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Outlook for Otto-Cycle Fuels in Brazil
Ivan de Sá General Manager of Clean Products Trading
Downstream – Trading & Marketing
From Crude Oils to Biofuels- Hart Energy Conference
October 25th, 2011
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DISCLAIMER
FORWARD-LOOKING STATEMENTS:
DISCLAIMER
The presentation may contain forward-looking statements about
future events within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that are not
based on historical facts and are not assurances of future
results. Such forward-looking statements merely reflect the
Company’s current views and estimates of future economic
circumstances, industry conditions, company performance and
financial results. Such terms as "anticipate", "believe", "expect",
"forecast", "intend", "plan", "project", "seek", "should", along with
similar or analogous expressions, are used to identify such
forward-looking statements. Readers are cautioned that these
statements are only projections and may differ materially from
actual future results or events. Readers are referred to the
documents filed by the Company with the SEC, specifically the
Company’s most recent Annual Report on Form 20-F, which
identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements,
including, among other things, risks relating to general economic
and business conditions, including crude oil and other
commodity prices, refining margins and prevailing exchange
rates, uncertainties inherent in making estimates of our oil and
gas reserves including recently discovered oil and gas reserves,
international and Brazilian political, economic and social
developments, receipt of governmental approvals and licenses
and our ability to obtain financing.
We undertake no obligation to publicly update or
revise any forward-looking statements, whether as
a result of new information or future events or for
any other reason. Figures for 2011 on are
estimates or targets.
All forward-looking statements are expressly
qualified in their entirety by this cautionary
statement, and you should not place reliance on
any forward-looking statement contained in this
presentation.
NON-SEC COMPLIANT OIL AND GAS
RESERVES:
CAUTIONARY STATEMENT FOR US INVESTORS
We present certain data in this presentation, such
as oil and gas resources, that we are not permitted
to present in documents filed with the United States
Securities and Exchange Commission (SEC) under
new Subpart 1200 to Regulation S-K because such
terms do not qualify as proved, probable or
possible reserves under Rule 4-10(a) of Regulation
S-X.
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AVISO
Estas apresentações podem conter
previsões acerca de eventos futuros. Tais
previsões refletem apenas expectativas dos
administradores da Companhia sobre
condições futuras da economia, além do setor
de atuação, do desempenho e dos resultados
financeiros da Companhia, dentre outros. Os
termos “antecipa", "acredita", "espera", "prevê",
"pretende", "planeja", "projeta", "objetiva",
"deverá", bem como outros termos similares,
visam a identificar tais previsões, as quais,
evidentemente, envolvem riscos e incertezas
previstos ou não pela Companhia e,
conseqüentemente, não são garantias de
resultados futuros da Companhia. Portanto, os
resultados futuros das operações da
Companhia podem diferir das atuais
expectativas, e o leitor não deve se basear
exclusivamente nas informações aqui contidas.
A Companhia não se obriga a atualizar as
apresentações e previsões à luz de novas
informações ou de seus desdobramentos
futuros. Os valores informados para 2011 em
diante são estimativas ou metas.
A SEC somente permite que as
companhias de óleo e gás incluam em seus
relatórios arquivados reservas provadas
que a Companhia tenha comprovado por
produção ou testes de formação
conclusivos que sejam viáveis econômica e
legalmente nas condições econômicas e
operacionais vigentes. Utilizamos alguns
termos nesta apresentação, tais como
descobertas, que as orientações da SEC
nos proíbem de usar em nossos relatórios
arquivados.
Aviso aos Investidores Norte-Americanos:
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Overview
5 comparisons on the same energetic basis
Throughout last decade fuels market share ( energetic basis ) has changed and Ethanol reached a maximum share of 45,8% in 2009
2000
66,5%
19,5%
12,6%1,5%
2009
47,8%
15,9%
29,9%
6,4%Total Ethanol
= 45,8%
Total Ethanol
= 32,1%
Source: MME
2010
52,2%
16,3%
25,8%
5,7%
Total Ethanol
= 42,1%
Gasoline A Anhydrous Ethanol
NGV Hydrous Ethanol
6
0
5.000
10.000
15.000
20.000
25.000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
-
5.000
10.000
15.000
Flex fuel fleet Ethanol Hydrous + Anhydrous Gasoline A
2000 – 2009 Growth:
GASOLINE “A” = +0,9% aa
HYDROUS+ANHYDROUS = +10,0 % aa
Source: ANP & Petrobras Strategic Planning Area
Gasoline A & Total Ethanol
In 2008 & 2009, Ethanol (hydrous + anhydrous) sales surpassed Gasoline, but since 2010 this trend shifted.
2011 (Jan-Aug):
Gasoline A = 16.973 thousand m³
Ethanol = 12.920 thousand m³
Mill
ions
veh
icle
s
thou
sand
m³
7
Drivers
8
• GDP
• Consumer credit
• Population
• Energy Policy (tax, subsidies…)
• Automotive Industry Strategy
Economic and social variables influence vehicles sales and Otto-Cycle demand
Vehicles Sales
Prices
Fle
et
reti
rin
g
LGN Conversions
Fleet Unitary
Consumption
Fuel Sales
Ethanol x
Gasoline C
9
R2 = 95%
20.000.000
25.000.000
30.000.000
35.000.000
40.000.000
45.000.000
80
0.0
00
1.0
00
.00
0
1.2
00
.00
0
1.4
00
.00
0
1.6
00
.00
0
1.8
00
.00
0
2.0
00
.00
0
2.2
00
.00
0
2.4
00
.00
0
Domestic consumption (R$ millions)
Ott
o c
yc
le s
ale
s (
m³
- g
as
olin
e C
eq
uiv
ale
nt)
Brazilian GDP and the impact on the Otto-Cycle demand
2001 2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: ANP & IPEA/IBGE
Otto cycle sales = Gasoline C + Hydrous Ethanol
10
-
200
400
600
800
1.000
1.200
1.400
1.600
jan
-09
fev-
09
ma
r-0
9a
br-
09
ma
i-0
9ju
n-0
9ju
l-0
9a
go
-09
set-
09
ou
t-0
9n
ov-
09
de
z-0
9ja
n-1
0fe
v-1
0m
ar-
10
ab
r-1
0m
ai-
10
jun
-10
jul-
10
ag
o-1
0se
t-1
0o
ut-
10
no
v-1
0d
ez-
10
jan
-11
fev-
11
ma
r-1
1a
br-
11
ma
i-1
1ju
n-1
1ju
l-1
1a
go
-11
55%
60%
65%
70%
75%
80%
85%
Hydrous Ethanol Sales Relative Prices Ethanol/Gasoline C
Hydrous Ethanol sales X Relative Prices Ethanol/Gasoline C
Hyd
rou
s E
than
ol S
ales
(th
ou
san
d m
3) R
elative Prices E
than
ol/G
asolin
e C
Source: ANP
Consumers are aware of relative fuel prices and seek the most economically efficient fuel option
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Information regarding Ethanol supply and demand are essential for Gasoline competitiveness assessment
Otto
Cycle
Market
Gasoline
Production/
quality
Ethanol
Production/
quality
Sugarcane Crop
Sugar
Production
$G $E
Import
Export
Weather Customers Preferences/
Decision
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10.59311.536
12.623
14.80915.41715.94717.719
22.527
27.51325.700
27.281
22.027
24.750
0
5.000
10.000
15.000
20.000
25.000
30.000
00/0
1
01/0
2
02/0
3
03/0
4
04/0
5
05/0
6
06/0
7
07/0
8
08/0
9
09/1
0
10/1
1
Fore
cast 11/1
2
Fore
cast 12/1
3
Reduced Ethanol production reflected on prices increase, boosting Gasoline sales
Key Points:
• Reduced new plants
expansion
• Old sugar cane plants: low
yielding
• Weather conditions: 2009
rainy & 2010 dry
• Production driven to sugar
due to high prices on
international market
Sources: UNICA e DATAGRO
Total Ethanol Production – Brazil (thousand m³)
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Supply Challenge
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Gasoline sales forecast is an input for Petrobras´s Planning Process, that involves the whole supply chain activities: from E&P to Marketing.
48 national crude oils
60 imported crude oils
28 terminals
14 refineries
156 final products
delivery in 20 terminals
+15.000 km pipelines
55 importing origins
97 exporting destinations
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Light Vehicles Fleet - Brazil
Source: Petrobras Strategic Planning Area
0
10.000
20.000
30.000
40.000
50.000
60.000
1990 1995 2000 2005 2010 2015 2020
Gasoline Ethanol Flexfuel Diesel
Th
ou
san
d V
eh
icle
s
18%
1%
77%
5%
There are increasing uncertainties about the composition of the mix gasoline/ethanol due to the significant growth of flex-fuel fleet
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Vendas de gasolina C e etanol hidratado (fonte: ANP)
0
20.000
40.000
60.000
80.000
100.000
jan
/04
ma
r/0
4m
ai/0
4ju
l/0
4se
t/0
4n
ov/0
4ja
n/0
5m
ar/
05
ma
i/0
5ju
l/0
5se
t/0
5n
ov/0
5ja
n/0
6m
ar/
06
ma
i/0
6ju
l/0
6se
t/0
6n
ov/0
6ja
n/0
7m
ar/
07
ma
i/0
7ju
l/0
7se
t/0
7n
ov/0
7ja
n/0
8m
ar/
08
ma
i/0
8ju
l/0
8se
t/0
8n
ov/0
8ja
n/0
9m
ar/
09
ma
i/0
9ju
l/0
9se
t/0
9n
ov/0
9ja
n/1
0m
ar/
10
ma
i/1
0ju
l/1
0se
t/1
0n
ov/1
0ja
n/1
1m
ar/
11
ma
i/1
1ju
l/1
1
m³/
dia
Hydrous Ethanol
Gasoline C
How to cope with unexpected changes in consumption profile?
Source: ANP
Daily
Sale
s m
³
Gasoline C & Hydrous Ethanol Sales - Brazil
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• Huge monthly Gasoline sales variations reaching 22% (March 2011 vs February 2011)
• Some distribution systems are closed to maximum capacity need of supply chain adjustments
• As an agricultural commodity Ethanol supply can be affected by weather conditions and economy
– Ethanol supply forecasts can vary significantly during crop year (decrease of 5 billion liters from initial to latest forecast for 2011/12 crop)
Main challenges
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Supply Chain Management
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To cope with this volatile environment, Petrobras includes in its Business Plan…
• Biofuels investments:
– partnerships with the sugar cane sector (PBIO)
– Ethanol logistics (LÓGUM)
• Gasoline supply flexibility:
• Changes on internal production mix (Gasoline production
optimization)
• Facilities for Gasoline imports
• Continuous trading & marketing assessments for Gasoline and
Ethanol
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