What is driving growthin transport fuels?Alternative Energy ConferenceBiofuelsSillas Oliva FilhoAlcohol and Oxygenate Trading Manager

Petrobras in NumbersPetrobras in NumbersPetrobras in Numbers16 Refineries with a capacity of 2,125

millions bpd

Gross RevenueUS$ 72 billions

ethylene production: 2,4 millions ton/year

gas sales: 45,000 m3/day

proven reserves: 14.9 billions of boe (SEC)

oil and gas production:*2,217 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 inArgentina

Pipelines: 30.343 km

Gas & EnergyGas & Energy

PetrochemicalsPetrochemicals RetailingRetailing

E&PE&P

*Brazil and abroad

Refine, Transportation,

Trading

Refine, Transportation,

Trading

Oil rings in operation: 97Vessels: 50 owned and 75 tcp

Thermoelectric: 9 – 3.2 GW

Strategic Planning for BiofuelsStrategic Planning for Strategic Planning for BiofuelsBiofuels

Petrobras MissionPetrobras Mission

Operate in a safe and profitable manner in the oil, gas and energy industry in Brazil and abroad, with social and environmental responsibility, providing products and services that meet client's needs.

Business StrategyBusiness Strategy

Diversify the business portfolio (emphasizing petrochemicals, logistics and commercial operations of new energy products), anchored in the synergy of downstream assets and capabilities;

Develop, coordinate and implement activities related to energy efficiency and renewable energy at Petrobras companies and to final consumers.

Selective entry into renewable energy projects.

Corporate Target for Carbon CreditsCorporate Target for Carbon Credits

Carbon credits generated in renewable energy projects 1,200 million CO2by 2010.

Business StrategyBusiness StrategyBusiness Strategy

Renewable EnergyInvestments will go towards the following priority sources energy:

Biomass energyPhoto voltaicBio-diesel production

Main targets for 2010Availability or 169 MWProduce 8,200 bpd of biodiesel

EMBRAER – E100

Fuel Ethanol Program EvolutionFuel Ethanol Program Evolution

Brazilian ExperienceBrazilian ExperienceBrazilian 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

Why did ethanol become a fuel in Brazil?Why did ethanol become a fuel in Brazil?Why did ethanol become a fuel in Brazil?

Brazil was an oil importer;

Looking for fuel diversification;

An alternative and internal solution;

First car operating

100% ethanol

Fiat 147 – 1979

Brazilian Energetic Matrix - 2004Brazilian Energetic MatrixBrazilian Energetic Matrix -- 20042004

Renewable Sources 43.9%

Hydroelectricity14.4%

Uranium 1.5%

Coal 6.7%

Natural gas 8.9%

Other renewable sources 2.7%

Wood 13.2%

Sugarcane 13.5%

Petroleum and derivatives 39.1%

100% = 213.4 millions [toe] Source: Brazilian Energy Balance (2005)

INTEGRATED SUGAR & ETHANOL PRODUCTIONINTEGRATED SUGAR & ETHANOL PRODUCTIONINTEGRATED SUGAR & ETHANOL PRODUCTION

Process Heat & Cogeneration

Sugarcane Transport,Cleaning & Crushing

JuiceTreatment

Bagasse

Sugar Production

HydrousEthanol

Distillation Fermentation

DehydrationAnhydrous

EthanolMolasses

PrimaryJuice

Secondary +Filter Juice

Source: UNICA

Ethanol: Learning CurveEthanol: Learning CurveEthanol: Learning Curve

Trend (Rotterdam Gasoline Prices)

Prof. Goldemberg, Coelho, Nastari and Lucon - USP

Trend(Anhydrous Ethanol Prices)

More than 400 types of Sugar-Cane

FFV changed fuel market:FFV changed fuel market:Consumer want 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

Why FFV in Brazil?Why FFV in Brazil?Why FFV in Brazil?

010,000

20,00030,000

40,00050,000

60,00070,000

80,00090,000

100,000110,000

120,000130,000

140,000150,000

units

Jan-

03Fe

b-03

Mar

-03

Apr

-03

May

-03

Jun-

03Ju

l-03

Aug

-03

Sep-

03O

ct-0

3N

ov-0

3D

ec-0

3Ja

n-04

Feb-

04M

ar-0

4A

pr-0

4M

ay-0

4Ju

n-04

Jul-0

4A

ug-0

4Se

p-04

Oct

-04

Nov

-04

Dec

-04

Jan-

05Fe

b-05

Mar

-05

Apr

-05

May

-05

Jun-

05Ju

l-05

Aug

-05

Sep-

05O

ct-0

5N

ov-0

5D

ec-0

5Ja

n-06

Feb-

06M

ar-0

6

LIGHT VEHICLES TOTAL SALES

Ethanol Gasoline FFV

LIGHT VEHICLES FLEET(thousand units)

9,08810,463

11,399 12,01912,755

13,506 14,075 14,439 14,680 14,431

3,716

3,4713,221

2,9722,712

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

499

546597

632686

734764 782 810

843

335 1,108

1,004807626439288

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

jan/

04 feb

mar apr

may jun jul

aug

sep

oct

nov

dec

jan/

05 feb

mar apr

may jun jul

aug

sep

oct

nov

dec

jan/

06 feb

mar

Light Vehicles Sales

FFV Gasoline Diesel Oil Ethanol

North and Central America

37%

Europe

9.8%

South America

38%

Asia

16.2%

Ethanol global market – 46.5 Billions LitersEthanol global market – 46.5 Billions Liters

Brazil35%

Brazil35%

A New Opportunity for BusinessA New Opportunity for BusinessA New Opportunity for Business

How much the production can be increased to attend the demand with social responsibility?

Main Production Areas in Brazil Main Production Areas in Brazil Main Production Areas in Brazil

Source: Brazilian Government

Mid South Region - 89% Production

North East Region - 11% Production

61%3%

8%1%

2%5%4%

5%5% 2%

2%1%1%

Potential Land for Sugar CanePotentialPotential LandLand for Sugar for Sugar CaneCane

LowUnusable

HighMedium

Withouth Irrigation

CTC - UNICAMP

Land use in BrazilLandLand use in use in BrazilBrazil

851370180

619759

7,626390

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

Area(Mha)Type

Source: FAO, 2002 and EMBRAPA (*)

Ethanol Logistic to Export Ethanol Logistic to Export Ethanol Logistic to Export

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

Sustainable EnergySustainable EnergySustainable Energy

EthanolEthanol EthanolEthanolGuarantee of

social responsibility

Guarantee of Guarantee of social social

responsibilityresponsibility

CO2Capture

Ethanol

Production

Ethanol

Use

CO2Emission

Facts about Ethanol Market in 2005Facts about Ethanol Market in 2005Facts about Ethanol Market in 2005

Ethanol as a Fuel is 30.6 Billions LitersEthanol as a Fuel is 30.6 Billions Liters

Ethanol as a Fuel is 67% of total ethanol productionEthanol as a Fuel is 67% of total ethanol production

Today the ethanol consumption is 2.6% of gasoline MKTToday the ethanol consumption is 2.6% of gasoline MKT

10% of ethanol in gasoline will represent 118 Billions Lt10% of ethanol in gasoline will represent 118 Billions Lt

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 Billions LitersEthanol global market is 46.5 Billions Liters

Ethanol as a Fuel around the WorldEthanol as a Fuel around the WorldEthanol as a Fuel around the World

Reduction of the oil dependence

Energy diversification

Agribusiness development

MTBE and lead replacement

Kyoto Protocol

Carbon Credit Opportunities

Why Ethanol Market is now an alternative?Why Ethanol Market is now an alternative?

Guarantee of Supply• Reliable and stable supply

Contracts:• Development of price mechanism• Infrastructure development

International Ethanol Prices:• On line information

International Future Market(international commodity)

Ethanol as a Fuel - New MarketEthanol as a Fuel Ethanol as a Fuel -- New MarketNew Market

Conclusion Conclusion Conclusion

Petrobras, as an integrated energy company, can have an important role in the development of this market and contribute

to develop friendly and environmental solutions.

Petrobras, as an integrated energy company, can have an important role in the development of this market and contribute

to develop friendly and environmental solutions.

Sillas Oliva Filhosillas@petrobras.com.br

Ethanol and Oxygenate Manager

Sillas Oliva Filhosillas@petrobras.com.br

Ethanol and Oxygenate Manager