refining
system and reduced internal demand.
21
Focused Strategy to Add Value to Domestic Crude
Expand refining capacity
in Brazil and
internationally
Optimize quality to make
Petrobras the preferred fuels Improve margins by
brand for consumers in Brazil expanding average
and abroad complexity
Increase production of basic Use commercial and
petrochemicals, capturing logistical partnerships to
synergies within the expand presence in
Petrobras System target markets
22
Investing During 2010-2014 to Realize These Goals
2009‐2013 Plan 2010‐2014 Plan
Downstream Investments Downstream Investments
US$ 47.8 billion
12%
US$ 78.7 billion
Refining
7%
Pipelines & Terminal 6%
Transport 8% 6%
Refining
Ship Transport
12%
Petrochemicals 73% Pipelines & Terminal
Transport
Ship Transport
Petrochemicals
76%
• Adding values to domestic crude and producing diesel and gasoline in‐line with
international standards
• Investment targets Fuel Quality, Conversion and Expansion
23
Lessening Imported Crude Requirements for Refining Inputs
Domestic Crude as a Percentage of Total Feedstock Processed
91%
Petrobras’ refining site will be adapted to
run more domestic crude, therefore
capturing the light/heavy differential and
avoiding acidity crude discounts
24
Domestic Refineries Crude Throughput
Downstream Investments
US$ 78.7 billion
• Adding values to domestic crude and producing diesel and
6% 6%
Refining
gasoline in-line with international standards
12%
Pipelines & Terminal • Investment targets Fuel Quality, Conversion and Expansion
Transport
Ship Transport
3,012
Petrochemicals Premium I
76% 300 tho. bpd
1st Fase:
2014
2,260
Premium I
300 th bpd
REPLAN RNE 2st Fase:
1,779 1,791
(k bpd)
25
Domestic Refining Greenfields Capacity Additions
(600 kbpd) (300 kbpd)
(Premium I & II)
Diesel 10 ppm (60%), LPG (4%),
Naphtha (14%), Jet (12%), OC +
Terminals and Pipelines
Bunker (10%)
Operated by Transpetro
(230 kbpd)
Diesel (64%), LPG (3%), Naphtha (6%),
Bunker (16%), Coke (11%)
(330 kbpd)
Diesel (53%), LPG (6%), Naphtha
Existing pipelines (1%), Jet (28%),OC (4%), Coke (8%)
Refineries
Onshore Terminals
Offshore Terminals
Numbers in kbpd are capacities
26
Domestic Refining Capacity Additions
1.400
K bpd
1.200
1.000
800
600
400
200
0
2010 - 2014
Until 2014, Brazil will add 736 k bpd of Distillation Capacity, 495k bpd of Conversion
Capacity and 1273 k bpd of Treating Capacity
Coking units investments will convert Brazilian heavy oil into lighter products at the
same time that HDT units will reduce sulphur to meet international standards.
Treating investments will allow Brazil to have diesel in metropolitan areas containing a
maximum sulphur content of 50/10 parts per million, significantly lower than current
levels in 2009.
27
CDU Capacity and Petroleum Demand – Latin America
and Brazil
12,000
K bpd
10,000
8,000
6,000
4,000
2,000
-
2005 2006 2007 2008 2009 2010 2014
4,000
3,000
2,000
1,000
-
2005 2006 2007 2008 2009 2010 2014
Until 2014 Latin America will add 1,12 MM bpd of Conversion capacity (Firm + Probable
Projects). Brazil represents 44% of this addition.
Projects ranked as “Less Likely” account for more 463 k bpd of Conversion Capacity
200
100
0
2010 2011 2012 2013 2014
Considering only firm and probable projects, in 2014 the major refining countries in
Latin America will be Brazil (2.6 MM bpd), Mexico (1.6 MM bpd) and Venezuela (1.4
MM bpd) representing more than 60% of the region total capacity.
0
2010 2011 2012 2013 2014
-100
Considering firm and probable projects, conversion capacity in 2014 will be also
concentrated in Brazil (1.2 MM bpd), Mexico (0.67 MM bpd) and Venezuela (0.46 MM
bpd) representing 65% of the region total capacity.
Venezuela
Mexico
Colombia
Ecuador
Peru Brazil
Bolivia
Paraguay
Chile
Argentina Uruguay
Tighter specifications for mogas and diesel from 2013 on.
Source: IFQC, PFC and Petrobras
32
New Vessels: Investments in Marine Transport
Besides Petrobras Investments in Marine Transport, the two stages of EBN Program
(Brazilian Navigation Company ) will allow 39 vessels to be built by Brazilian companies in
shipyards located in Brazil, based on a 15 years charter contract with Petrobras.
33
Comperj: Contributing to Petrobras Value Chain
Comperj is going to:
Expand the domestic petrochemical Capture synergies from existing regional
market infrastructure
Run Marlim crude as feedstock Improve the balance within the commercial value
chain for oil, oil products and petrochemicals
DOWNSTREAM PETROCHEMICALS
Production
Products
(kta)
Production
Diesel 8,060 Products
(kta)
QAV 1,720 Polypropylene 920
Fuels Coke 1,400 Polyethylene 930
Ethylene 1,245 Styrene 400
Propylene 1,035 Ethylene glycol 380
Petrochemicals Benzene 410
Butadiene 170
p-Xylene 475
Sulphur 45
34
How to Add Value to Stakeholder
Running our business with operational excellence, capital discipline and sound
returns
Safe, reliable, and environmentally responsible operations
Focus on client needs
Providing the domestic and international markets with international products
specifications, mainly through premium and high value products
Advantaged domestic crude processing through enhanced integration with
Exploration & Production segment and investments in refineries and high
conversion units
Investments in refining and petrochemicals technology
Capturing scale gains and synergies in Petrobras System
35
www.petrobras.com.br