Petrobras is a large, integrated Brazilian oil and gas company. It aims to achieve self-sufficiency in oil production and consumption for Brazil by increasing its investments in renewable fuels like ethanol and biodiesel. Petrobras plans to invest over $780 million in renewable energy sources between 2007-2011, including expanding Brazil's domestic biodiesel production and ethanol exports. The company sees opportunities to apply its expertise in Brazilian ethanol to expand global distribution networks and break into new markets like Japan.

1. PETROBRAS
Petrobras and Ethanol
Perspectives from a Brazilian Oil Company
Ethanol Finance and
Investment Americas
Conference
Ted Helms
General Manager
PETROBRAS New York Office
1

2. PETROBRAS
Petrobras: World Class Integrated Public Energy Company
Proved Reserves as of Dec 31, 2005 (billion boe) 2Q2006 Oil & Gas Production (thousand boed)
5,000
22.4 4,163 4,018
25
4,000 3,253
20 17.6 1,462 1,487 2,668 2,537
3,000 2,290 2,273
15 12.9 11.9 11.8 11.7 1,356
10.7 805 1,748
2,000 975 824 378
10 6.9 1,098
2,701 2,531 692
5 3.3 1,000 1,897 1,863 1,466 1,895 600
1,562 1,056
0 498
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Market Value as of September 19, 2006 (US$
2005 Refining Capacity (thousand boed) 5
billions)
500 8,000
394 6,400
400
6,000
300 220 4,026
213
200 148 4,000 2,832 2,708
138 2,610 2,195
109 97 90 2,156
100 34 2,000 1,233
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Notes: Based on information from company financials and Wall Street research
1 Reflects only those activities relating to the Oil Products business
2 Proforma for acquisition of Burlington Resources
3 Includes revisions on Bolivian reserves
4 Includes volumes added from Unocal acquisition
5 Includes equity in affiliates
6 Based on capacity of wholly owned refineries
2

3. PETROBRAS
Achieving Self-Sufficiency in Oil Consumption & Production
Production/
Consumption 52% 70% 91% 100% 114%
2500
2300
2000 1806 1802 1761
1686 1722 1769 1700
1783 1766 2060
1800
1684
1500 Self-Sufficiency
1500 1540 1493
1336
1271
1000 1132
1004
869
Petrobras’ Production
500 Brazilian Consumption
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010
(*) Petrobras' estimate considering an average growth of 2.6 % per year
3

4. PETROBRAS
Overview of the Company's Activities
Petrochemical Imported Imported Oil
Plants H - Bio
Oil Products
Biodiesel Oil Products
Brazilian
Brazilian Oil sold in Brazil
Refining
Production
Throughput
Ethanol
International Oil International International
Production Refining Sales
Domestic
Natural Gas
Other
Production Energy
Renewables
Imported Gas Infrastructure
Industry
LNG Expansion/future activities
4

5. PETROBRAS
Corporate Strategy evolving to include International, Gas, Petrochemicals, Bio-
fuels
Corporate Strategy
Social and Environmental
Growth Profitability Responsibility
Lead the Latin American oil, natural gas, oil products and biofuels market, working as an
Liderar o mercado de petróleo, gás natural e derivados na América Latina,
integrated energy company, empresa integrada de energia, com expansão renewable energy and
atuando como with selective expansion in petrochemical, seletiva
international activities.
da petroquímica e da atividade internacional.
Consolidate and Develop and lead Selectively Selectively Expand participation
increase the domestic expand expand interest in biofuels market,
competitive natural gas market international in the lead the domestic
advantages in and perform in an activities in an petrochemicals biodiesel production
the Brazilian and integrated manner integrated market and increase
South American in the gas and manner with the participation in the
oil and oil power market in Company’s ethanol business
products market South America business
Operational, management, technological and human resources excellence
5

6. PETROBRAS
Petrobras Investment Plan 2007-2011
BP 2006-10
(2007-11 Period) BP 2007-11
US$ 52.4 billion US$ 87.1 billion
59% 56%
49.3
31.0
1.0
1.0 12.4
2% 4.7
1.8
2.3 2.3 3.3 23.0
2% 24% 3% 26%
4% 7.5
9% 3% 4%
9%
E&P Downstream G&E
Petrochemical Distribution Corporate
Note: Includes International 6

7. PETROBRAS
Renewable Energy and Biofuels (2007-2011)
2007-2011 Investments 2011 Target
US$ 136 MM Biodiesel Plants Availability of 855 Thous. m3/year
Processing 425 Thous. m3/year
US$ 140MM H-Bio (Bio-Refining)
of vegetable oil
US$ 170MM Alcohol pipelines
3.5 million m3 Ethanol Exports
US$ 70MM Alcohol Vessel Project
US$ 104MM Wind Power
Additional 240 MW Installed Capacity of
US$ 123MM Photovoltaic Power Generation from Renewable
Sources
Other Renewable Energy Sources
Investments of US$ 780 MM in development of renewable energy sources
and biofuels
7

8. PETROBRAS
Domestic Refined Products and Natural Gas Market in Brazil
3500
3.1% p.y 2,117
3000 211
97
Thousand bpd
2500 1,766
935
128
2000 108
282
777
1500
368
237 147
1000 224
315
126
500 201 786
295
0
2005 2011
Natural Gas LPG Ethanol** Gasoline
Naphta Diesel* + QAV Fuel Oil Other
* Includes Biodiesel (2%)
** Assumes 40% of gasoline market
8

9. PETROBRAS
Consumption by Light Vehicle in Brazil
Ethanol Market-share:
14.8% + 19.92% ⇒ 34.7%
NGV
Hydrous Ethanol
5.5%
14.8%
Gasoline (E25)
79.7% Anhydrous Alcohol
represents 19.92% of
Vehicle consumption Source: ANP and Gás Brasil (2004)
9

10. PETROBRAS
Evolution of Flexfuel Automobile Productionl
Light Vehicles Sales
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
may
may
jan/04
nov
jan/05
nov
jan/06
jun
jun
jul
dec
jul
dec
feb
aug
sep
feb
aug
sep
feb
mar
apr
mar
apr
mar
oct
oct
FFV Gasoline Diesel Oil Ethanol
10

11. PETROBRAS
Gradual Replacement of Conventional Engines
LIGHT VEHICLES FLEET
(thousand units)
20,000
CNG vehicles FFV since 2003
335 1,108
44
18,000 807
439 626 1,004
288 764 782 810
143 734 843
16,000 57 686
18 1,996 1,820
632 2,230 1,678
9 597 2,449
546 2,712
14,000 5 2,972
499 3,221
3,471
12,000
3,716
10,000
8,000
14,439 14,680 14,431
14,075
13,506
12,755
6,000 11,399
12,019
10,463
9,088
4,000
2,000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Gasoline Ethanol Diesel Oil CNG FFV
11

12. PETROBRAS
Ethanol: Learning Curve Driving Down Ethanol Prices
More than 400 types of Sugar-Cane
Trend
(Anhydrous Ethanol Prices)
Trend (Rotterdam Gasoline Prices)
Prof. Goldemberg, Coelho, Nastari and Lucon - USP
12

13. PETROBRAS
The Potential to Expand World Production Is Enormous
North and Europe
Central America 9.8%
37%
Brazil
Brazil
35%
35% Asia
South America 16.2%
38%
Current Market Distribution of World Consumption
•Ethanol global market is 46.5 Billions Liters
• Ethanol as a Fuel is 30.6 Billions Liters, or 67% of total ethanol
production
•Today the ethanol consumption is 2.6% of gasoline MKT
• Increasing ethanol to 10% of gasoline will represent 118 Billions Lt
13

14. PETROBRAS
Brazil Enjoys Enormous Advantages in Ethanol Production
Raw Material Energy Output / Energy Input
Wheat 1.2
Corn 1.3 – 1.8
Sugar Beet 1.9
Sugar Cane
(under Brazilian production conditions) 8.3
Production / ha Quantity of Ethanol Energy Output /
Raw Material (kg) / ha Energy Input
Sugar Cane 85,000 7,080 liter 8.3
Corn 10,000 4,000 liter 1.3 – 1.8
14

15. PETROBRAS Land use in Brazil
Area
Type (Mha)
• Total country 851
• Native Amazon Forest 370
• Secondary Amazon Forest and Others 180
• Native Forests 6
• Pasture 197
• Temporary Crops 59
• Permanent Crops 7,6
• Available land 263
• Available land with low impact (*) 90
Source: FAO, 2002 and EMBRAPA (*)
15

16. PETROBRAS
Petrobras Will Participate Through Export Logistics
New Ethanol Pipeline
(800 km)
New Water Way
for Ethanol Ethanol Export
8.0 Million m3 in 2012
Marine Terminal
Rio de Janeiro
Marine Terminal
São Paulo
16

17. PETROBRAS
Petrobras Will Use Ethanol Knowledge to Expand World Distribution
Brazil-Japan Ethanol Inc.
• Recently, Petrobras incorporated Brazil-Japan Ethanol
Inc.
• The company will import and distribute Brazilian-
produced ethanol in Japan;
• Development of technical and commercial solutions for
the reliable and long term supply of alcohol in the
Japanese market;
• Petrobras will break into one of the most complex and
important energy markets in the World:
• ethanol logistics distribution
• fuel distribution sector in Japan.
17

18. PETROBRAS
Biodiesel Will Follow Ethanol Trajectory
Law 11.097/2005 – established minimal percentage for biodiesel mix in diesel
2008
2005
to From 2012
to
2012 on
2007
(2% required) (5% required)
(2% allowable)
(5% allowable)
Brazilian market Brazilian market Brazilian market
0 – 5.2 million barrels 5.2 – 15.7 million barrels 15.7 million barrels
Petrobras market share Petrobras market share Petrobras market share
0 – 1.3 million barrels 1.3 -3.8 million barrels 3.8 million barrels
• Petrobras target for 2010: Production of 8,200 bpd of Biodiesel
18

19. PETROBRAS
Bifuel Production- Two Approaches to Using Vegetable Oil
Hydrogen Diesel
Agribusiness Processed Fractions
Seeds Oil
Farming Crushing Refinery
Diesel
or or
Ethanol Transerestification Biodiesel
or Distributors
B2 or B5 or
Methanol Diesel
mixture
Stations
Glycerin + Others
Complementary and not competitive processes
19

20. PETROBRAS
Bio-diesel Production Facilities Underway
3 Projects Being Implemented Quixadá
Capacity: 171 thousand m3/year
CE
Investments: ~ US$ 60 million
Inputs
Family Agriculture: castor, cotton, and palm.
Complementary: soy. BA
Jobs Generations: Candeias
Construction: 1,200 direct and 400 indirect
Operation: 105 direct MG
Montes
Raw material production:70,000 families Claros
Start up: 4 Q/2007 semi-arid region
All Petrobras Biodiesel has Social Fuel Seal
20

21. PETROBRAS
Legal Requirements for Bio-Diesel
Voluntary Social Seal
• Given to biodiesel producers that:
• Purchase a minimum percentage of raw materials from family
agriculture:
• 50% NE and semi-arid region
• 10% NW and CW region
• 30% SE and S region
• Sing a formal contracts with the family agriculture that includes:
• Contract period
• Value to purchase and price readjustment criteria
• Raw material delivery conditions
• Safeguards for each party
• Identification and agreement that a representative of the farmers
participated in the negotiations
• Assure assistance and technical training for the agriculture families
21

22. PETROBRAS
Biodiesel Production Cost
Capacity Ton/year 10,000 35,000 65,000 100,000
Chemicals R$/litro 0.11 0.10 0.10 0.10
Energy R$/litro 0.05 0.02 0.02 0.02
Depreciation R$/litro 0.08 0.08 0.05 0.04
Labor R$/litro 0.11 0.04 0.02 0.015
Maintenance R$/litro 0.05 0.04 0.03 0.03
Oper Cost R$/litro 0.40 0.30 0.22 0.21
Investment US$ MM 5 8 10 12
Laboratory US$ 500,000
Source: Dedini, Intecnial, Lurgi 22

23. PETROBRAS
Results of Auction for Biodiesel
Biodiesel Sales in ANP´s Auction (B100 m3 )
Quantity Price
Auction Delivery (R$/L)
(mil m3)
10 NOV/2005 70 JAN/DEZ/2006 1,90 + ICMS
20 MAR/2006 170 JUL/2006 TO JUN/2007 1,86+ICMS
30 11/JUL/2006 Ofertado 1.266
JAN/DEC/2007 1,75+ICMS
Arrematado 600
40 12/JUL/2006
Voluntary Participation of Petrobras and Refap – start sales ahead of schedule
23

24. PETROBRAS
H-Bio – A Complementary, Proprietary Use of Vegetable Oil
2006-2007
• H-BIO in 4 refineries – using up to 256 thousand m3/year of vegetable oil
• 9.1% of total soy oil export
• Equivalent to 15% of Diesel imports
2008
• H-BIO in 5 refineries
• Using up tp 425 thousand m3/year of vegetable oil
• 15.1 % of total soy oil export
• Equivalent to 25% of Diesel imports
Main advantages:
• No waste
• Simple logistics
• Improves diesel quality
• Flexible vegetable oil source
* Of total of Soybean oil exported, 2288 thousand m³ is crude oil, and 535 thousand m³ is refined oil
** Estimated volume of imported diesel in 2006 = 1.709 thousand m3 Sources: Abiove e Petrobras
24

25. PS2
PETROBRAS
Continuing Research Efforts for Renewable Energy
• Budget: US$ 32 million
• 66 R&D projects
• 6 Research Lines
• Solar Photovoltaic
• Biofuels
• Solar Thermal
• Biomass
• Other renewables
• Wind
• Example: BioLignocellulosic Bioethanol
• Raw material: sugar cane bagasse
• Proprietary process
• Successful ongoing bench-scale experiments
• Patent issued
• End of tests: 4thQ 2006
• Pilot plant start-up: 2ndQ 2007
• Demonstration plant start-up: 3rdQ 2010
25

26. Slide 25
PS2 PETROBRAS S.A.; 24/5/2004