1ER CONGRESO INTERNACIONAL DE BIOCOMBUSTIBLES The Brazilian Experience on Biofuels 1ER CONGRESO INTERNACIONAL DE BIOCOMBUSTIBLES The Brazilian Experience on Biofuels Luthero Winter Moreira Downstream Area Luthero Winter Moreira Downstream Area Guadalajara, Mayo 07-08, 2008.

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", "seek", "should", 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. Disclosure

Fuel Ethanol Program Evolution Ethanol: 30 Years of Experience Program for Oil Imports Reduction Environmental Benefits 70’s80 ´S 90 ´S Ethanol Program Implanted ( BLENDS ) Gasohol and Ethanol Cars ( 2 nd oil shock ) Program of Emission Control ( PROCONVE ) Gasohol and Flex Fuel Cars 00 ´S Cellulosic Ethanol and Renewable Hydrogen Future

Original drivers were energy security and economic attractiveness. Today environmental benefits are also a consideration. CNG ETHANOL GASOLINE Source: MME, BEN In this period, the use of ethanol avoided 644 million tons of CO 2 emissions Brazil is the 1st country to get benefits from Ethanol Fuel demand for Otto Cycle Vehicles BEP Accumulated effective economy: 1 billion boe ~US$ 52 bi

A Brief History of Ethanol and Petrobras by the End of Oil Monopoly 1976/ PB creates the first task force to study blending operations - PB starts to convert storage tanks and tankers for ethanol transportation 1982/ PB broadens its scope and encompasses internal market as well as international market for ethanol - PB concludes coastal shipping plans for ethanol 1986/ PB issues over 130 papers and studies on all aspects of ethanol handling and distribution - PB consolidates over 40 internal procedures related to ethanol handling 1978/ PB starts to export fuel ethanol - The first 35 PB service station pumps for ethanol are installed (SP and RJ) 1980/ PB develops LUBRAX, the first lubricant for ethanol cars - PB is appointed responsible for handling the safety stock of ethanol - PB starts to produce ethene from ethanol Source of ethanol production data: UNICA Source of Petrobras developments: PETROBRAS 1973 OIL SHOCK

A Brief History of Ethanol and Petrobras after the End of Oil Monopoly Creation of Petrobras Transporte and end of PB monopoly in the Brazilian oil market 1998/2001 -The Brazilian market starts to adjust itself to the new rules After a steep drop, the price of oil reaches its lowest point The first contracts to follow the new rules established in 1997 for ethanol transportation in multi- product pipelines are signed Source of ethanol production data: UNICA Source of Petrobras developments: PETROBRAS 1997/ PB issues over 80 new papers and studies on all aspects of ethanol handling and distribution - PB updates its internal procedures related to ethanol handling, including new technologies for Pipeline Integrity Management and dye handling Petrobras Transporte converts in 15 days 80,000 m3 from diesel to ethanol. It’s the first increase in storage capacity since Petrobras Transporte has to adapt it’s logistics to handle the dyed ethanol. From that point on, there would be 3 different specifications of ethanol in the PB system

North and Central America 45.8% Europe 9.2% South America 32.6% Asia & Africa 12.4% Estimated Ethanol Production in 2008 – 70.5 Billion Liters Brazil 32% Brazil 32% More than 75% of all ethanol is produced by Brazil and USA. Brazilian exports in 2007: 3.5 billion liters. World ethanol consumption is 3.7% of gasoline market. Increasing ethanol blending in the world to 10% would represent 187 billion liters. Source: F.O.Licht

Nigeria / South Africa :: Petrobras is providing technical cooperation in logistics and blending know-how. Japan :: Recently, Petrobras has incorporated Brazil-Japan Ethanol Inc. (Joint Venture of Petrobras and Japan Alcohol Trading); :: The Company will import and distribute Brazilian ethanol in Japan; :: Development of technical and commercial solutions for a reliable, long term supply of ethanol to the Japanese market; :: Petrobras intends to introduce fuel ethanol into one of the most complex and important energy markets in the world: ethanol for power generation, fuels distribution in Japanese market, logistics for distribution of ethanol in Japan and other Asian markets. Petrobras Partnerships to Introduce Ethanol as a Fuel

Research on lignocellulosic ethanol (2nd generation biofuels) using sugar cane bagasse as raw material: -Pilot plant start-up: 4thQ 2007; - Demonstration plant start-up: 3rdQ 2010; - Property of process (patent already issued). HBIO: process of crude oil refining that uses vegetable oils as raw material to obtain a cleaner diesel oil by hydrogenation of a blend of diesel and vegetable oil. Biodiesel: research on new raw materials, improvement of industrial process, quality of product, and tests with engines. R&D - Petrobras Projects on Biofuels

Stages Petrobras’ Technology Evolution Large-scale deployment Technology implementation (1 st industrial unit) Demonstration (Prototype unit) R&D (including pilot plant) HBIO HBIO Biodiesel Biodiesel Lignocel. Ethanol Summary – Petrobras’ Technological Roadmaps on Biofuels

Renewable Energy Business Strategies Investments 2012 Target Biodiesel Plants Availability of 938,000 m3/year H-Bio (Bio-Refining) Vegetable oil Processing 1.6 million m³/year Installed Capacity of Generation of Electric Power from 365 MW Renewable Sources Ethanol pipelines Export of 4.7 million m³/year of Ethanol Aeolic Energy US$ 1.5 billion Investments Total avoided GHG emissions: 3.93 MM tons CO2 equivalent Ethanol Project Vessel Solar Energy Other Sources of Renewable Energy

Petrobras will continue to invest on: development of international markets for ethanol, improvement of Brazilian export infrastructure, and R&D of new production technologies (lignocellulosic process and BTL). Petrobras’ investment on the development of feasible production technologies of 2nd generation biofuels will assure, in the long- term, the regular supply of renewable fuels, in a fully sustainable manner – regarding economical, environmental and social aspects – along the production chain. In summary, Petrobras’ investments on biofuels contribute to reduce emissions of fossil fuels, generating environmental benefits and increasing social inclusion by creation of jobs in rural areas. Final Comments

Vision 2015 Petrobras will be an integrated energy company with a strong international presence and a leading force in Latin America, working with a focus on profitability and social and environmental responsibility.