2010 Brazil Oil & Gas Seminar Magda Chambriard Director Brazilian Petroleum Agency Pre-Salt Opportunities & New Regulatory Framework

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) GT ~ 60/65% 2007 Directive CNPE nº 8/03 ANP studies the areas, defines the blocks and promotes the bidding rounds. ANP studies areas and promotes the bidding rounds according CNPE approval Bill 5.938/2009 for the Pre-Salt areas Institutional Evolution O&G sector Pre-salt IM group

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

Concession Contracts: Exploratory Phase 377 blocks (JUN/2010) Production Phase 368 fields 304 operated by Petrobras Current scenario Concession contracts 38 sedimentary basins 29 principal basins 7,5 million km 2

Marlim Field Marlim Field: discovered in 1985 in 835m water depth Production (DEC/2008 ): 345 thousand bbl/day Royalties: R$ 2.15 billion Special Participation: R$ 4.84 billion Government Take ~54% (2008) Proven Reserves (DEC/2008): 1,7 Billion bbl

The Pre-Salt as a New Paradigm

Pre-Salt Area The study of the Interministerial Group 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

 Production-sharing agreements for E&P in the unlicensed Pre-Salt areas (PL 5.938/09);  Creation of a new state company – Pre-Sal (PL 5.939/09);  Formation of a Social Fund (PL 5.940/09);  Onerous assignment of rights, which shall grant Petrobras the right to produce in certain areas of the Pre-Salt, up to 5 billion boe (PL 5.941/09). New Regulatory Framework New rules for E&P in the Pre-Salt area: Four (04) Bills

Objective : Increase the Brazilian Society benefit on the pre-salt E&P. Main Rules:  Brazil shall adopt the Production Sharing Contract in the Pre-Salt Area;  Petrobras shall be the only operator in this area with at least 30% participation;  Opportunities in the pre-salt area shall be bidden considering Petrobras as the Operator;  The winner shall be the one who offers the biggest share of oil production to the State;  A New State Company shall run the State share of the contract;  Petrobras can be contracted without a bidding process;  ANP provides the bidding rounds and regulates the contracts. Production Sharing Contract Bill n /09 Senate approval on 06/10/2010 General Features

Pre-Salt Social Fund Bill n /09 Senate approval on 06/10/2010  Social Fund shall carry out investments in Brazil and abroad in order to diversify the risk and avoid the problems of the “Dutch disease”  Investments shall follow solidity criteria: liquidity, risk classification and diversification, expected return  Investments in Brazil may be used in infrastructure projects  Financial institutions may be hired to act as operating agents Investment Policy  The Social Fund shall use the resources generated by the production-sharing contracts in reducing poverty; education; culture; science and technology; environmental sustainability.  The revenue of the Social Fund will come from the sale of profit oil, from the signature bonus and from the royalties destined to the Federal Government.

The New State Company Bill n /09 Bill n /09  Shall have a qualified technical staff, but shall NOT be an operator;  Participates in the PSC on behalf of the Brazilian Government;  Shall have casting vote, according to the contract. New State Company Lower Court approval on 11/18/09

 Authorization to assign to Petrobras the right to explore and produce oil and gas up to 5 billion boe, in selected areas not yet under contracts; Onerous Assignment Bill n /09 Objective: Petrobras capitalization  Authorization to subscribe and pay in new shares of Petrobras’ joint stock. Senate approval on 06/10/2010

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-2-RJS

2-ANP-1-RJS The decision of drilling wells to increase pre-salt value 2-ANP-2-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 4,5 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.). In a 1 st step Brazil considers to hire 40 rigs and semi- submersible platforms, 234 ships, including 70 large ones (Lima, 2008) 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.

Final Remarks  The Pre-Salt is a new paradigm in Brazil;  Production-sharing contracts shall be applied for the Pre-Salt area (around 2% of the Brazilian sedimentary area);  Concession contracts shall be applied for ALL other areas (> 97%);  ANP waits for CNPE approval to promote 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.

Agência Nacional do Petróleo, Gás Natural e Biocombustíveis Av. Rio Branco, 65 12º ao 22º andar tel

Oil Price Evolution

Govern Take Evolution (2002 – 2007) Brazil – 60% GT Govern Take around the world