"Petrobras Strategy: Focus on Social and Environmental Performance"

PETROBRAS

1

Petrobras Strategy:Focus on Social and Environmental

Performance

PETROBRAS

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Disclaimer

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.

Cautionary Statement for US investorsThe United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC.

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Petrobras

Strategic Planning

Economical Sustainability

Environmental

Social Responsibility

Acknowledgment

Governance

Summary

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Petrobras

Strategic Planning


Environmental Responsibility


Acknowledgment

Governance

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Company OverviewAn integrated energy company with US$ 74 billion in gross revenue (2005 US GAAP)

Exploration and Production

• Proven Reserves: 11.8 billion boe (SEC 2005)• Oil and Gas Production: 2.22 million boed (2005)

Refining, Transport and Marketing

• 16 Refineries • Capacity: 2,114 thousand bpd• Pipelines: 18,854 miles • Vessels (own fleet): 50

Distribution• 6,933 service stations (34% share in the Brazilian

market), 746 in Argentina and 105 in Bolivia

Petrochemicals• Ethene Production: 460,000 tons/year• Styrene Production: 250,000 tons/year• Polystyrene Production: 120,000 tons/year

Natural Gas • Sales of Natural Gas: 1.83 bcf/day

Operational data includes Petrobras Energia

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Activities in the World

Regional Presence

E&PTradingHeadquarters Gas & Power

Representation OfficeRefining

Houston

Colombia

Argentina

Angola

United KingdomUSA

BRASIL

Bolivia Rio de Janeiro

NigeriaVenezuela

EcuadorPeru

Mexico

Tanzania

Iran ChinaJapan

New York

Uruguay

Libya

EquatorialGuinea

Pakistan

Paraguay

PETROBRAS

7

309416427

593614624660

809908919945

1.2671.4481.484

SinopecRepsolStatoil

ENILukoil*Yukos*

ConocoPhillipsPetrobras

TotalChevron Texaco

Petrochina*Shell

BPExxonMobil

6.3434.026

2.9982.7472.708

2.2022.1952.114

1.2231.1751.139

524296

2.275

XOMRDS

SinopecBP

TOTCOP

PetroChinaCVX

PetrobrasYukos

RepsolLukoil

ENI**Statoil8,0

9,010,1

11,512,212,212,313,114,214,615,1

19,620,8

32,7

RepsolShell

StatoilENIBP

TotalSinopec

Chevron TexacoConocoPhillips

PetrobrasExxonMobilPetrochina*

Yukos*Lukoil*

3,33,84,3

6,89,4

11,111,511,812,113,0

17,618,5

20,122,4

RepsolSinopec*

StatoilENI

ConocoPhillips

TotalShell

PetrobrasChevron Texaco

Yukos*BP

Petrochina*Lukoil*

ExxonMobil

Publicly traded peer comparisonProven reserves (SEC - billion boe) – Dec. 2005 Oil and gas production (million boe) - 2005

Reserve life (years) – Dec. 2005 Refining capacity (thousand bpd) - 2005

Source: Evaluate Energy and Company Reports

7th

5th

9th

7th

PETROBRAS

8

Majors Average *

2,735

3,176

4,793

4,329

1,630

1,579

National Oil Companies Average **

Petrobras2,296

2,114

Product Sales (thous. bpd)

Refining (thous. bpd)Production (thous. boed)

* Majors: BP, Exxon, Total, Royal Dutch Shell, Chevron, Conoco and Repsol-YPF ** NOIC: PEMEX, PDVSA, Saudi Amraco, KPC, Pertamina and Sonatrach

*** 2004 figures, except for Petrobras (2005)Source: PIW Intelligence and Petrobras

2,217

3,400Year 2011

2011: New Refinery will add 200

thous. bpd capacity2010:

Pasadena Refinery revamp concluded – processing 70

thous. bpd of heavy oil

Vertical Integration Comparison

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53.6% 61.6%44.4% 40.6% 40.1% 39.8%

46.4% 18.0%25.1% 23.1% 20.7% 20.4%

10.3% 9.9% 8.0% 8.3%

31.5%10.9%9.5% 20.3% 26.4% 31.2%

Oct/1992 Jul/2000 After Aug/00offering

After Jul/01offering

Dec/2003 Sep/06

Government (1) (%) Bovespa Brazil Bovespa Foreign ADRs

(1) Includes BNDES / BNDESPAR

Foreign39,8%

Free Float 46,4 38,4 55,6 59,4 59,9 60,2

Bovespa28,7%

Diversified Shareholder Base

• More than 400,000 investors in Brazil and abroad• 60% of the economic value of Petrobras in private hands• Almost 40% of the stocks with international investors

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Dividend Payout43,37%

52,06%

26,60%34,82%

28,17% 32,22% 28,20% 29,90% 31,5%29,9%29,7%28,3%26,5%25,9%30,7% 29,6%

1998 1999 2000 2001 2002 2003 2004 2005

% of Net Profit % of Adjusted Net ProfitDividend Yield

4 ,6 %6 ,2 %

4 ,3 % 3 ,9 %

6 ,8 %

4 ,7% 4 ,3 %

2 ,0 %

4 ,6 %6 ,3 %

4 ,8 %3 ,4 %

1,8 %

4 ,9 %

6 ,5%5,4 %

1998 1999 2000 2001 2002 2003 2004 2005Ordinary Shares Preferential Shares

Dividend Yield: Dividend declared for each year / Share price at end of same year

Dividend Payout and Dividend Yield

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Market Focus

Turnover (traded volume) in NYSE 1H06 daily average

US$

256

mill

ion

US$

247

mill

ion

US$

223

mill

ion

US$

359

mill

ion

US$

150

mill

ion

US$

128

mill

ion

US$

123

mill

ion

US$

118

mill

ion

US$

111

mill

ion

US$

101

mill

ion

-50

100150200250300350400

Petrobras

*

Cia. Vale

do Rio D

oce*

BP

NokiaAméri

ca M

óvil*Elan

Corp

.

CemexBHP B

illiton

Total

Tenari

sU

S$ m

illio

n

* All firm's ADR programs

Source: Bloomberg

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A Petrobras

Strategic Planning




Acknowledgment

Governance

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Liderar o mercado de petróleo, gás natural e derivados na América Latina, atuando como empresa integrada de energia, com expansão seletiva

da petroquímica e da atividade internacional.

Growth ProfitabilityGrowth Profitability Social and Environmental Social and Environmental ResponsibilityResponsibility

Consolidate and increase

competitive advantages in

the Brazilian and South American

oil and oil products market

Develop and lead the domestic

natural gas market and perform in an integrated manner

in the gas and power market in South America

Selectively expand

international activities in an

integrated manner with the

Company’s business

Selectively expand interest

in the petrochemicals

market

Expand participation in biofuels market, lead the domestic

biodiesel production and increase

participation in the ethanol business

Operational, management, technological and human resources excellence

Lead the Latin American oil, natural gas, oil products and biofuels market, working as an integrated energy company, with selective expansion in petrochemical, renewable energy and

international activities.

Corporate Strategy

Corporate Strategy

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Drivers Business StrategiesE&P• Focus on light oil and natural gas

production and reserve growthDownstream• Expand conversion capacity and improve

quality of refined products• Increase bio-refining capacity, biomass,

petrochemical and fertilizers businesses• Promote Brazilian biodiesel production and

export ethanolDistribution• Increase market-share in Brazil for oil

products and biofuelsGas & Energy• Develop and establish a profitable and

reliable natural gas market including LNGInternational• Expand E&P in Gulf of Mexico and Africa• Undertake investments in refining

conversion capacity and quality

Develop market and monetize natural gas reserves in Brazil

Reduce dependence on light oil and oil product imports

Improve oil product quality in Brazil and abroad

Reduce carbon intensity of operations and products

Drivers & Strategies

Exploit competitive advantage from deep water exploration technology abroad

Assure future demand and add value to heavy oil exports

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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.

Vision 2015

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Note: Includes International

31.0

12.41.0

1.0

49.3

23.07.5

3.32.31.8

E&P Downstream G&EPetrochemical Distribution Corporate

9%4%

3% 26%

56%

3%

Business Plan 2007-2011US$ 87.1 billion

86%

14%

Brazil International

US$ 12.1 bi

US$ 75.0 bi

Investment Plan

49,3

23,0

7,53,32,21,8

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Technological Programs: Research & Development

PROTER Refining

PROFEX Exploration

PROAMB Environment

PRAVAP Enranced Oil Recovery

PROPES Heavy Oil

INOVA Fuel Innovation

PROREC Optimization &

Reliability

PROCAP Deep Water

PROTRAN Transportation

PROGAS Gas

PROGER Renewable

Energy

PROMOBBasin Modeling

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Petrobras

Strategic Planning

Governance




Acknowledgment

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Corporate Governance Structure

Board Committees:

• Audit• Environment• Compensation and Succession

Management Committees:

• Downstream• E&P• Gas and Energy• Human Resources• HSE• Analysis of Corporate

Structure and Management• Information Technology• Internal Control• Information Security• Risk• Social and Environmental

Responsibility• Marketing and Brands

Rapporteur

Fiscal Council

Board of DirectorsBoard

Committees

Audit Board Ombudsman

Strategic definitions and

supervision

Strategy execution and

development of operations

Executive Board

CEO

Officers

Business Committees

ManagementCommittees

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GovernancePetrobras Audit System

Internal Audit

External Audit

Audit CommitteeFiscal Council

Federal Accounts Court - TCU

Corporate Audits• Management Quality

Audit• HSE• etc

Business Unit Audits• ISO 9000• BS 8800/OHSAS

18001• ISO 14001• etc

SECCVMCNV

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TransparencyTransparency with Stakeholders

• Signed the Partnering Against Corruption Initiative (PACI) -January/2005

• Signed the Global Compact – October/2003 – board member

• Website, Webcasts, roadshows, chats with investors and press

• Ombudsman in all subsidies

• Client Channel, Supplier channel, call center, Green telephone, emergency telephone, 0800 service phone

• Extractive Industry Transparency Initiative (EITI)

• Public selection of corporate sponsorship projects

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General Ombudsman

• Reports directly to the Board of Directors

• Receives suggestions, complaints, claims, denunciation or exposes general problems;

• Guarantees confidentiality, independence, impartiality and neutrality

• Follows all Sarbanes-Oxley requirements;

• Forwards to the audit committee financial reports, accounting, audit and internal controls issues;

Communication and Denunciation Line

02000400060008000

10000120001400016000

2003 2004 2005

InternalDemandsExternalDemandsTotal

Num

ber o

f Dem

ands

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Governance



Acknowledgement

Petrobras

Strategic Planning

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2 , 3 7 42 , 8 1 2

5 5 1

7 2 4

7 4 2

1 8 5

2 7 8

3 8 3

2 0 1 5

F o r e c a s t

Oil and Gas Production• 632 thous. bpd of oil exports in

2011;• US$ 49.3 billion CAPEX in the

2007-2011 period;• 3 new refineries

1 , 6 8 4 1 , 8 8 01 , 5 4 0 1 , 4 9 3

2 5 0 2 6 5 2 7 4

2 8 9

1 3 3

1 6 1 1 6 81 6 3

8 5

1 0 1

9 49 6

2 0 0 3 2 0 0 4 2 0 0 5 T a r g e t 2 0 0 6

O i l a n d N G L - B r a z i l N a t u r a l G a s - B r a z i l

O i l a n d N G L - I n t e r n a c i o n a l N a t u r a l G a s - I n t e r n a c i o n a l

2,036 2,020 2,217 2,403

3,493

4,556Thousand boed

7.8% p.a.

7.5% p.a.

T a r g e t 2 0 1 1

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• In 2011 domestic natural gas production will double compared to 2005.

• US$ 22 billion investments in the natural gas chain in the 2007-2011 period

• Demand Flexibilization – studying LNG imports thourgh the Brazilian coast using floating storage and regasification units (FSRU or SRV)

• Quickest way to respond to increases in demand;

• More efficient and less polluting than diesel;

• ~20MM m3/day up to the end of 2008.

• US$ 1.6 billion investments up to 2011

Natural Gas Supply ExtensionNew investments will reduce the country’s dependence on imported gas

Existing Gaspipes

New Gaspipes2007-11 BP

Manaus

Belém

Recife

Salvador

São Paulo

Porto Alegre

Brasília

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54,3% 53,1% 51,5% 50,5%

43,8%40,5% 39,7%

34,3%30,0% 29,7%

25,0%20,3%

12,9%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

Petr

obras

She

ll

T

otal

CNOOC

Stat

oil

BP

Exx

onMob

il

L

ukoil

Chev

ron

Conoco

Phillips

Reps

ol-YPF

Petr

oChina

Sinop

ec

Undeveloped Reserves / Total Reserves* (2005)

• Strong investments in production will optimize the development of Petrobras’proven reserves, aiming light oil production and a minimum reserve/production ratio of 15 years.

• Petrobras had a 55% success ratio for our exploration wells during 2005, with 38 wells classified as discovery or producing wells.

* Source: Evaluate Energy

Oil & Gas Reserves

17

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Petrobras BiofuelsExperience:Going Beyond Legal Compliance

Petrobras BiofuelsExperience:Going Beyond Legal Compliance

- Brazilian Conditions - Legal Requirements- Petrobras Strategy- Research and Development

- Brazilian Conditions - Legal Requirements- Petrobras Strategy- Research and Development

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Brazilian Conditions

Type Area(Mha)

• Total country• Native Amazon Forest• Secondary Amazon Forest and Others• Native Forests• Pasture• Temporary Cultures• Permanent Cultures• Available land• Available land with low impact (*)

851370180

619759

7.626390

Source: FAO, 2002 and EMBRAPA (*)

Land use in Brazil:

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Biodiesel Brazilian SeedsCastor oil seed Sunflower Palm CottonSoy

Oil contents

47% 42% 18% 20% 15%

2005 Production in Brazil (m3/yr)

90,000 23,000 5,600,000 151,000 315,000

Oil yield (kg/ha)

705 630 540 4,000 450

Crop yield (kg/ha)

1,500 1,500 3,000 20,000 3,000


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Raw Material ComparisonRaw Material Energy Output / Energy Input

Wheat 1.2

Corn 1.3 – 1.8

Sugar Beet 1.9

Sugar Cane(under Brazilian production conditions) 8.3

Raw MaterialProduction / ha

(kg)Quantity of Ethanol

/ haEnergy Output /

Energy Input

Sugar Cane 85,000 7,080 liter 8.3

Corn 10,000 4,000 liter 1.3 – 1.8


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Fuel Ethanol Program Evolution

Brazilian Experience

Program for oil imports reduction Environmental Benefits

70’s 80´S 90´S

EthanolProgram

Implanted(BLENDS)

Gasohol and Ethanol Cars(2nd oil shock)

Program of Emission Controls

(PROCONVE)Gasohol and Flex fuel Cars

00´S

RenewableHydrogen

Future

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Brazilian Ethanol Production

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

80/8

1

81/8

2

82/8

3

83/8

4

84/8

5

85/8

6

86/8

7

87/8

8

88/8

9

89/9

0

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

Crop Year

thou

sand

(m³/t

on)

Anhydrous Hydrous Total

2006/07Estimates

Ethanol Production

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Ethanol: Learning Curve

Trend (Rotterdam Gasoline Prices)

Source: Prof. Goldemberg, Coelho, Nastari and Lucon - USP

Trend(Anhydrous Ethanol Prices)

More than 400 types of Sugar-Cane

Accumulated Ethanol Production (thous. m3)

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• Consumer wants to decide the fuel at the gas station

• Fuel price is one the most important factor

• Consumer is aware of pollution and renewable fuels

• Today cars manufacturer is producing 80% of FFV in Brazil

010,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

units

Jan-

03

Feb-

03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep-

03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

Feb-

04

Mar

-04

Apr

-04

May

-04

Jun-

04

Jul-0

4

Aug

-04

Sep-

04

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb-

05

Mar

-05

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep-

05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb-

06

Mar

-06

LIGHT VEHICLES TOTAL SALES

Ethanol Gasoline FFV

Flex-Fuel VehiclesBrazilian Conditions

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LIGHT VEHICLES FLEET(thousand units)

10,46311,399 12,019

12,75513,506 14,075 14,439 14,680 14,431

(76%)

3,716

3,4713,221

2,9722,712

2,4492,230 1,996 1,820 1,678

(9%)

499

546597

632686

734764 782 810

843 (4%)

335 1,108 (6%)

1,004 (5%)807626439288

1435718

9

5

44

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Gasoline Ethanol Diesel Oil CNG FFV

FFV since 2003CNG vehicles

9,088

Gradual Replacement of Conventional Engines

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2005to

2007(2% allowable)

2008to

2012(2% required)(5% allowable)

From 2012on

(5% required)

Brazilian market0 – 5.2 million barrels

Brazilian market5.2 – 15.7 million barrels

Brazilian market15.7 million barrels

Law 11.097/2005 – established minimal percentage for biodiesel mix in diesel

• Addition of 20-25% of anhydrous ethyl alcohol fuel to gasoline as per Agriculture Ministry determination

Legal RequirementsBiodiesel Requirement

Anhydrous Ethanol Requirement

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• Given to biodiesel producers that:• Purchase a minimum percentage of raw materials from family

agriculture: • 50% NE and semi-arid region• 10% NW and CW region• 30% SE and S region

• Sing a formal contracts with the family agriculture that includes:• Contract period• Value to purchase and price readjustment criteria • Raw material delivery conditions • Safeguards for each party• Identification and agreement that a representative of the farmers

participated in the negotiations• Assure assistance and technical training for the agriculture families

Legal RequirementsVoluntary Social Seal

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Alíquotas de PIS/COFINS(em R$/litro)

General 0,218 Agrobusiness + N/NE + Semi-Árid + mamona/palma

0,151

Family Agriculturein any reqion 0,070

Family Agriculture + N/NE + Semi-Árid +mamona/palma 0

R$ 0,218 / litro

R$ 0,151 / litro

R$ 0,070 / litro

R$ 0,0 / litro

Federal Taxes

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2007-2011 Investments 2011 Target

Biodiesel Production 855 Thous. m3/year

H-Bio (Bio-Refining) Process 425 Thous. m3/year of vegetable oil

Wind Power

PhotovoltaicAdditional 240 MW Installed Capacity of

Power Generation from Renewable Sources

Alcohol pipelines3.5 million m3 Ethanol Exports

Alcohol Vessel Project

Other Renewable Energy Sources

Investments of US$ 0.7 billion in development of renewable energy sources and biofuelsPetrobras currently has 280 MW of renewable energy installed capacity

Petrobras StrategyBusiness Plan (2007-2011)

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BA

MG

CE

Montes Claros

Quixadá

semi-arid region

3 Biodiesel Production Projects

Capacity: 171 thousand m3/year

Investments: ~ US$ 60 million

Start up: 4 Q/2007

InputsFamily Agriculture: castor, pinhão manso, cotton, and palm. Complementary: soy.

All Petrobras Biodiesel has Social Fuel Seal

Candeias

Petrobras Strategy

Raw Material Costs US$/bblPinhão Manso Oil 43Palm Oil 46Soy Oil 73Animal Fat 41Source: UOP

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41

Capacity Ton/year 10,000 35,000 65,000 100,000

Chemicals R$/litro 0.11 0.10 0.10 0.10

Energy R$/litro 0.05 0.02 0.02 0.02

Depreciation R$/litro 0.08 0.08 0.05 0.04

Labor R$/litro 0.11 0.04 0.02 0.015

Maintenance R$/litro 0.05 0.04 0.03 0.03

Oper Cost R$/litro 0.40 0.30 0.22 0.21

Investment US$ MM 5 8 10 12

Laboratory US$ 500,000

Biodiesel Production Cost

Source: Dedini, Intecnial, Lurgi

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Already over 2900 stations offering Biodiesel

October 2006

September 2006

September 2006

January 2007

January 2007

October 2007

B100 sales estimates up to Dec 2006:• 26,688 m3 for 3520 stations• 25,000 m3 for 3000 large consumers

Petrobras Strategy

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Auction Quantity(mil m3) Delivery

NOV/2005 70 JAN/DEZ/2006

MAR/2006 170 JUL/2006 TO JUN/2007

11/JUL/2006

12/JUL/2006

Ofertado 1.266Arrematado 600

10

20

30

40

JAN/DEC/2007

Biodiesel Sales in ANP´s Auction (B100 m3 )

Price(R$/L)

1,90 + ICMS

1,86+ICMS

1,75+ICMS

Voluntary Participation of Petrobras and Refap – start sales ahead of schedule

Petrobras Strategy

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Production Chain and Technology Paths

Agribusiness

Farming

Seeds

or

or

or

Ethanol

Methanol

Glycerin + Others

Biodiesel

B2 or B5mixture

orDiesel

Distributors

DieselRefinery

Hydrogen Diesel Fractions

Stations

ProcessedOil

Crushing

Transerestification

Complementary and not competitive processes

• H-Bio: refining process that utilizes vegetable oils as an input, in order to obtain diesel oil;• Hydrogenation of a blend of diesel and vegetable oils;

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45

100 liters

soy bean oil

2,1 Nm3

fuel gas96 liters

diesel oil

2,2 Nm3

propane8,8 liters

water

+ + +

Vegetable/animal oil hydrogenationRenewable Energy Research Program

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46

Potential H-Bio Use

*do total de óleo de soja exportado 2288 mil m³ são de óleo bruto e 535 mil m³ de óleo refinado**volume estimado de diesel a ser importado em 2006 = 1.709 mil m3 Sources: Abiove e Petrobras

2006-2007

2008

• H-BIO in 4 refineries – using up to 256 thousand m3/year of vegetable oil • 9.1% of total soy oil export• Equivalent to 15% of Diesel imports

• H-BIO in 5 refineries• Using up tp 425 thousand m3/year of vegetable oil • 15.1 % of total soy oil export• Equivalent to 25% of Diesel imports

Main advantages:• No waste• Simple logistics• Improves diesel quality• Flexible vegetable oil source

Petrobras Strategy

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47

Facts about Ethanol Market in 2005

608 x 103 KCAL

598 x 103 KCAL

512 x 103 KCAL

1718 x 103 KCAL

1 Ton Sugar Cane

SUGAR 153 KG

BAGASSE(50% UMIDADE)

276 KG

LEAVES (*)(15% HUMIDY)

165 KG

1 Ton-Field1718 x 103 KCAL

1.2 boe

1 boe1,386 x 103 KCAL

~=

• Ethanol global market is 46.5 Billion Liters (2005)

• Ethanol as a Fuel is 30.6 Billion Liters (67% of total ethanol production)

• Today the ethanol consumption is 2.6% of gasoline MKT

• 10% of ethanol in gasoline will represent 118 Billion Lt

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48

Marine Terminal Rio de Janeiro

Marine Terminal São Paulo

New Ethanol Pipeline (800 km)

New Water Wayfor Ethanol Ethanol Export

8.0 Million m3 in 2012

Ethanol Export LogisticsPetrobras Strategy

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49

• Recently, Petrobras incorporated Brazil-Japan Ethanol Inc.

• The company will import and distribute Brazilian-produced ethanol in Japan;

• Development of technical and commercial solutions for the reliable and long term supply of alcohol in the Japanese market;

• Petrobras will break into one of the most complex and important energy markets in the World:

• ethanol logistics distribution

• fuel distribution sector in Japan.

Brazil-Japan Ethanol Inc.

Petrobras Strategy

Others• Exploiting opportunities for sales and technology transfer in

Ecuador, Venezuela, Cuba and Nigeria.

PETROBRAS

50

• Photovoltaic pumping units• Largest photovoltaic park in Latin America installed in the

Research Center (CENPES) • Thermo-solar energy in business units• Development of Brazilian photovoltaic cells

Solar and Wind

Wind Energy

• Wind plant in Macau and Rio Grande• Identification of wind potential in strategic interest areas • Currently studying partnership projects

Solar Energy

Hybrid System

• Community with 200 inhabitants and 62 residences (S. Tomé –Pará)

• Objective: autonomous and sustainable management by the community

PETROBRAS

51

Renewable Energy Research Program• Budget: US$ 32 million• 66 R&D projects• 6 Research Lines

• Biofuels• Biomass• Wind

• Solar Photovoltaic• Solar Thermal• Other renewables

Example: Hydrogen

• H2 sustainable production• Bio-hydrogen• H2 storage in nanotubes• Distribution and supply

technologies

Hydrogen Hybrid Bus• High-end technology• Development with local

partners• Operation will start Dec 2006

PETROBRAS

52

Lignocellulosic Bioethanol• Raw material: sugar cane bagasse

• Proprietary process

• Successful ongoing bench-scale experiments• Patent issued• End of tests: 4thQ 2006

• Pilot plant start-up: 1sQ 2008

• Demonstration plant start-up: 3rdQ 2010

Renewable Energy Research Program

PS8

Slide 52

PS8 PETROBRAS S.A.; 24/5/2004

PETROBRAS

53

Synthetic bio-fuel (BTL)

• GTL small pilot-plant on stream since 1st Q 2004

• High yield FT Catalysts patented (2004-2005)

• Combinatorial Catalysis Unit on stream since 4th Q 2005

• Start-up cold prototype unit for fluid dynamic tests: 4th Q 2006

• Start-up GTL 1 bpd pilot plant: 4th Q 2007

• Start-up integrated biomass gasification pilot plant: 2nd Q 2008

• Start-up 300 bpd demonstration plant: 4th Q 2011

Renewable Energy Research Program

PS9

Slide 53

PS9 PETROBRAS S.A.; 24/5/2004

PETROBRAS

54

Agenda

Petrobras

Strategic Planning

Economic Sustainability



Acknowledgement

Governance

PETROBRAS

55

Strategic Agenda –HSE Excellence

1997 2000 2001 2002 2005

CertificationISO 14.001/

OHSAS 18.001

Program of Excellence in

Environmental Management

(PEGASO)

Pipeline Integrity Program

HSE Corporate Guidelines

PSP –Process Safety

Program

Evolution of HSE Management

Investment: Jan / 2000 to Dec / 2005: R$ 3.8 billion in more than4.000 projects

PETROBRAS

56

0.42

1.90

2.82

1.53

0.900.95

0.00

0.50

1.00

1.50

2.00

2.50

3.00

1 2 3 4 5 62000 2001 2002 20052003 2004

Spills – cubic meters

HSE Excellence Program

PEGASO

PipelineIntegrity Program

HSE CorporateGuidelines

PSP – Process Safety Program5,983

269MPL* 2011 = 601 m3

Oil and NGL Production (Mbpd)

1,846

1,323MPL* 2011 = 137,210 t

151,617

158,620

SOx Emissions – tons

Eco-efficiency of Operations

*MPL = Maximum Permissible Limit

Insurance Premium/ Insurance Value

PETROBRAS

57

0

2000

4000

6000

8000

10000

12000

bp shell Total ExxonMobil Statoil Petrobras0,00

0,501,00

1,50

2,00

2,503,00

3,50

2002 2003 2004 2005 spill/prod

Petrobras and Peers - Spills (m3) *

• Waste, Effluent and Emissions Inventory• Emissions Inventory includes: CO2, CH4, CO, SOx, NOx, N2O, MP, COV , flare

and fuel consumption• Water availability assessment in critical watersheds • Pre-qualification and audit water treatment companies

*spilled oil that reached the environment

spill

ed o

il (m

3 )spilled oil (m

3)/ production (bpd)

Eco-efficiency of Operations

PETROBRAS

58

• Investments around US$ 6.9 million in E&P:• Baseline and impact assessment of Deep Water in UN-BC (2001-2004)• Monitoring of Sergipe and Alagoas Basin (2001-2004)• Monitoring of Potiguar and Ceará Basins (2001 - 2005)

• Integrated remote sensing for surface monitoring for hydrocarbons from accidental or natural events

• Environmental sensitivity study around 108 mil km2 of pipelines and 6 thousand km around coastal terminals

• R$ 9 million research for ecosystems in Guanabara Bay

Biodiversity

PETROBRAS

59

0,00

5,00

10,00

15,00

20,00

25,00

bp Chevron Exxon Shell Total Petrobras0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

160,00

Direct CO2 Eq (M ton) Emissions

Carbon Intensity: Direct CO2 Eq/Production+processed load (Mbpd)

• Goal 2006-2011: Avoided GHG emissions of 18.49 million ton of CO2eq

Climate Change

GHG Reduction Strategy based on: • Carbon credits• Eco-Efficiency of operation and

products• Carbon sequestration• Change fuels to natural gas and

renewables• Energy Efficiency

2004 2005Petrobras

M Ton

M T

on/M

bpd

PETROBRAS

60

• CO2 Separation and Capture (4 projects)• Underground Geologic Repositories (1

project)• CO2 Carbonation (1 project)• Carbon fixation in biomass (8 projects)

• Reforestation pilot (até 50 ha)• Consortium with cultures for income

generation• Methodology validation to estimate

amount of fixed carbon• Biomes: Atlantic Forest, Amazonia

Rainforest, Cerrado, Araucária, Restinga, Caatinga

• Species accelerated growth• Microalgaes

Carbon Sequestration Projects Portfolio

Climate Change

PETROBRAS

61

Energy EfficiencyCONPET Program• EconomizAr Project – Reduced 13% of diesel consumption, equal to

approximately 50,000 bpd• Transportar – Up to 12/05,

4,600 evaluations in 2,300 vehicles from 300 companies. 57,279 ton/year CO2 avoided emissions.

• Natural gas bus powered • CONPET in School• National Award• Brazilian Label Program – Conpet

Seal

• Energy Efficiency Program in Petrobras – since 1991

471

522

488

465479479

10,5

11,110,8

10,4

9,7

10,2

430440450460470480490500510520530

2000 2001 2002 2003 2004 2005

Mill

ion

GJ

9,0

9,5

10,0

10,5

11,0

11,5

Num

ber o

f Tim

es

Petrobras Enegy Consumption

Sales/Petrobras Energy Consumption

PETROBRAS

62

Theme: WATER - Freshwater and Marine, including their biodiversity

Sponsored Projects – Petrobras Ambiental

• Module I : Public Selection

• Module II : Local Initiatives

• Module III : Existing Projects

• Module IV : Volunteers

• Self-sufficiency Planning• Environmental Education• Processes, Experiences and Results

Systematization• Accompanying and valuation instruments

The Program admits four main types of guidance:

• Recovery and conservation of environments that have a water body (surface, underground, coastal or marine)

• Implementation of integrated water resources management

• Promotion of rational use of water resources

• Environmental integrity of the water bodies around Petrobras facilities.

Investments of US$ 15 million in 186 projects

Modules I and II Requirements: The projects shall contemplate the following actions:

*Free conversion using average exchange rate

PETROBRAS

63

Agenda

Petrobras

Strategic Planning




Acknowledgement

Governance

PETROBRAS

64

30%

40%

50%

60%

70%

80%

1996 1998 2000 2002 2003 2004 2005

Employees Satisfaction Index

11

9,69,4

9,5

10,4

2001 2002 2003 2004 2005

% of Women in Management Positions

HR Practices in Petrobras• Gender Commission• Ambiance Survey• Ethics Code• Woman Assistance Program• Petrobras University – 154

hours per year average of training per employee

• Personal Performance Management

• New employees training• Leader Performance

• Result: 3,17% turnover• Petrobras chosen by university

students as the dream company*

goal

Human Resources

* Source: Research accomplished in 2005 by RH Júnior Consulting

PETROBRAS

65

Supplies Qualification Requirements

TECHNICAL

LEGAL

ECONOMICHSE

QUALITY & SOCIAL

RESPONSIBILITY

ReferenceQuality:ISO 9.001Social Resp. : ETHOS

Reference:Environmental : ISO 14.001Health and Safety :OHSAS 18.001

Requirements for pre-qualifying suppliers

ACCORDING TO THE GOOD OR SERVICESOME REQUIREMENTS ARE OBLIGATORY

SOME ATTRIBUTES ARE REQUIRED FOR BEING INCLUDED IN THE DATABASE DEPENDING ON THE GOOD OR SERVICE

PETROBRAS

66

Social & Environment Responsibility in services contracts

1. SCOPE DEFINITION

2. BIDDING OR DIRECT NEGOTIATION

3. FORMALZE CONTRACT

4. MANAGEMENT AND INSPECTION

5. VALUATION AFTER CONCLUSION

S&ER REQUIREMENTS

BAD( Management, Result )

2.1 SELECTION DATABASE(Containing S&ER

Requirements)

CONTRACTOR

Goods and Services Suppliers

PETROBRAS

67

• Prominp - investments of R$ 200 million to qualify 70 thousand professionals between 2005-2007

• TEAR (Weaving Responsible Network): partnership Inter-American Development Bank, ETHOS and IBP

• 33 projects to develop new suppliers to substitute imports – R$ 53.5 million

• Pact with Government Agency (Sebrae) to include small and medium companies in the supply chain

• “Mechanics Friend Program” - since 2001 23,500 people have participated

• “Transport Quality Program” from BR – aims to reduce accidents through training and qualification

Petrobras demands high quality, but the company also helps the local market to achieve necessary standards


PETROBRAS

68

Improvement of the Supply Chain S&E Responsibility• Partneership with ETHOS Institute• Reporting to Ethos Indicators• Assessement of Results• 2003: 105 companies assessed• 2004: 195 companies assessed• 2005: 400 companies assessed

• Implementing CSR for micro and small companies• Petrobras’ Role (anchor of Oil and Gas sector): commitment, expertise, staff,

operational costs, seminars, working groups and qualification courses.

TEAR (Weaving Responsible Network): partnership Inter-American Development Bank, ETHOS and IBP


• Local baseline of Micro and Small companies• Development plan for Micro and Small companies• Qualification of Micro and Small companies to be potential suppliers for the Oil & Gas Sector• Networking and cooperation between local companies and Oil & Gas Companies, • Institutional support of Oil & Gas Companies• Network and cooperation between large, micro and small suppliers to become local suppliers

Main Initiatives of the Agreement Petrobras/Sebrae

PETROBRAS

69

• Planning (risk analysis, environmental aspects, legal compliance and goals)

• Structure and responsibility• HSE Training• Involvement and communication• Accidents and incidents treatment• Critical analysis by the administration • HSE management system audit• Organization and Cleaning• Subcontracts

HSE requirements that will be requested in every contract with adegree of flexibility that will depend on the level of the contract’s risk

1

2

3

4

OCURRANCE PROBABILITYB DA C

GRAV

ITY

QI

QIIQIII

QIV

SERVICES CATEGORIES EXAMPLE


PETROBRAS

70

Purpose:• Transmit Petrobras values in the entire supply chain

Scope• 60 large industrial clients in Brazil• Products: Gasoline, diesel and QAV (over 60% of sales)

Progressive Bonus Levels:• Level 1: HSE management system plan structured• Level 2: HSE management system implemented• Level 3: ISO 9001, ISO 14001 and OHSAS 18001

certification

Pilot Program• In Paulinia with 20 clients, over R$1million paid in bonuses

in one year.

Clients

Responsible Partnership Program

PETROBRAS

71

0

1

2

3

4

5

6

bp Shell Total ExxonMobil Petrobras

• Fatal and serious accidents videoconferences

• HSE Alerts

• Communication of the blockage actions implemented

• Indicator audit and scope analysis

• Leadership Training: Systemic Accidents, Incidents and Deviations Investigation

• Best Practices Seminar – 1,300 professionals

• Behavior audits

The performance measured by LTIF* and Fatalities has been improving as a consequence of the implementation of best practices, such as:

* Lost Time Injuries Frequency– number of accidents involving leave from work per million man-hours of risk exposure.

0

10

20

30

40

50

60

bp Shell Total ExxonMobil Petrobras

2002200320042005

LTIF*

Number of Fatal Accidents

n.a.

n.a.

Health and Safety

PETROBRAS

72

OCURRENCES RECORD

PETROBRAS’ PYRAMID

2002 2003 2004 200521 (1) 19 (1) 16 (1) 15 (1)

512 (24,38) 511 (27) 505 (32) 516 (35)---- ---- ---- 4,183 (279)---- ---- ---- -------- 226,914 490,000 515,000

(11,943) (30,625) (34,334)HHER HHER HHER HHER

333,860,291 415,886,619 484,598,772 533,029,635

INTERNATIONAL ACCIDENT PYRAMID

FATALITYACIDENTES WITH LOST

TIMEACIDENTES WITHOUT LOST

TIME

INCIDENTS

DEVIATION

1

30

300

3.000

30.000

Working in the base of the pyramid administrating deviation and applying behavioral audit reduces even more serious accidents.

Health and Safety

PETROBRAS

73

Aspects and risks linked to the work environment:

Aspects and risks linked to life style:

• Occupational Hygiene • Ergonomics • Emergency Health• Impact of the company’s activities in community health

• Program for the Health Promotion

EPIDEMIOLOGICAL VIGILANCE

Health and Safety

PETROBRAS

74

• Proposes sustainable development for communities with limited social inclusion.

• Supports communities to achieve “Local Agenda 21” with democratic participation.

Community Relations

• Identifies necessary actions for sustainable local development.• Qualifies individuals and organizations, aligning actions to Petrobras’

mission in respect to Social Responsibility.• Provides knowledge and training to communities.

PETROBRAS

75

• Input for the selection of projects and activities

• An opinion survey among communities directly impacted by exploration, production and refining activities is being held for the third time in the units located in Brazil and for the first time in Argentina, Bolivia and Colombia. More than 12,000 people will be interviewed.

• Stakeholder Relationship Activities

• Emergency Simulation Exercises

• Visits Program

• Thematic Panels

• Educational Projects

Community Relations

PETROBRAS

76

Stakeholders

CommunicationDepartment

BA/BU

Requests and

conditions

Demands consolidation

Projects selected and

approved

registration Project monitoring

Registers and

ApprovesProject

Select Socio-environmental

Projects(filter and

selection criteria)

Demand Identificat

ion

Concludes project and

issues a Report

Stakeholders


BA/BU

Stakeholders


BA/BU

Stakeholders


BA/BU

Approval Project monitoring

Project Monitoring

Report

Community Relations

PETROBRAS

77

60 MILLION755Total

17 MILLION311Childhood and Adolescence Fund payment

254 THOUSAND8Others

1.5 MILLION15Advanced Program of Assistance and Treatment of Disabled People

7 MILLION181Social endeavor

4 MILLION27Children and adolescents rights guarantee

11 MILLION 111Employment and income creation

20 MILLION 102Education and professional qualification for youth and adults

AMOUNT INVESTED IN 2005 (US$)

NUMBER OF PROJECTS

LINHAS DE ATUAÇÂO

Community Investments

More than 2000 volunteer workers in more than 1,200 projects

• Total Investments from 09/2003 to 12/2006 : US$ 125 million*

*Free conversion using average exchange rate

PETROBRAS

78

Community Investing• Petrobras is among the companies that invest the most on the

community well being

Source: Goldman Sachs 2005

Community Investment as a percentage of CAPEX

PETROBRAS

79

Agenda

Petrobras

Strategic Planning




Acknowledgement

Governance

PETROBRAS

80

SiRi Benchmark

Othercompaniesinclude (in

alphabeticalorder): BG,

BP, Chevron, ENI,

ExxonMobil, OMV, RepsolYPF, Royal Duch Shell,

Total

Industry Average

PETROBRAS

81

Goldman Sachs

PETROBRAS

82

R2 = 0.4121

-20

-10

0

10

20

30

40

50

0 10 20 30 40 50 60 70 80 90 100

Sustainability Score (%)

RO

E 5

year

ave

rage

(%)

DJSI

DJSI

DJSI DJSI

DJSI

DJSI

DJSIDJSI

Petrobras

Dow Jones Sustainability Index

Source: Sam Research, 2004-1999 data

PETROBRAS

83

Thank You

Visit our website: www.petrobras.com.br/ri/

For more information please contact:Petróleo Brasileiro S.A – PETROBRAS

Investor Relations DepartmentRaul Adalberto de Campos– Executive Manager

E-mail: [email protected]. República do Chile, 65 – 22o andar

20031-912 – Rio de Janeiro, RJ(55-21) 3224-1510 / 3224-9947

Documents

"Petrobras Strategy: Focus on Social and Environmental Performance"