The Brazilian shipping industry presents opportunities for oil and gas supply. Brazil has large oil reserves and is the third largest producer in South America. It has 31 sedimentary basins and over 526,000 square kilometers of contracted areas for exploration and production, with most fields still in exploratory phases. Infrastructure investments in ports and shipping are growing to support Brazil's expanding oil and gas sector.

1. Brazilian Shipping Industry:
Opportunities for O&G Supply
Dr. Roberto Giannini
Sao Paulo & Singapore – July 2nd, 2012

2. Where are we?
Paris Good
Morning
Singapore
São Paulo Good
Evening

3. Presentation Contents

4. Brazilian Economy Overview

5. stereotyped images of Brazil
Brazil: Facts and Figures
When you hearbeauties…
OrBrazilian Team about Brazil
our natural
you probably imagine…
Football
Beach
Beautiful woman
Carnival
Samba
The Carnival Parade

6. Another way to see BrazilFigures
Brazil: Facts and
These images are correct
But we are much more than that
Agriculture Life science
We are a Country of Innovation
Military jets Knowledge
Defense industry
satellites
Connectivity
Sophisticated products
Air crafts Huge industry
Sustainability

7. Fifth larger Country in the world
(about the size of continental US – except Alaska)
8.514 million km2 of continuous area
(around 50% of the South America area)
Population around 195 million inhabitants
(About 50% of the South America population)
Strongly diversified economy
(Mineral, agriculture, Industry and Services)
Sixth larger GDP in the World
(near 65% of South America GDP)

8. Brazil: Facts andof Brazil
Federative Republic Figures
National flag Coat of Arms
Brazil is a Federation of 26 States
Government: Presidential republic
4.400 km
Capital City: Brasília
4.600 km
literacy: 86,4%
Unemployment rate: 4,7%
Inflation rate: 4,5%
Local currency: Real (BRL)

9. Selected facts Facts and Figures
Brazil: & figures
Competitive and dynamic industry which
ranks among the world’s top
Leader in clean and renewable energy, such
as hydropower, biofuels, and wind farms
Largest consumer market in Latin America
(195 mi inhabitants)
3rd largest market in the world for cell phones
and cosmetics
3th main aircraft manufacturer and exporter
5th largest market for personal computers
5th main automobile manufacturer
4th largest consumer of automobiles

10. Population
Brazil is an ethnical miscellaneous country, made through migration and
miscegenation
European Indian Asian African Mixed
47,3% 0,3% 2,1% 7,6% 43,1%
Source: IBGE Census, 2010

11. Population
• Brazil counts 195 million inhabitants. Near 80% live in cities
• Most of local population spread along the Atlantic Ocean coast
Some important metropolitan areas:
Manaus (2,1 million)
Fortaleza (3,6 million)
Recife (3,7 million)
Brasília (2,7 million)
Belo Horizonte (5,0 million)
Population Density Rio de Janeiro (12 million)
22,4 Inhabitants/km 2 São Paulo (20 million)
Porto Alegre (4,0 million)
Source: IBGE Census, 2010

12. Population
Age distribution Life expectance at birth
10,8% > 60 years
73,7 years
Man: 70 years
65,1 % 15-59 years Women: 77,5 years
24,1% < 14 years
Economically active population
101,1 million
53% women
47% men
Source: IBGE Census, 2010 and IBGE/PNAD, 2009

13. Climate
Brazil: Facts and Figures
Due to the large size and varied topography, the climate of Brazil has a wide range of
weather conditions. Even within the dominant tropical zone.
From the all-year hot Amazon Rainforest in the North till the winter snowfall in the
Southern highlands and the humid tropical coast in Rio de Janeiro.
Equatorial rainforest
Tropical savanna
Semi-arid
Coastal
Humid subtropical
Source: IBGE Atlas, 2012

14. Religion
Brazil: Facts and Figures
73.6%
2.0%
7.4%
1.6%
15.4%
Roman Catholic Protestant Spiritualist
None Other
Source: IBGE Census, 2010

15. Social class distribution Figures
Brazil: Facts and
100
90 Class A/B
80
70
60 Class C
50
40
30 Class D
20
10
0 Class E
2003 2004 2005 2006 2007 2008 2009 2010 2011
Middle class
Poverty
Poverty reduction and social inclusion reinforce domestic market growth
expansion
reduction
Source: FGV, 2012

16. Job Creation
3,000
2,500
New jobs (1000)
2,000
1,500
1,000
500
0
1995 1996
1997 1998
1999 2000
2001 2002
2003 2004
2005 2006
2007 2008
2009 2010
2011
Net job creation 2.079.188
in 2011

17. Total energy supply
Diesel fuel
19.1%
Electricity
18.1%
Other
13.6%
Sugar cane
bagasse
Kerosene 11.9%
1.6%
Fuel oil
2.0% Gasoline
9.1%
Ethanol
Lixivium Wood Natural gas
4.7%
2.1% LPG 7.2% 7.2%
3.4%
Total energy supply 228.658.522,6 toe
World: 12.267 x 106 toe
Source: BEN, 2012

18. Energy consumption per sector
90,000
80,000
70,000
60,000
1000 toe/year
50,000
40,000
30,000
20,000
10,000
0
Industry Transportation Energy generation Houses Agriculture Commerce Public Sector
Source: BEN, 2012

19. Electricity supply
Brazil has the clearest energy matrix in the world due to the large scale use of
biomass replacing fossil fuels (sugar cane bagasse and biodiesel) and
hydropower plants to produce electricity.
15%
Fossil 11% Hydropower (81,7%) 467.000 GWh
Non-renewable
Biomass (6,5%) 37.411 GWh
Wind (0,8%) 5.408 GWh
80%
89%
Total electricity supply (2011)
20% 571.302 GWh
Renewable
World Brazil
Source: BEN, 2012

20. Infrastructure investments
180
160.0
160 146.5
140 131.3
52.1 Private
120.8 44.9
120
99.2 44.0
R$ (Billion)
100 48.9
84.6
79.5
80 67.2 36.9
59.9 35.8
60 37.5
33.4 101.6 107.9
26.8 87.3
40 71.9
62.3 Public
20 42 48.8
33.1 33.8
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: BACEN, 2012

21. Exchange rate (R$/US$)
3.5
3
2.5
2
1.5
1
0.5
0
19941995
19961997
1998 1999
2000 2001
2002 2003
2004 2005
2006 2007
2008 2009
2010 2011 *
2012
Actual exchange 1,95 ≤ R$/US$ ≥ 2,05
rate * Predicted Source: BACEN, 2012

22. GDP evolution
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1995 1996
1997 1998
1999 2000
2001 2002
2003 2004
GDP (Local currency - R$) 2005 2006
2007 2008
2009 2010
GDP (US$) 2011 2012*
2012 GDP R$ 4,33 Trillion
(Predicted) US$ 2,32 Trillion
* Predicted Source: BACEN, 2012

23. Countries by nominal GDP
16
14
12
GDP (US$ Trillion)
10
8
6
4
2
0
8 Countries represent 60% of
US$ 70 Tri the World GDP
World GDP
Source: World Bank, 2012

24. GDP Annual grow
8
7
6
5
4
3 10 years average: 4,0 %
2
1
0
*
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
* Predicted Source: BACEN, 2012

25. GDP Composition
67.0% 5.5%
Industrial GDP:
R$ 972,2 Billion
27.5%
Agriculture Industry services 53.0%
14.8%
21.0%
11.2%
Mining Manufacturing
Construction Eletricity and public services

26. Industrial sectors
Food and Beverage 17.3
Refining, nuclear energy and biofuels 13.4
Chemical products 10.8
Automobiles 8.7
Basic metallurgy 8.5
Heavy machinery 6.0
Cellulose and paper 3.7
Rubber 3.7
Mechanic industry 3.7
Non-metallic minerals 3.5
Printing industry 3.1
Eletric apparatus 2.3
Electronic apparatus 2.2
As percent of industrial GDP
Textiles 2.2
Other transportation equipments 2.0
Leather 1.8
Furniture 1.7
Clothes 1.7
Wood 1.4
Other industries 2.4 Source: IBGE, 2012

27. Industrial facilities distribution
The industrial areas are
concentrated in the Southeast
Region, specially in
São Paulo
Rio de Janeiro
Source: IBGE, 2012

28. Foreign Trade (US$ Billion)
300
250
200
150
*
100
50
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-50
Exports (US$) Imports (US$)
* Predicted Source: SRF/Alice, 2012

29. Trade basket
Imports
Exports
Source: SRF/Alice

30. Predicted trade balance 2012
Imports
US$ 241,8 billion
Exports
US$ 258,4 billion

31. Foreign Trade 2012 (predictions )
Exports Imports
US$ US$
258,4 Bi* 241,8 Bi*
Brazil still a closed
GDP economy based on
Us$ domestic market
2.340 Bi*
Trade flow/GDP
21,4 % * Predicted Source: BACEN, 2012

32. Trade flow/GDP
30.0
25.0
20.0
15.0
10.0
5.0
0.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
* Predicted Source: BACEN, 2012

33. Political strength
Brazil is a peaceful and politically safe country:
No border conflict with neighbourhood Countries
Consolidated leadership in South America
No ethnical conflicts
No active terrorist groups
Low-risk country
Consolidated democracy
She can run for a second
Stable political system
term in 2014

34. Future prospective

35. Why invest in Brazil
 Strong and fast growing domestic market
o large labor pool
o Stable economic growth with social and environmental sustainability
 Solid macroeconomic fundamentals
o Declining net public debt
o Open capital markets
o Floating exchange rate
o Free capital flow, Limited barriers to FDI
o Well-built, solid, and well regulated bank system
 Opening up markets and reinforcing foreign trade
 Vast natural resources
 Cultural and natural wealth, vast and diverse population
 Clean energy matrix. Renewable, abundant and clean energy
 Democratic institutions and political stability

36. Brazilian O&G Industry

37. S. America O&G status
Reserves Production
Country
(109 bbl) (103 bbl/day)
Argentina 2,5 651
Brazil 14,2 2.137
Colombia 1,9 801
Ecuador 6,2 495
Peru 1,2 157
Trinidad and Tobago 0,8 146
Venezuela 211,2 2.471
Other Countries 1,4 131
6% Regional reserves
30% Regional production
70% Regional investment
Source: OPEC Annual Statistical Bulletin, 2011

38. Brazilian oil potential
31 sedimentary
basins
Origin - 60% Cenozoic
- 25% Mesozoic
- 15% Paleozoic
6.430.000 km2
4.880.000 km2 1.550.000 km2
on shore off shore
Sources: ANP Statistical Yearbook, 2011; IBGE Geographical Bulletin, 2012

39. Contracted areas for E&P
After 10 rounds (bids), last one took place in 2010
Fields under concession 765
301 off shore
464 on shore
Exploratory phase 345
Development phase 82
Operational Fields 321
Total contracted area 526.555 km2
232.661 km2 off shore
293.984 km2 on shore
Producing wells 8955
824 off shore
8.131 on shore
Source: ANP Statistical Yearbook, 2011

40. Main producing areas
In spite of E&P activities in throughout the Country, the main reserves and production are concentrated on three offshore basins
Production
Basin
(bbl/d)
Campos 1.756.277
Spirit Santo
Basin
Spirit Santo 68.079
Santos 49.009
Campos
Basin Reconceive 43.545
Sergei 41.324
Slimes 35.697
Santos Basin Other 46.428
 Almost 90% of oil reserves and production are located in Rio de Janeiro, Espírito
Santo and São Paulo states shore. The most important industrial area in Brazil.
 Campos and Espírito Santo Basins produce in the post-salt layer since 1976, major
fields are expected to be close to the production peak, but still have new discoveries
and fields to be bidden.
 Santos Basin produces small quantities in the post-salt layer since 1979, but recently
major reserves were find (specially for gas)
Sources: ANP Statistical Yearbook, 2011; Roberto Giannini, 2012

41. Oil production evolution
2.50
2.00
Oil Production (106 bpd)
1.50
1.00
0.50
0.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Produção on shore
Produção off shore
Produção total
Average 2011 production: 2,1 Mbpd
Source: ANP Statistical Yearbook, 2011

42. Oil production share
2.9% ONGC
2.3%
Frade
Japão
2.4%
Other 4.2% Other
88.3%
Petrobras lead Brazilian oil market. The company is, and will be for a long
time, the major player in Brazil. There’s no oil business (technology, service or
equipment supply) without their agreement.
Sources: ANP Monthly Statistical Bulletin, 2011/2012; Companies

43. The pre-salt province
In 2006 Petrobras finds oil on Campos Basin on the pre-salt layer. In 2008 the “pre-salt province” was mapped.
Total pre-salt province area
(As defined in the regulation)
149.000km2
Spirit Santo
Basin
Previously contracted area
Campos Basin
41.772 km2
Petrobras 35.739 km2
Other (IOC’s and local ) 6.033 km2
Available area
(will be bided until 2014)
Santos Basin 107.228 km2
Expected recoverable
80 ~ 100 x109 bbl
reserves Sources: Roberto Giannini, 2011

44. Oil on pre-salt layer
FPSO Well
Water Seafloor
Post-salt oil deposits Sedimentary rocks layer
Salt layer
Primitive seafloor
Pre-salt oil deposits
Primitive Sedimentary
Magmatic rocks rocks layer

45. Pre-salt oil drilling challenge
Ocean deep: 2.200~3.300 m
Post-salt layer: 1.000~2.500 m
Well deep:
Salt layer : 1.500~2.400 m 3.000~6.400 m
Pre-salt layer: 500~1.500 m
By the way…
Linear distance to the coast: 150~330 km

46. Pre-salt production potential
Source: ANP - Boletim da Produção de Petróleo e Gás Natural, Janeiro de 2012

47. Pre-salt production potential
Source: ANP - Boletim da Produção de Petróleo e Gás Natural, Janeiro de 2012

48. Pre-salt well cost evolution
First Well drilled
Took 1 year to be completed
Cost US$ 240 million
Learning curve
Last well drilled
Took 60 days to be completed
Cost US$ 66 million

49. Petrobras Strategic Plan

50. Petrobras strategic plan
Source: Petrobras CFO conference @ BTG CEO Conference 2011

51. Petrobras strategic plan
Source: Petrobras CFO conference @ BTG CEO Conference 2011

52. Petrobras strategic plan
Actual Refining Capacity: 2.1 Mbpd
13 Refineries
Planned revamps: 0,4 Mbpd
New refineries: 1,5 Mbpd
Projected capacity (2014): 4,0 Mbpd
Considering only Petrobras units in Brazil
Source: Petrobras CFO presentation @ BTG CEO Conference 2011

53. Petrobras strategic plan
Source: Petrobras CFO presentation @ BTG CEO Conference 2011

54. The million dollar question:
How can we take advantage
of this scenario and convert it
into business opportunities?

55. Field operator’s main challenges
Technology development

56. Services provider’s challenge
Seismic and reservoir
characterization
Production Management Field development and
and logistics delimitation
Services integration
Drilling and exploration
Information systems and
databases
Production optimization Well completation and
and oil flow well services

57. Brazilian Shipping Industry

58. Industry summary
47 operating yards
11 facilities under construction
386 Contracts
6,9 million DWT order book
59.000 employees

59. Operating Brazilian shipyards

60. Main operating yards
Yard Steel Process (t/y) Area (m2) Dry Dock Slipway Dock
Eisa 52.000 150.000 0 2 3
BrasFELS 50.000 410.000 1 3 2
Mauá 36.000 334.000 1 1 4
STX OSV 15.000 120.000 1 1 1
Aliança 10.000 61.000 0 1 2
UTC N.a. 112.000 0 0 2
Wilson, Sons 10.000 22.000 1 1 1
Navship 15.000 175.000 0 1 2
Rio Grande 30.000 100.000 1 1 1
Quip N.a. 70.000 0 0 1
Atlântico Sul 160.000 15.000 0 2 2
Sum 378.000 1.569.000 5 13 21
Other 184.000 1.257.000 13 8 21
Grand Total 562.000 2.826.000 18 21 42

61. Oil & Gas demand
Demand assured for the next 10 years (2011–2020)
due to the world’s largest E&P investment program:
• Production Platforms
50
• Drill Rigs
50
• Offshore supply vessels
500
• Oil tankers
130

62. Contracted platforms & FPSO
Unit Status Brazil International
P55 Semi-Sub Construction Hull + Top sides None
P56 Semi-Sub Concluded Hull + Top sides None
P57 FPSO Concluded Hull + Top sides Hull
P58 FPSO Construction Hull + Top sides Hull
P62 FPSO Construction Hull + Top sides Hull
P63 FPSO Construction Top sides Hull
FPSO Construction Top sides Hull
FPSO Construction Top sides Hull
FPSO Twins 8 units under contruction Hull + Top sides None
FPSO 4 units under bid Hull + Top sides None

63. Offshore Drilling Platforms
Sete Brazil, a joint venture of Petrobras, some
local pension funds and Brazilian banks, was
announced as the winner of the bid to build in
local yards 21 drilling rigs.
- Seven drilling ships are in construction at Atlantico Sul Shipyard
- Two jack ups drilling rigs are finishing construction at Consorcio Rio
Paraguaçu
- 12 drilling rigs build in international yards by Brazilian operators will
start operations in 2012 and 2013.

64. Merchant Marine Fund (FMM)
Brazilian Merchant Marine Fund is a clearly defined and well-regulated
legal system for the financing of shipbuilding, in place for over 50 years.
3,000
2,500
(R$ Million)
2,000
1,500
1,000
500
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011
The FMM annual disbursements on loans for ship construction covers
up to 90% of total investment.

65. Local Content achievement
Brazilian industry associations developed the data base of equipments, products
and materials needed by shipyard, based on real case purchases for a Platform
Supply Vessel, a tanker and a FPSO platform. The data base is shared with the
supply chain to increase local production.
Local
Type (%) Imported (%)
• Tanker • 70,8 • 29,2
• OSV • 61,0 • 39,0
• FPSO • 64,2 • 35,8

66. Local Content
Ships Work Groups
A • Structural steel, steel plates, sections of steel and steel shapes
B • Machinery, motors, compressors and pumps
C • Piping and valves
D • Electric systems, wiring, cables and control panels
E • Hull accessories
F • Finishing materials
G • Paint and corrosion protection

67. Local Content
Platform and Drill Rigs Workgroups count 11 equipments family and 111 sub-
groups, summing 534 critical items
Electric Package reached 100% of local content for some items:
Electric cables
Control Panels
Auxiliary motors for energy generation
Actually on this group, the most critical items for suppliers are:
 Propulsion Motors above 650 HP
 Cargo and ballast pumps
 Navigation, communication and safety equipments

68. Conclusions
 Brazilian modern shipbuilding industry is active since the
60’s, experienced downfalls from the middle of the 80’s until the
end of the 90’s. Since 2003 became a government priority
 A consistent regulatory and legislation arrangement is in place
 Demand is clearly visible for at least the next 10 years, based on
the offshore demand of high valued drill rigs, oil production
platforms, OSV and tankers
 Labor relations are recognized as an example by the International
Labor Organization
 Challenges are identified and the industry works closely with the
government departments to develop sustainable solutions
 However, the local industry has a huge technology gap, when
compared to the world leaders

69. Doing business in

70. Doing business in Brazil - Focus
 Find a local partner and focus on hiring local content
 Companies want to see technology… show them ready-to-
use technology
 Keep your attention on Health, Safety and Environment
 In general, companies are well capitalized and have access
to government funds to invest. But… You can be creative
and show ways do fund globally…
 Many non-Petrobras companies teams and directors are ex-
Petrobras employees. You will see Petrobras way to do
business everywhere…

71. Doing business in Brazil - Tips
 Brazil is a democratic, low-risk and stable country, both in
political and economic fields.
 Europeans are well respected for their
tradition, culture, respectability and low-profile approach to
business.
 Brazilians are not used to do business with people and
companies they don’t know. Be low-key and invest time to
work with your local counterpart.
 Relationships and face-to-face contacts are very important
 Portuguese is the language spoken in Brazil (all other Latin
American countries speaks Spanish)

72. Doing business in Brazil - Tips
 Brazil is not corrupt. Don’t make that assumption! If you try
“shortcuts”, you’ll have problems…
 In other hand… We are very bureaucratic... Learn the
System and be patient...
 Taxation laws and fiscal issues are complex and change
frequently
 Labor laws and social costs are burdensome and favor the
employee
 The business culture is sophisticated and westernized
 Laws and contracts are respected and enforced

73. Final message
When you plan an overseas investment
Take a look at Brazil

74. Dr. Roberto Giannini
 + 55 11 9266-4273
 roberto_giannini@uol.com.br
Yvan Bernardin
 + 55 11 9938-2388
 bernardin@barnardin.com.br