2010 Brazil Oil & Gas Seminar

PrePre -Salt Opportunities & New Regulatory Framework

Magda Chambriard
Director Brazilian Petroleum Agency

Institutional Evolution O&G sector

Constitutional Amendment N 9/95 Law n 9.478/97 Creation of ANP & CNPE (National Energy Policy Council) Implementation of the ANP Directive CNPE n 8/03
1995 1997 1998 1999 2000 2001 2002 2003 2004

Pre-salt IM group
Self-sufficiency Pre-salt discovery

2005

2006

2007

2008

2009

Concession contracts signed with Petrobras (Round Zero) GT ~ 60/65% Bill 5.938/2009 for the Pre-Salt areas ANP studies the areas, defines the blocks and promotes the bidding rounds. ANP studies areas and promotes the bidding rounds according CNPE approval.

Current scenario
(2009)

Proven Reserves(*) Oil ~13 billion bbl Gas ~366 billion m3

(*) without pre-salt discoveries

Production Oil e LGN 2,03 million bbl/day Gas 57,9 million m3/day

Imports/Exports Balance

Oil 132,5 thousand bbl/day Gas 23,5 million m3/day

Current scenario Concession contracts

38 sedimentary basins 29 principal basins

7,5 million km2

Concession Contracts: Exploratory Phase 377 blocks (JUN/2010)

Production Phase 368 fields 304 operated by Petrobras

Marlim Field
Marlim Field:
discovered in 1985 in 835m water depth Production (DEC/2008): 345 thousand bbl/day Proven Reserves
(DEC/2008):

1,7 Billion bbl

Royalties: R$ 2.15 billion Special Participation: R$ 4.84 billion Government Take ~54%
(2008)

The PrePre-Salt as a New Paradigm

Pre-Salt Area PreThe study of the Interministerial Group

2-ANP-2-RJS 2-ANP-1-RJS
Dry well Wells being drilled (APR/2010) Oil Oil and Gas Gas Pre-SaltPolygon Area Pre-Salt (Bill of Law 5.938/2009) Fields producing/under development Exploratory Rounds (Rounds) 0 1 2 3 4 5 6 7 9

New Regulatory Framework

New rules for E&P in the PrePre-Salt area: Four (04) Bills

Production-sharing agreements for E&P in the unlicensed Pre-Salt areas (PL 5.938/09); Creation of a new state company Pre-Sal (PL 5.939/09); Formation of a Social Fund (PL 5.940/09); Onerous assignment of rights, which shall grant Petrobras the right to produce in certain areas of the Pre-Salt, up to 5 billion boe (PL 5.941/09).

Production Sharing Contract Bill n. 5.938/09

Senate approval on 06/10/2010

General Features
Objective:
Increase the Brazilian Society benefit on the pre-salt E&P.

Main Rules:
Brazil shall adopt the Production Sharing Contract in the Pre-Salt Area; Petrobras shall be the only operator in this area with at least 30% participation; Opportunities in the pre-salt area shall be bidden considering Petrobras as the Operator; The winner shall be the one who offers the biggest share of oil production to the State; A New State Company shall run the State share of the contract; Petrobras can be contracted without a bidding process; ANP provides the bidding rounds and regulates the contracts.

Pre-Salt Social Fund PreBill n. 5.940/09

Senate approval on 06/10/2010

The Social Fund shall use the resources generated by the production-sharing contracts in reducing poverty; education; culture; science and technology; environmental sustainability. The revenue of the Social Fund will come from the sale of profit oil, from the signature bonus and from the royalties destined to the Federal Government.

Investment Policy
Social Fund shall carry out investments in Brazil and abroad in order to diversify the risk and avoid the problems of the Dutch disease Investments shall follow solidity criteria: liquidity, risk classification and diversification, expected return Investments in Brazil may be used in infrastructure projects Financial institutions may be hired to act as operating agents

The New State Company Bill n. 5.939/09

Lower Court approval on 11/18/09

New State Company

Shall have a qualified technical staff, but shall NOT be an operator; Participates in the PSC on behalf of the Brazilian Government; Shall have casting vote, according to the contract.

Onerous Assignment Bill n. 5.941/09

Senate approval on 06/10/2010

Objective: Petrobras capitalization

Authorization to assign to Petrobras the right to explore and produce oil and gas up to 5 billion boe, in selected areas not yet under contracts; Authorization to subscribe and pay in new shares of Petrobras joint stock.

The decision of drilling wells to increase prepre-salt value

Pre-Salt Area (PL 5.938/09) TAC Limit (drilling) Exclusion Area 3D Seismic Pub Exc Pos 3D Seismic Conf NonExc Pos 2D Seismic Conf Exc Pos 2D Seismic Conf NonExc Pos Wells being drilled (APR/2010) Oil il and Gas Gas Pre-Salt Polygon (Bill of Law 5.938/2009) Fields producing/under development Exploratory Rounds (Rounds) 0 1 2 3 4 5 6 7 9

Franco 2-ANP-1-RJS Libra 2-ANP-2-RJS

The decision of drilling wells to increase prepre-salt value

2-ANP-1-RJS 2-ANP-2-RJS

Franco discovery
(2 (2-ANPANP-1-RJS)

Forecasted Recoverable Volume 4,5 Bi bbl

3D structural map of the salt base as interpreted by the ANP technical staff (2010)

Brazilian Opportunities
PrePre -salt Campos & Santos Basins
(50 billion barrels ?)
Campos Basin

Santos Basin
If proven the way ANP forecasted, Brazil will need to invest heavily in infrastructure (platforms, pipelines, oil pipelines, ports, ships, steel, etc.). In a 1st step Brazil considers to hire 40 rigs and semisemisubmersible platforms, 234 ships, including 70 large ones (Lima, 2008)
Fonte: PETROBRAS, 2009

Brazilian Opportunities New Bidding Rounds

After the approval of the PrePre -salt bills ANP shall bid: PrePre -salt areas under PSC
(~ 2,3% sedimentary area)

Other areas under concession contracts (> 97% sedimentary area)

ANP waits for CNPE approval the 11th Bid Round; The 11th 11th Bid Round shall focus on the Brazilian equatorial margin.

Final Remarks
The PrePre-Salt is a new paradigm in Brazil; Production-sharing contracts shall be applied for the Pre ProductionPre-Salt area (around 2% of the Brazilian sedimentary area); Concession contracts shall be applied for ALL other areas (> 97%); ANP waits for CNPE approval to promote the 11 bidbid-round focusing the equatorial margin; And to promote a bid round focusing prepre-salt opportunities; In Brazil, opportunities go far beyond the prepre-salt.

Agncia Nacional do Petrleo, Gs Natural e Biocombustveis

Av. Rio Branco, 65 12 ao 22 andar tel. 21 21122112-8100

www.anp.gov.br

Oil Price Evolution

160 140 120 Oil Barrel Price (U$) 100 80 60 40 20 0

1990 1995 2000 2005 2006 2007 2008 (JUL) 2008 (DEZ) 2009

YEAR

Govern Take around the world

Govern Take Evolution (2002 2007)

Brasil
0% 10% 20% 30% 40% 50% 60% 70%

Brazil 60% GT