Financial times petrobras_190607


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Financial times petrobras_190607

  1. 1. Financial Times Conference Prospects for José Sergio Gabrielli CEO Renewable Fuels in June, 19th 2007 Reducing Carbon Emissions
  2. 2. PETROBRAS Cautionary Statement The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments. Cautionary Statement for US investors The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. 2
  3. 3. Mas esta estrutura gera externalidades negativas •Projected increases in global energy demand and emissions dominated by power, and industry that represent 49% and 18% of projected CO2 emissions through 2030; •Transport sector dominated by oil represents only 21% of projected increase in CO2 emissions through 2030. World Energy-Related CO2 World Primary Energy Demand Emissions by Sector Increase 2004-2030 (14,341 million tonnes) Increase 2004-2030 (5,891 million tonnes) 5% 4% 7% 8% 3% 28% 2% 21% 49% 27% 18% 28% Coal Oil Power Generation Industry Gas Nuclear Hydro Biomass and waste Transport Residential Services* Other renewables Other** * Includes agriculture and public sector ** Includes international marine bunkers, other transformation and non-energy use Source: World Energy Outlook 2006
  4. 4. Mas esta estrutura gera externalidades negativas Chinese industrialization distorts all emission projections 2020 27,982 Million Metric Tons of Carbon Dioxide • China emissions are growing 10 GDP - Billion 2000 dollars times faster than US; 19,073 20,274 • By 2020 China GDP will have surpassed US GDP but so will CO2 emissions. 9,287 9,960 9,009 7,543 4,532 • 53% result from power 2,343 2,899 1,981 556 generation as compared to 40% for rest of world OCDE (*) USA Russia China India Brazil reflecting rapid Carbon Dioxide Emission GDP industrialization. Export Orientation by Countries to USA (percent of GDP) Average period 2001-05 5.9% • Reflecting dependence of Chinese growth on exports particularly to the US; 3.1% • CO2 trading mechanisms reflect transfer 1.4% of CO2 emissions and not necessarily reduction. Russia China Brazil Source: EIA - International Energy Outlook 2006 and IMF Report (*) without USA
  5. 5. Mas esta estrutura gera externalidades negativas •Regional Distribution of CDM Projects concentrated in China and secondly India with major power generation concerns; •Russia and Brazil have lagged due to use of natural gas and hydro-electricity for power; •Energy for transport has not benefited from carbon trading mechanisms as they require assertive government policies that are not addressed by KT; •Renewable fuel projects are usually too small for complex carbon trading mechanisms Location of CDM Projects (Sellers) Percentage Share of Projected CO2 Emissions Rest of Latina 2004 - 2030 Reference America 6% Africa Others 3% 5% 7% 3% Brazil 19% 4% R of Asia 7% China India 61% 12% 73% Brazil Russia India China
  6. 6. BRIC energy consumption patterns are very different and reflect power generation • China and India high CO2 emissions from oil Growth Rate 2003-2030 and coal for power represent more than 91% 6.9% 6.3% and 88% respectively; • Russia predominance of cleaner natural gas 5.3% 5.0% represents 54% of energy sources; 4.4% • Share of renewable energy sources in Brazil 3.5% and natural gas represents 43% of energy 3.1% sources. 2003 2.6% 2.1% 6% 6% 4% 1.4% 8% 3% 2% 3% 7% 37% 22% 25% 31% 54% OCDE Russia China India Brazil 1% 6% Carbon Dioxide Emission GDP • Projections suggest higher GDP growth 45% and CO2 emissions growth in India and 66% 50% 20% 57% China so that oil and coal surpass 90% of energy consumption; 22% 18% 6% • Continued use of natural gas in Russia; OCDE Russia China India Brazil • Brazilianuse of natural gas and Hydroelectricity other Renewable Energy Nuclear Energy renewables could surpass 50% of Natural Gas Oil consumption by 2030. Coal Source: EIA - International Energy Outlook 2006
  7. 7. But transport sector can still contribute to emission reductions (IEA alternative scenario) Increased use of renewable Alternative Increase in Reference Increase in Demand 2004-2030 (mtoe) fuels can contribute to reduce Demand 2004-2030 (mtoe) projected increase in energy for transport by 7 %, to 15 % 45 if adequate policies followed. 1,023 659 77 132 42 Bio 2004-2030 Oil Bio Other Oil Bio Other Reference - Alternative 5% Total: 836 mtoe Total: 1,142 mtoe 18% United States 36% OECD Europe OECD Pacific The direct benefits in 4% Other OECD emission reductions would Brazil be equally distributed 9% China India between US, Europe OECD 5% Other Asia and the rest of the world 2% 16% Rest of World 4%
  8. 8. Brazil is the 1st country to reap benefits from Ethanol Because program is government regulated there are no benefits from KT but benefits of reduction in CO2 emissions have already materialized; Used up to 10% in petrol, ethanol substitutes lead Alcohol Exports and MTBE as an oxygenate, withour any change in 2005 engines, without harmo to air or groundwater End of regulation 1999 FFV 160000 Beginning of the During this sector deregulation 140000 period, ethanol PROÁLCOOL 120000 utilization Alcohol Vehicles saved 644 10000 million ton. of CO2 80000 emission 60000 1000 BEP Accumulated effective economy: 40000 1 Billion boe ~US$ 52 bi 20000 CNG ETHANOL 0 GASOLINE 1972 1976 1980 1984 1988 1992 1996 2000 2004 Source: MME, BEN 2006
  9. 9. Ethanol can be introduced also as a partial or full substitute for petrol: up to 25% (Brazil) partial motor adjustments require participation of automobile industry; up to/over 85% requires flex-fuel vehicles, consumer preference (price/performance). Source:Henry Joseph Jr. ANFAVEA - Volkswagen
  10. 10. Of the original incentives to promote ethanol only lower taxes on vehicles have survived the whole program because of benefits to car manufacturers and consumer preferences: • Ethanol price lower than petrol • Guaranteed return to ethanol producer • Lower taxes for ethanol powered vehicles • Loans to increase ethanol production • Service stations obliged to sell ethanol • Strategic inventories of ethanol Other tax incentives may be applicable such as circulation taxes, higher taxes on petrol vis a vis ethanol
  11. 11. Quais seriam os motivos do diferencial de produtividade brasileira ? Brazil has already made substantial progress in cost reduction of ethanol • Substantial savings can and have been achieved in costs of reducing CO2 emissions through renewable fuels but which are not addressed by Kyoto Treaty Greater production cost reduction when Ethanol Engine Relative Performance* 20 compared to gasoline. 140 132,4% 120 110,0% 110,0% 18 103,3% 100 80 16 60 40 14 20 US$/GJ 2002 0 12 Consumption Power 10 Gasoline 100% Gasohol 22% Ethanol 100% 8 6 4 2 1980 1985 1990 1995 2002 0 Ethanol prices in Brazil Rotterdam regular gasoline price Source: Goldemberg 2004 *Source: Volkswagen (Brazil) - Presentation prepared for review within The Warren Centre for Advanced Engineering at Sydney University
  12. 12. Incentives are required to develop logistics for renewables in the USA for example; Such as those that exist and are being expanded in Brazil. US Ethanol producers are concentrated in upper mid-west with little or no integration with oil facilities Ethanol Logistics System in Brazil • While most oil and product pipelines run from the south to northeast, north or southwest; • Shipment in the Pacific will have a comparative advantage in supplying California.
  13. 13. Diferenças de produtividade na cana de açúcar Latin America offers excellent potential to increase ethanol production • Incentives are required to associate better use of natural resources which could contribute in reducing and not transferring CO2 emissions; • Availability of lands, water and low labor cost also benefit production in Central and South America. Latin America has the largest potential arable land per capita and only uses 13,9% of it. Sugar-Cane Productivity Potential Arable Land % of Potential Arable Land Yeld per Hectar actually in use (1.000 ha per capita) 72.41 73 71.13 2.2 61.4 67.77 69.34 55.6 1.7 48.6 1000 Kg/Ha 0.6 13.9 0.2 Asia USA Central South Brazil Asia and Europe North Latin Asia and Europe North Latin America America Pacific America America Pacific America America World Average Source: FAO
  14. 14. Diferenças de produtividade na cana de açúcar 33% of the world’s internal renewable water resources are concentrated in Central and Latin America; Annual water use by sector Internal renewable water resources Latin America and Brazil Caribbean (m³ per capita – 1997) 18% 9% 35000 33.097 19% 30000 27.673 21% 61% 73% 25000 20000 World 15000 20% 10000 6.984 9% 5000 71% 0 World Latin America and Brazil Caribbean Agriculture Domestic Industrial Source: FAO
  15. 15. Energy output/input ratio is likely to be greater in tropical climates Increasing Efficiency in Raw Material Use is not addressed in KT Raw Material Energy output / energy input Wheat 1.2 Corn 1.3 – 1.8 Sugar Beet 1.9 Sugar Cane (under Brazilian Production Condictions) 8.3 Tomorrow Potential ethanol production would grow by more than 100% based on Lignocelluloses Biomass technology Molasses yields only 85 l of ethanol, 1 metric ton of sugar cane But Cane bagasse yields 185 L of ethanol Base calculation 15
  16. 16. Mas esta estrutura gera externalidades negativas Petrobras 2011 CO2 Emission Targets In line with its sustainability objectives Petrobras has established its own emission targets apart from its efforts in renewable fuels. To allow the definition of the targets, future GHG emissions were estimated based on the Company’s Business Plan for 2007 – 2011, adopting 2005 total GHG emission as an initial reference. The BAU baseline defined this way was then used as a reference to set yearly avoided GHG emission targets, as shown in the following table: 2006 2007 2008 2009 2010 2011 Avoided GHG emission target (million tones of CO2 equiv) 1.13 1.79 3.56 4.15 3.93 3.93 Percentage of baseline year emissions 2.20% 3.50% 6.90% 8.10% 7.60% 7.60% The total amount of GHG emissions to be avoided from 2006 to 2011 (18.5 million tonnes of CO2 equivalent) is equivalent to about 36% of the 2005 emission figure (51.56millionCO2e)
  17. 17. Mas esta estrutura gera externalidades negativas Summary • Bulk of projected emissions come from power generation not transport; • China and India will benefit most from carbon trading and emission limitations because of coal and oil requirements for power while Russia and Brazil use more cleaner natural gas and hydro for power; • Renewable fuels are flexible in their implementation but require adequate incentives and taxation mechanisms to encourage participation of entire energy chain (producers, distributors, car manufacturers and consumers) • Comparative advantage of production in the tropics of renewable fuels requires revision of agricultural trade barriers which are not provided for in Kyoto.