1 BIOETHANOL & FLEX FUEL IN BRAZIL PETROBRAS Kuniyuki Terabe Bangkok 28 – 30 June 2006 FEALAC Inter- regional Workshop on Clean Fuels and Vehicle Technologies

2 PETROBRAS ETHANOL PRODUCTION ETHANOL USE IN BRAZIL FLEX FUEL CAR FUTURE OF ETHANOL AS FUEL CONCLUSION AGENDA

3 PETROBRAS ATIVITIES

4 Petrobras in Numbers 16 Refineries with a capacity of 2,114 million bpd Gross Revenue US$ 50.6 billion ethylene production: 2,4 million ton/year gas sales: 32 million m 3 /day proven reserves: 13 billion of boe (SPE)  oil and gas production:* 2,257 million boe/day 6,154 gas stations in Brazil (33% of retail market)  25% of retail market in Bolívia and 14% in Argentina  727 gas stations in Argentina Pipelines: km Natural Gas Petrochemicals Retailing E&P *Brazil and abroad Refine, Transportation, Trading Refine, Transportation, Trading

5 Petrobras in the world Uruguay Argentina Chile Paraguay Bolivia Colombia Venezuela Mexico USA - Houston USA – New York UK Libya Nigeria Angola Tanzania China Japan Singapore Peru Ecuador Iran Trading Exploration & Production Distribution / Service Stations Refining Lubricant Sales Representative Office Headquarters BRASIL

6 ETHANOL PRODUCTION

7 PETROBRAS ETHANOL PRODUCTION EVOLUTION OF ETHANOL USES FLEX FUEL CARS WORLD PRODUCTION INFRA-STRUTURES CONCLUSION 50 thousand sugar cane growers 313 Industrial Plants Agents of Sugar Cane Industry

8 INTEGRATED SUGAR & ETHANOL PRODUCTION Process Heat & Cogeneration Sugarcane Transport, Cleaning & Crushing Juice Treatment Bagasse Sugar Production Hydrous Ethanol Distillation Fermentation Dehydration Anhydrous Ethanol Molasses Primary Juice Secondary + Filter Juice Source: UNICA

9 Production of Sugar and Ethanol Production of Sugar and Ethanol

10 Main Production Areas in Brazil Source: Brazilian Government 61% 3% 8% 1% 2% 5% 4% 5% 2% 1% Mid South Region-89% Production North East Region-11% Production

11 Coal 6.4% Natural Gas 9.0% Oil 38,4% Biomass 29.0% Uranium 1.2% Hydroelectricity 16.0% Source: MME/2005 Energy Matrix in Brazil Charcoal 12,8% Sugar Cane 13.9% Others 2.3%

12 Raw Material Comparison RAW MATERIAL Relative Production Cost Energy out / Energy in SUGAR CANE388,3 CORN641,3 - 1,8 WHEAT921,2 SUGAR BEET1001,9

13 ETHANOL USE IN BRAZIL

14 EVERYETHING STARTED IN 1925 FIRST E100 in 1979 Bioethanol Use in Brazil E >10 in 1970’s 1980’s ENVIRONMENTAL

15 From 1925 up to 1975: Different Levels of Anhydrous Ethanol direct Blend in Gasoline. After PROALCOOL Fuel Ethanol blended as Additive and used to E100 cars. In 1980’s : Environmental, leads excluded In 1993 In 1993 : National law- mandatory use of ethanol as Oxygenate, 20% to 25% In 1997/1998: Deregulation of fuel ethanol - Free Market In 2003: New FFV-Flex Fuel Vehicles, Huge Demand of ethanol in Brazil; After 2004: Increasing International demand. Hydrogen production will be ? Bioethanol use in Brazil

16 AnhydrousEthanol8.5% Ethanol Market-share: 8,4% + 8,5%  16.9% Fuel Consumption in Vehicle in Brazil 2005

17 FUEL ETHANOL USE IN BRAZIL National / Imported Vehicle E100 or E20/E25 or FFV National or Imported Boats E20/25 National Motocycle or Imported E20/E25 Aircraft – E100

18

19 EVERYETHING STARTED IN 1925 FLEX FUEL 2003 Bioethanol Use in Brazil

20 Good conditions to produce ethanol Ethanol Producers and Government are interested Consumers want to decide which fuel to use at the gas station Government and Consumers are aware of pollution and renewable fuels Automobile producers are interest in producin Flex Fuel Vehicles in Brazil

21 Light Vehicles Sales in Brazil

22 Light Vehicles Sales in Brazil

23 FLEX FUEL CAR PERFORMANCE

24 FUTURE OF ETHANOL AS FUEL

25 North and Central America 36% Europe 8% South America 38% Asia 18% Ethanol global market – 44,0 Billion Liters Brazil ３ 6% Brazil ３ 6% World Ethanol production Ethanol Will be a Commodity ??

26 1.Total brazilian area :850 M ha 7% for agriculture (50% for soya and corn) 35% pastures 55% forests 2.Savanah area:24% *Sugarcane area:0,6% *Potential area for sugar- cane expansion:12% of the total. Actual area: 5,5 M ha Potential:20 times Satellite Image Source:CTC Sugarcane area in the Brazil Sugarcane

27 New Ethanol & Sugar Plants > Red are new Plants

28 Logistic Exportation in Brazil

29 CONCLUSION

30 Ethanol is Better Alternative Ethanol is Better Alternative Reduction of the oil dependence Energy diversification MTBE and lead replacement Kyoto Protocol and Carbon Credit Opportunities There are car technologies to use ethanol Brazil can increase production with adequate price

31 Equator line Capricorn Tropic 30 o S Cancer Tropic 30 o N The brazilian vocation for biofuels

32 I believe Ethanol is one of the best alternative to match part of World Biofuel needs. Brazil is prepared to attend part of the needs in a Sustainable way. The cars markers are fully prepared to adjust the vehicles to biofuel. Than all together, we can allow a better World Environmental Conditions by using biofuel.

33 Kuniyuki Terabe Petrobras General manager Vice President BJE -Tokio Kuniyuki Terabe Petrobras General manager Vice President BJE -Tokio THANK YOU