The Outlook for Oil&Gas in Brazil The Dialogue, 5th May 2017

Jorge M. T. Camargo President

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18 INSTITUTIONAL PARTNERS

About IBP

IBP: the Home of the Brazilian Oil&Gas Industry.

Founded in 1957

The worst economic and political crisis of Brazil modern history

Brazilian Downturn

(...)

What next?

November 2009 Brazil avoided Global

Crisis´effects. Rising credibility with boom of commodities

process and Pre-Salt discoveries.

September 2013 Economic turmoil. Protests

questioning political management, World Cup and

Olimpics.

February 2015 Economic recession, high inflation and corruption scandals (”Lava Jato”).

January 2016 Political and economic

worsening. Loss of investment grade and discredit of the

government.

Energy Transition

Oil prices Lower for longer

Oil&Gas Competitive Landscape

Onshore OPEC

Other L48 Tight Oil

Mid-Continent

Wolfcamp

Deepwater Brazil

Onshore Non-OPEC

Eagle Ford

Vertical L48

Bone Spring

Bakken

Deepwater Non-OPEC

Canada Oil Sands

Niobrara

Shallow Water Non-OPEC

Shallow Water Europe

Deepwater Angola

Deepwater US

Deepwater Nigeria0

20

40

60

80

100

120

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000

Bre

kev

en

US

$/b

bl

Bre

nt

eq

uiv

ale

nt

Liquids production 2026 (million b/d)

Deepwater US

Canada Oil Sands

Shallow Water Europe

Deepwater Non-OPEC

Weighted average based on production in 2026

Easy Labels

Shallow Water OPEC

Deepwater

Shallow water

Onshore

Lower 48 Tight Oil

Weighted average breakeven based on 2026 production

0 1 2 3 4 5 6 7 8 9 10 11 12

Pre-FID and US L48 future drilling cumulative production by breakeven in 2026 – by resource theme

Source: Wood Mackenzie onshore breakevens at 10% discount rate, offshore at 15%

Average oil daily production:

01 Well at Lula field (offshore)

x40 Non-conventional wells at

U.S. (onshore)

Source: IBP with data from Petrobras e US EIA

20 a 30 Thousand barrels/day

(Wells at Santos Basin)

High Wells Productivity at Pre-Salt

North Sea ~15.000 b/d

Gulf of Mexico ~ 10.000 b/d

Other examples:

Production

Development

Discovered

areas

Future Brazilian Production of Oil and NGL (Million barrels day)

Source: Rystad Energy (UCube Sept 2016)

Oil and Gas Market

The E&P Agenda

Mutiplicity of Operators

Bid Rounds Calendar

Gas Development

Evolution of Local Content Model

Regulatory and Tax stability

Environmental Licensing

Foster the development of the industry:

New projects and orders

Brazilian Energy Transition

Key recent policy and regulatory guidelines

• Sources: MME – “RenovaBio – Apresentação para reunião”, 2017; CNPE – “Resolução nº 11”, 2016; MME – “MME abre consulta sobre diretrizes propostas pelo Gás para Crescer”, 2016; MME – “Combustível Brasil – Evento de lançamento”, 2017; BNDES – “BNDES divulga novas condições de financiamento à energia elétrica”, 2016

‘

Renewables and decentralized power generation

O&G

Program to stimulate the production of biofuels, based on predictability and sustainability

New legislation to increase the mandatory percentage of biodiesel in diesel fuel to 10%

New financing guidelines for renewables and reduced support for fossil fuels

Promotion of decentralized power generation, focusing on renewables, mainly solar PV

Regulatory changes approved to open Brazilian pre-salt fields’ operation to new players

New local content criteria to allow for increased competitiveness of the industry

Improvement of the regulatory framework of the gas sector to adapt to Petrobras divestments

Reinforcing the competitive environment to attract new downstream players

Events to Watch

2017 Exploration Rounds

2018 Elections

Petrobras Divestments

“Crisis is a time when old has not yet gone, new has not yet arrived”

A. Gramsci