pre-salt, local content policy & new bidding rounds

Pre-salt,Local Content Policy &

25 min

Local Content Policy &New bidding rounds

Magda Chambriard

Director general

May 7, 2013

Summary

Brazil and Petroleum Sector Evolution1

3

Current Scenario and Perspectives 2

Local Content4

ANP Bidding-rounds5

Final Comments6

Pre-salt3

Brazil

Area: 8,502,728 km²

Population: 196 million

GDP: US$ 2.3 trillion

World’s seventh largest economy

Political , Economical and Regulatory Political , Economical and Regulatory stability

Over US$ 377 billion in International Reserves

Investment grade (Moody’s, Fitch and Standard and Poors)

Oil, Natural Gas and Biofuels regulated under the same institutional environment (ANP)

41

53

40

50

60

Apparent consumption of diesel oil (million m 3 per year)

Brazilian market in fuel numbers

26

20

25

30

Apparent consumption of gasoline (million m 3 per year)

0 2 4

11

20

31

0

10

20

30

40

1945 1955 1965 1975 1985 1995 2005 2012

12

6

14

7

14

17

0

5

10

15

20

1945 1955 1965 1975 1985 1995 2005 2012

Crude oil production (bbl/d)

Crude Oil Production

1 500 000

1 750 000

2 000 000

2 250 000

ANP

Pre-saltdiscoveryx 3

0

250 000

500 000

750 000

1 000 000

1 250 000

1 500 000

1945 1955 1965 1975 1985 1995 2005 2012 2013

Pre-salt283 M bbl/d

(feb/13)

Garoupa Campos Basin

ANP creation

12

14

15

12

14

16

18

Proven Reserves of Crude Oil

Proven Reserves of Crude Oil (billion bbl)

1 1 1 1

3

5

6

8

0

2

4

6

8

10

12

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2012

Creation of Petrobras

Creation of ANP RoyaltiesDiscussion

The resuming of ANP bidding rounds

Pre-salt discoveries: new paradigm

Creation of Inter-ministerial Group

MP 592/12 & Law 12734/12

1953 1995 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Pre-salt – new regulatory framework: Higher potential

Petrobras Capitalization

Blocks in the Pre-salt cluster

ANP has invested in G&G surveys to increase knowledge of the Brazilian sedimentary b asins.

Constitutional Amendment

Nº 9/95

Summary


3


Local Content4

ANP Bidding-rounds5

Final Comments6

Pre-salt3

Proven ReservesOil – ~15.3 billion bblGas – ~459.3 billion m 3

Near future: x2

Production Oil and NGL – 2.2 million bbl/day

Current scenarioand perspectives

(2012)

25

30

35

40

Proven Reserves (Bboe)

Imports /Exports BalanceOil – 237.9 thousand bbl/dayGas – 35.8 million m 3/day

Oil and NGL – 2.2 million bbl/dayGas – 70.7 million m 3/dayNear future: x2

39 national companies38 foreign companies

Petroleum Natural Gas

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Near

future

“One country, three systems…”

7.5 million km 2 - 4.2 % under concession

Onerousassignment:7 blocks

~ 2% of sedimentary areas:Production Sharing Regime1st Pre-salt Bidding Round

Other areas: Concession Regime11th and 12 th Rounds

JubarteOil: 38.6 M bbl/d

Gas: 1.2 MM m 3/dBaleia Azul

Oil: 72.2 M bbl/dGas: 2.4 MM m 3/d

VoadorOil: 3.1 M bbl/dGas: 74 M m 3/d

MarlimOil : 2.5 M bbl /d

TrilhaOil: 384 bbl/d

Gas: 12 M m /d

Pre-salt Production(February 2013)

Oil: 283 M bbl/d; Gas: 9.4 MM m³/d

LulaOil: 94.2 M bbl/d

Gas: 3.8 MM m 3/d

SapinhoáOil: 24.5 M bbl/dGas: 922 M m 3/d

Oil : 2.5 M bbl /dGas: 60.5 M m 3/d

Marlim LesteOil: 31.2 M bbl/dGas: 496 M m 3/d

BarracudaOil: 894 bbl/d

Gas: 13.6 M m 3/d

CaratingaOil: 14 M bbl/d

Gas: 214 M m 3/d

LinguadoOil: 610 bbl/d

Gas: 82 M m 3/d

Gas: 12 M m3/d

PampoOil: 654 bbl/d

Gas: 38 M m 3/d

Oil fields in production Top 10 (february 13)

297

244

170200

300

Oil production (M bbl/d)

140

11595 94

75 72 68

0

100

Pre-salt

Pre-salt ProductionPlatforms up to 2013

Pre-salt shall be responsible for 40-50% of oil pro duction in 10 years.

Cidade de Anchieta –Baleia Azul Cidade de Angra dos Reis – Lula Cidade de São Paulo – Sapinhoá

Cidade de Paraty – Lula (may/13) P-58 – Parque das Baleias (nov/13) – Pre e pos-salt

Source: Petrobras Business Plan

Summary


3


Local Content4

ANP Bidding-rounds5

Final Comments6

Pre-salt3

Next decade, the demand for goods and services should reach U$ 400 billion

Opportunities for suppliers in the petroleum sector

ShellOGXQueiroz GalvãoBP

35

Petrobras Investments in E&P in BrazilAverage values in the 5- year period Business Plan (US$ Billion)*

*Based on information from the Petrobras Business Plan

BPStatoilChevronBGPetrogalOthers

6 79

13

18

2224

26

30

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 Valor Médio (2013-2017)Averagevalues

(2013-2017)

Local Content Commitments in Concession Agreements

40

50

60

70

80

90

100

Average Local Content

Con

tent

Offe

rings

(%)

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

E xploration Development

Bid Round

Loca

l C

onte

nt

Pre-salt

According to O&G reserves forecast, Brazil shall nee d to invest heavily in infrastructure (platforms, supply boats, pipelines, ports, shipyards, steel etc.).

Petrobras – already auctioned

28 drilling rigs7 in PE, 6 in BA, 6 in ES, 6 in RJ and 3 in RS

Naval industry

OSX Shipyard

6 modules (OGX)

4 hulls (OGX)

Jurong Shipyard(under construction)

6 rigs

Atlântico SulShipyard

7 rigs

P-62

São Roque Shipyard

P-59

P60

6 rigs

Source: Adapted from the 4th balance of PAC 2, 2012

BrasfelsShipyard

P-57 (Jubarte)

P-56 (Marlim Sul)

P-61

6 rigs

Rio Grande Shipyard

P-55 – modules and topside

8 replicants – hulls

3 rigs

Rio Grande Harbor Shipyard

P-63

P-58

Action completed/operation

Running

Auctioned

Provided

InhaúmaShipyard

Conversion of 4 FPSOs (P-74, P-75, P-76 and P-77)

Onerous Assignment

OSX Shipyard(under construction)

4 hulls (OGX)

5 drillships (BR)

7 WHP (OGX)

Naval Industry with LCPlatforms, drilling rigs, supply boats

Mauá Shipyard – RJ (P-50)BrasFels Shipyard – RJ (P-52)

Sea Brasil – STX - RJ Atlântico Sul Shipyard - PE

Mauá Shipyard – RJ (P-50)BrasFels Shipyard – RJ (P-52)

Rio Grande Shipyard - RS

Policies for Competitiveness

REPETRO: Tax Incentive for Temporary Admissionso To boost the building of drilling rigs, vessels and oil

platforms in Brazilian shipyards;o One of the biggest federal tax incentives of Brazil ;o US$ 26 billion in tax exemption from 2001 to 2010;o Federal Government is willing to expand REPETRO

benefits to other levels of local oil & gas supply chain;

REPORTO: Tax Incentive for Ports Infrastructure (MP 353/2012)

oTo boost the modernization and expansion of ports andrailways;oTax exemption of US$103.5 million (2012) and US$136.7million (2013);

Update of Local Content Regulationo Resolution ANP nº 36/2007 – update the methodology ofmeasurement LC – Publication in May;o Resolution ANP nº 39/2007 – deeply detailing the activitiesthat fit on each line of the Investment Reports –Public Consultation in July.

Prioritization of Sectors Related to Exploration and Development

Rel

evan

cy o

f the

dem

and

Higher

Priority matrixSubsea

EquipmentSubsea Services

(instalation)

Modules and

Topsides

Drilling and OSVs

Source: Public policies for socio-economic development through investments in offshore E&P - Bain & Company, 2012Courtesy: IBP / Bain & Company

Rel

evan

cy o

f the

dem

and

Lower

Lower Higher

Socio-Economic Attractiveness

(HT)

Drilling and completion

(HT)

OSVs

Investimentos Locais

Concessionários

3rd part certification

Investimentos Locais

Aquisições de bens e serviços locaisANP – fiscaliza e audita os contratos

3rd part certification

Local Content in numbers3rd part certification

Activity area Certificates

Geology and Geophysics 2128

Drilling Rigs 622

Logistic and Operational Support 6257

Well Drilling, Completion and Assessment 9092

Basic Engineering and Detailing 623

Management, Construction, Assembly and Commissioning 431

Electrical, Control, Instruments and Measurement Systems 1186

Telecommunication Systems 51

2009-2012

23,042 certificates

Local Content: R$ 16,3 billion

Telecommunication Systems 51

Oil and Gas Pipelines and Storage Tanks 441

Transfer Pumps 53

Compression Units 58

Electric Power Generation Units 129

Steam Generation and Injection Units 25

Water Treatment and Injection Units 169

Underwater Equipments and Control 262

Monobuoys and Mooring System 0

Oil Processing and Treatment System 55

Natural Gas Processing and Treatment System 5

Ship Building 75

Operational Safety 684

Civil Works and Utilities 697

o 60-70% of Local Content

o Highest technology

o Brazil can become an exporter

40%

Local Content – Investments declaredSubsea Technology

60%

Drilling rings Others

GovernGovern

Innovate to competeCompeting for growth

Brazilian Program for Competitiveness

Increase LC and productivity of the O&G industry

Fostering innovation and technologicaldevelopment in the supply chain;

NOCNOC

R&D centers

R&D centers

TrainningTrainningServicesServices

IOCIOC

IndustryIndustryExtending qualification (with a focus onengineering);

Promoting the internationalization ofBrazilian companies, attracting foreigninvestment and encouraging technologicaltransference;

Competitiveness

Develop productive and technologicalpoles according regional characteristics.

Summary


3


Local Content4

ANP Bidding-rounds5

Final Comments6

Pre-salt3

The 11th Bidding Round

Basin State Area (km 2)

Foz do Amazonas AP 44,500

Pará-Maranhão PA, MA 4,616

Barreirinhas MA 13,074

Ceará CE 7,388

Potiguar CE, RN 7,326

289 blocks in 11 states

Pernambuco-Paraíba PE, PB 6,291

Espírito-Santo ES 4,330

Parnaíba MA, PI 59,764

Sergipe-Alagoas AL 733

Recôncavo BA 475

Tucano Sul BA 6,455

Potiguar RN 588

Espírito-Santo ES 179

Total area: 155,718 km 2 or 60,123 sq. milesEvaluation of the offers: Signature

Bonus, Local Content and Minimum Work Program (MWP)

Equatorial Margin

Shallow and deep-water areas – 75.6 M km 2: Opportunities for oil companies and suppliers

Equatorial Margin

Foz do Amazonas

Pará-Maranhão

Potiguar

Ceará

Barreirinhas

12th Bidding Round (30 and 31/10/13)

Natural Gas onshore

Parnaíba Basin“Gaviões” Park

Opportunities for electric power generation

Acre Basin

Parecis BasinTeles Pires River

São Francisco BasinBuritizeiro County

Paraná BasinBarra Bonita field Recôncavo Basin

Pending approval from CNPE

Sergipe-Alagoas Basin

1st Pre-salt Bidding Round(28 and 29/11/13)

Production sharing regime

Signature Bonus, MWP and LC

Defined in Tender Protocol

% OF PROFIT OIL% OF PROFIT OIL

?% BID PARAMETER

The winner best offer!

Petrobras as operator with at least 30% participation.

Summary


3


Local Content4

ANP Bidding-rounds5

Final Comments6

Pre-salt3

Final comments

Brazil is resuming bidding-rounds for O&G exploration and p roduction,reaffirming the LC policy;

The Country is aware of the scale of its opportunities, there fore it triesto use the O&G sector to boost the industrial development, us ing theLocal Content policy;

This means Brazil has not only opportunities for O&G compani es, butalso opportunities for suppliers, mainly for those that are willing toestablish themselves in Brazil;

The resuming of Brazilian bidding rounds, opening the Equat orialMargin, the pre-salt and the search for gas onshore in enormo us basinscan give a good idea of the size of the country’s potential;

Foreign expertise and investments are welcome (as long as incompliance with Brazilian main goals for the sector).

National Agency of Petroleum, Natural Gas and Biofu els – ANP

Av. Rio Branco, 65 – Centro – Rio de Janeiro – Brasil

12º to 22º andar

Phone : +55 (21) 2112-8100 Phone : +55 (21) 2112-8100

www.anp.gov.br

A importância do conhecimento das bacias sedimentares brasileiras

As aquisições sísmicas realizadas pelasEAD´s a partir da flexibilização domonopólio foram fundamentais para adescoberta do Pré-Sal.

Sísmica pré-1998

Sísmica até 2002

Sísmica atual

Investimentos Locais Declarados

– Fase de Exploração

BIDInvestimentos Declarados

Total (bilhões R$) Local (bilhões R$)

BID 01 4,82 2,95

BID 02 15,66 11,64

BID 03 7,66 5,79

BID 04 4,18 3,42

Do Bid 1 ao Bid 10 cerca de

R$70 bilhões de

investimentos na fase de

exploração. R$45 bilhões

declarados como conteúdo

BIDInvestimentos Declarados

Total (bilhões R$) Local (bilhões R$)

BID 07 10,84 5,48

BID 09 7,90 3,89

BID 10 0,52 0,45

Total 19,26 9,81

BID 04 4,18 3,42

BID 05 4,76 2,96

BID 06 11,95 8,25

Total 49,04 35,02

declarados como conteúdo

local.

Sendo R$9,8 bilhões em

investimento local

declarado dentro das regras

com exigência da

certificação de CL.

Why invest in Brazil?

26

56

58

354

Paper and Cellulose

Automotive

Mining

Oil and Gas

Investments2012-2015

Source: BNDES. Study: Visão do Desenvolvimento nº 100 – April, 2012

7

11

14

21

25

25

0 50 100 150 200 250 300 350 400

Aerospace

Industrial Health

Textile

Steel

Electronics

Chemical

R$ billion

Oil and Gas: 63%