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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

12

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

15

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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