1. Brazilian Oil, Gas and Reneweble Fuels Policies
MINISTRY OF MINES AND ENERGY
Brazilian Oil, Gas and Reneweble Fuels Policies
João José de Nora Souto
Deputy Secretary of Oil, Natural Gas and
Renewable Fuels
Quito – 13th July 2011

2. Guidelines for the Brazilian Energy Policy
Energy Supply Security
Reasonable Tariff Policy
Service availability for the entire population
Regulatory framework stability
Strengthening of planning
Energy matrix diversification and renewables usage
National energy integration
National technological development
Concern about social-environmental constraints

3. Brazilian Energy Supply Matrix (%)3
Brazilian Energy Supply Matrix (%)
5.8 % p.a.
Energy (Mtoe)
World 2008: → Brazil 2009: 2,0%
World 2020: → Brazil 2019: 2,9%
GDP Growth: 4.7 % per annum
Source: PDE 2019, IEA Data Services - World Energy Balances and IEO 2010/DOE

4. E&P Activity in Brasil - 2010
Total sedimentary area:
7.5 million sq km
2.8 million sq km of E&P efective area (37.3% from total)
Granted area: th sq km (12.3% from efective area)
376 exploratory blocks
392 fields in production phase
7 blocks at Onerous Assignment
80 E&P concessionaries
Source: ANP, 2010 4

5. Oil & Gas Statistics
Petroleum: Expected Investments E&P: R$ 232,91 billion
Proved Reserves (December, ): billion barrels (+11% over 2009)
Production (2010): million barrels/day
Consumption (2010): million barrels/day
Imports (2010)*: million barrels/day
Exports (2010)*: million barrels/day
Refine capacity (2010): million barrels/day
Reserve / Production Rate - R/P: years
Produção em 2010: barris, equivalente a ,5 bbl/d
Natural Gas: Expected Investments: R$ 8,96 billion
Proved Reserves (December, ): billion m³ (14.9 tcf, +16% over 2009)
National Production of NG (2010): million m³/day
Consumption in Process, Reinjection, Flare (2010): million m³/day
National Gas made available to the market (2010): million m³/day
Imports (transport consumption deleted )*: million m³/day
Total supply of natural gas (2010): million m³/day
Reserve / Production Rate - R/P: years
Source: MME 2011 and ANP 2011 ( 5

6. National Oil Production and Demand – 2010 to 2019
Main Derivates: GLP, Nafta, Gasoline, QAV, Diesel, Fuel Oil and Coke. Source: PDE and ANP, 2011

7. Supply and Demand for Oil Products (Kbbl/day)
Surplus
96%
Maximum deficit
between 1970 and 2009
Surplus 6%
deficit
85%
Supply
Demand
Note: % surplus and deficits = net external trade divided by internal demand
In 2019, net imports will be around 2,200 Kbbl/day

8. Natural Gas Supply and Demand
160
140
120
100 80 60 40 20
Source: PDE
Northern Region not included

9. Natural Gas Supply and Demand Projections (Mm³/day)
Surplus
21%
deficit
13%
deficit
28%
Supply
Demand
Note: % surplus and deficits = net external trade divided by internal demand
(a) Expected production, based on known reserves (imports of 24 Mm³/day)
(b) Expected production, based on known and to be discovered reserves (net exports of 40 Mm³/day)

10. Main Oil & Gas Discoveries in Pre-salt10
Main Oil & Gas Discoveries in Pre-salt
Parque das Baleias
Granted area: 42 th sq km (28%)
1.5 to 2 bi
boe
Cession area: 3.,74 th sq km(2.5%)
Estimated volumes
(12/2010)
25.3 to
33.8
billion
boe
Franco
Libra
2.0 to 5.5 bi boe
7 to 8 bi boe
Entorno de Iara
Florim
0.6 to 0.8 bi boe
0.1 to 0.4 bi boe
Iara
Guará
3 to 4 bi boe
1.1 to 2 bi boe
Sul e NE de Tupi
0.5 to 0.7 bi boe
Lula - Cernambi
Sul de Guará
Peroba
8.3 bi boe
0.1 to 0.3 bi boe
1.1 to 1.8 bi boe

11. E&P Legislation
Law nº 9,478/1997 – Petroleum Law, establishes concession rules for outside of Pre-salt polygon
Law nº 12,351/2010 – Establishes the use of production sharing contracts for oil and gas exploration and production in Pre-salt polygon and areas with strategic or high potential for oil and creatse the Social Fund to receive the results
Petrobras will be the only operator at new contract areas (PSC) in the Pre-salt polygon , with at least 30% of work interest in the contracted consortium
Government will either contract Petrobras directly or other companies through bidding
Contract is under construction with collaboration of oil companies associations. At the end it will be object of public debate
Block offers at PSC model will take into account the national policy for oil exportation and the national industry for oil and gas sector capacity to attend the requirements of the Local Content policy
Social Fund - resources will be invested in profitable activities in Brazil’s or foreign countries. Profits will be used in national projects to reduce poverty, and to improve education, public health, culture, sports, science and technology, environmental issues and to mitigate climate changes

12. Natural Gas Law - Overview
Law nº 11,909/2009 and Decree nº 7,832/2010
Establishment of a new framework for natural gas transport activities
Main goals:
Increase investments in natural gas exploration, production and infrastructure
Expansion of Brazilian natural gas market
Competition in transport will bring more investments in E&P, resulting in more investments in infrastructure, creating a virtuous circle
New concession contracts should bring more competition in the transport sector

13. Local Content Policy
Concessionaries operating in Brazil must grant equal opportunities to local suppliers, giving them preference based on competitiveness
Contract clause establishing minimum percentage for local supply of goods and services
Aims to enhance the participation share of national industries, in a competitive and sustainable way, at local and foreign projects for petroleum industry
Local suppliers development will be necessary to attend petroleum industry contract compromises
Brazilian and foreign companies associations to produce locally are encouraged 13

14. 14
Oil and Gas Rounds
11th Bidding Round for exploration blocks in concession modality planned to November, 2011
1st Bidding Round in production sharing modality planned to take place by the end of 2011 14

15. Refining Instaled Capacity Expansion (Kbbl/day)
Oil Production in 2019 = 5,113 Kbbl/day
Base Line: +38 expansion of the current refineries Abreu e Lima Refinery (PE) COMPERJ Refinery (RJ) + 30 Potiguar Refinery (RN)
Premium refinery trajectory: base line (CE) (MA)

16. Bioenergy Bioethanol Biodiesel16
Bioenergy
Bioethanol
The ethanol production will rise from 27,9 million m³ (2010) to 73,3 million m³ (2020).
The usage of ethanol allows Brazil to avoid, yearly, around 10% of the Green House Gas emissions.
Flex-fuel vehicles represent almost 90% of the new vehicles licensed (2011)
The productivity of sugarcane ethanol in Brazil is the highest in the world (6,800 l/ha).
Biodiesel
Dec. 2004: Launch of the National Program for the production and use of Biodiesel
Growing use of Biodiesel contributes to reduce urban pollution, improving life quality of the citizens.
Brazil is already the world’s 3rd largest consumer (after Germany and France)
Accomplished in 2010: Obligatory addition of 5% of biodiesel on fossil diesel.
(2ª Comunicação Nacional sobre mudança climática)
Ainda segundo MEIRA FILHO & MACEDO (2010), o impacto positivo do etanol na mitigação à mudança do clima é substancial. O uso do etanol combustível permitiu ao Brasil, excluídas as emissões da agropecuária e indiretas de mudanças do uso da terra e florestas, evitar o equivalente a 10% das emissões dos gases de efeito estufa em Para 2020, estima-se um corte de 18%. Assim, desde 1975, a redução de emissões diretas provenientes do uso do etanol carburante no Brasil foi de aproximadamente 600 milhões de toneladas de CO2 (PACCA & MOREIRA, 2009).
Quando se considera apenas o setor de transporte e geração de energia elétrica, a contribuição do álcool é ainda mais expressiva. Em 2006, o uso do etanol como combustível proporcionou a redução de 22% das emissões finais dos dois setores e chegaria a 43 % em 2020 (MEIRA FILHO & MACEDO, 2010).
A velocidade de aceitação pelos consumidores dos carros flex-fuel, foi muito mais rápida do que a indústria automobilística esperava. Os flex-fuel representaram 94,2% do licenciamento total de automóveis novos em 2008, enquanto a participação dos movidos a gasolina ficou em 5,8%, segundo a Associação Nacional dos Fabricantes de Veículos Automotores – Anfavea (Figura 1.3).
Worldwide biofuels production, (World Energy Outlook 2010, IEA, não publicado ainda)
Etanol Biodiesel Total
Mtoe Kb/d Mtoe Kb/d Mtoe Kb/d US
Brazil EU
China
Canada
India
Other
Total ,136

17. Ethanol and Biodiesel Projections – 2011 to 2020

18. Sustainable Biofuels Expansion Sugar Cane Agro- ecological Zoning
BRAZIL – Qualified Areas (P, R, M) in Livestock (Ap) and Agriculture (Ag)
P – Areas qualified as “Preferential”
R – Areas qualified as “Regular”
M – Areas qualified as “Marginal”
Due to environmental reasons, the bill would effectively make 92.5% of Brazil’s national territory off-limits for sugarcane farming and processing.
Excluded biomas
Suitable areas identified sum up to 64 million hectares (or 7.5% of the territory)
Currently, sugarcane for ethanol corresponds to 4 million hectares or 1% of arable lands.

19. Sustainable Biofuels Expansion Palm Oil Agro-ecological Zoning
Plantation in areas with previous human activities identified until 2008 only
Fobids native vegetation deforestation
Orient the recovery of degraded lands
Restricts 86,4% of the apt areas in the agroclimatic point of view and 96,3% of the Brazilian territory
Potential for sustainable expansion: 31,8 million ha

20. Latest Biofuel Regulations
Publication of the MP 532/2011 by the Executive:
With this regulation the ethanol is no more considered an agricultural good. Now ethanol is considered a energetic product.
The measure gives the ANP (regulatory agency) the competence to regulate, authorize and supervise the activities related to production, importation, exportation, storage, transportation, distribution and commercialization of ethanol. 20

21. Investment Opportunities 2019 Energy Plan: Investments21
2019 Energy Plan: Investments
Energy Investments
Billion US$
(%)
Electricity
Power Generation
Transmission
127
104 23
22.5
18.4
4.1
Oil and Gas
398
70.6
Biofuels 39
6.9
TOTAL
564
100.0
ENERGY: Makes up about 2.2% of GDP and 10.1% of gross fixed capital formation on the period ( )
Source: PDE 2019 (MME), R$ 1 = US$ 1,69 (oct. 2010)

22. Brazilian Oil & Gas Policies
Ensure the supply of oil and natural gas
Transform Brazil into a net exporter of oil and its derivatives
Develop the national industry of suppliers of goods and services for the oil sector
Auctions for Oil Exploration Blocks
Realization of Round 11 in Concession System
Realization of Round 1 in Production Sharing Regime
Local Content Policy
Ensure that investments in the development of hydrocarbon production in Brazil result in sustainable growth and competitiveness of domestic industry
Natural Gas Sector
Regulation of the Natural Gas Act
Formulation of the Plan for Expansion of Pipeline Network - PEMAT
Assessing the PRE-SALT potential

23. FINAL REMARKS
Brazil has excellent opportunities for oil and gas exploration and production, presenting growing expectations for both reserves and production
The Brazilian Government wants international oil companies as partners and not as simple finance investors for the oil field development projects, even at the Pre-Salt
The pace of bidding rounds in the Pre-Salt Area will depend heavily on local industry's capacity to provide goods and services required by local content rules
Foreign companies are encouraged to seek partnerships with local suppliers and establish manufacturing operations within Brazil
Government has also policies to achieve sustainability in the oil industry, according to long term goals
The Brazilian Government will at all times give ways to assure and respect contracts, induce and facilitate the international trade
The Brazilian energetic policies intend to keep increasing the participation of renewable fuels in its energy mix in accordance to sustainability criteria.

24. MINISTRY OF MINES AND ENERGY Deputy Secretary of Oil, Natural Gas and
THANKS!
João José de Nora Souto
Deputy Secretary of Oil, Natural Gas and
Renewable Fuels
Rio de Janeiro, July 2011