Brazil Energy & Power VIII Magda Chambriard Director Brazilian Petroleum Agency The present scenario in Brazilian Oil & Gas sector

Institutional evolution O&G sector in Brazil Self-sufficiency Pre-salt discovery Constitutional Amendment Nº 9/95 Law nº 9.478/97 – Creation of ANP & CNPE (National Energy Policy Council) Implementation of the ANP Concession contracts signed with Petrobras (Round Zero) 2007 Directive CNPE nº 8/ Bills for the Pre-Salt areas Pre-salt IM group 2010 New Regulatory Framework

Production Oil e LGN – 2,03 million bbl/day Gas – 57,9 million m 3 /day Imports/exports balance Oil – 132,5 thousand bbl/day Gas – 23,5 million m 3 /day Proven Reserves(*) Oil – ~13 billion bbl Gas – ~366 billion m 3 Current scenario (2009) (*) without pre-salt discoveries Companies 39 national companies 38 foreign companies

Petroleum proven reserves Billion barrels About 30 billion bbl Tupi, Iracema, Iara, Guará, Franco,Jubarte, Cachalote, Baleia Franca

2-ANP-1-RJS 2-ANP-2-RJS Exploratory Rounds (Rounds) Fields producing/under development Pre-Salt Polygon (Bill of Law 5.938/2009) Oil and Gas Gas Oil Wells being drilled (APR/2010) Pre-Salt Area Dry well The pre-salt as a new paradigm

New regulatory framework New rules for E&P in the pre-salt area: Four (04) bills Creation of a new state controlled company: Pré-Sal Petróleo S.A. Law nº /10 Production- sharing agreements for E&P in the unlicensed pre-salt areas Formation of a Social Fund Onerous assignment of rights, which shall grant Petrobras the right to produce in certain areas of the pre-salt, up to 5 billion boe Law nº /10 House of representatives Senate

The decision of drilling wells to increase pre-salt value Franco 2-ANP-1-RJS Exploratory Rounds (Rounds) Fields producing/under development Pre-Salt Polygon (Bill of Law 5.938/2009) Óil and Gas Gas Oil Wells being drilled (APR/2010) 2D Seismic Conf NonExc Pos 2D Seismic Conf Exc Pos 3D Seismic Conf NonExc Pos 3D Seismic Pub Exc Pos Exclusion Area TAC Limit (drilling) Pre-Salt Area (PL 5.938/09) Libra 2-ANP-2A-RJS

2-ANP-1-RJS The decision of drilling wells to increase pre-salt value 2-ANP-2A-RJS 3D structural map of the salt base as interpreted by the ANP technical staff (2010) Franco discovery (2-ANP-1-RJS) Forecasted recoverable volume 5 bi bbl

Fonte: PETROBRAS, 2009 Brazilian opportunities: pre-salt Campos & Santos basins (50 billion barrels?) If proven the way ANP forecasted, Brazil will need to invest heavily in infrastructure (platforms, pipelines, oil pipelines, ports, ships, steel, etc.). ANP waits for this year the Tupi’s Commerciality Declaration. Tupi Pilot: 100,000 bpd FPSO capacity. 8 standardized FPSOs (150,000 bpd) already contracted by Petrobras. Santos basin Campos basin

Brazilian opportunities: new bidding rounds After the approval of the Pre-salt bills ANP shall bid: Pre-salt areas under PSC (~ 2,3% sedimentary area) (~ 2,3% sedimentary area) Other areas under concession contracts (> 97% sedimentary area ) ANP waits for CNPE approval the 11th Bid Round The 11th Bid Round shall focus on the Brazilian equatorial margin

Pre-salt safety challenges Production High productivity of the wells Pipelines integrity CO2 (08 a 12%) Drilling 2,200 m WD 2,000 m Salt Layer Reservoirs Depth: 5,000 a 6,500 m

Safety - ANP Resolution Nº 43/2007 Focus on the Safety Management System Regulatory Framework for Offshore Safety  Performance-Based/Goal Setting Model  Fewer prescriptive requirements  Non-restrictive approach to technological innovations Minimum requirements for: Mechanical Integrity, Risk Assessment, Contractors Selection, Internal Audits, Incident Investigations, Management of Change, Safe Working Practices, Simultaneous Operations, etc Safety Documentation Analysis (Solution Acceptance) Onboard Audits (Safety System Verification) Injunction Actions (Enforcement) ANP Verification Method

Facilities and Technology MP 10:Design, Construction, Installation and Decommissioning MP 11:Critical Operational Safety Elements MP 12:Risk Identification and Analysis MP 13:Mechanical Integrity MP 14:Planning and Management of Major Emergencies Safety - ANP Resolution Nº 43/2007 Management, Leadership and Personnel MP 1:Culture of Safety, Commitment and Managerial Responsibility MP 2:Involvement of Personnel MP 3:Personnel Qualification, Training and Performance MP 4:Work Environment and Human Factors MP 5:Selection, Control and Management of Contracted MP 6:Monitoring and Continuous Improvement of Performance MP 7:Audits MP 8:Information and Documentation Management MP 9:Incident Investigation Operational Practices MP 15: Operational Procedures MP 16:Management of Change (MOC) MP 17:Safe Working Practices and Control Procedures in Special Activities The Resolution might be revised after the publication of the Gulf of Mexico oil spill report

Brazilian Contingency Plan Present day: Individual Emergency Plan + Petrobras’ Contingency Plan – 9 Environmental Defense Centers, 200 vessels (14 large ones) and 80 aircrafts Brazilian Contingency Plan: Mines & Energy and Environment Ministries, ANP, Navy, Civil Defense and Petrobras are working on the elaboration of the plan that should be ready in the coming months

Worst case scenario: spill of the whole volume of an FPSO (24 hours of spill – 482,000 bbl) Probability of oil presence – 31 days simulation No trajectory reached the coast! Oil spill modeling – Tupi long-term test Summer Winter Source: PETROBRAS, 2008 But… 86 days of spill as the Gulf of Mexico? Individual Emergency Plan: 1 st vessel in 2 hours and 52 minutes. In about 36 hours, all vessels arrive on the local

Final remarks  The Pre-Salt is a new paradigm in Brazil;  Brazil shall apply a mixed regulatory framework for the petroleum sector (Production-sharing Contract, Concession Contract and Onerous Assignment);  ANP has a satisfactory regulation about the operational safety, but the experience of Gulf of Mexico oil spill might be used;  ANP waits for CNPE approval to launch the 11º bid-round focusing the equatorial margin;  And to promote a bid round focusing pre-salt opportunities;  In Brazil, opportunities go far beyond the pre-salt.

Claudia Rabello –