° °

Natural Gas Business Overview

Antonio CastroExecutive Manager

Gas & Energy

AGENDA

The Brazilian Natural Gas Market

Investments in Natural Gas Infrastructure

The Role of LNG

New Policy for Gas Contracts

Natural Gas Integration with Electric System

Brazilian Natural Gas Market

(1) Others: vehicular, residencial, commercial, refinaries e fertilizer plants.

(2) Considering Maximum Dispatch of every thermoeletric power plant

25,3

42,1

17,5

43,9 (1)

72,9

30,0

31,1

48,0 (2)

5,50

20

40

60

80

100

120

140

160

2007 2012

Thermoeletric Industry

Million m3/dMillion m3/d

134,0 134,0

48,3

10,7% p.y.

E&P

Bolívia

LNG

Supply 2012

@ 9.400 kcal/m3

Brazilian Natural Gas Market – 2012 Supply and Demand

Others

6%4%

1%2%

26%

58%

2%

Business Plan 2008-2012 - Investments

29,6

4,3

E&P RTC G&EPetroquímica Distribuição

Nota: Inclui Internacional

65,1

2,6 2,61,5

* US$ 97,4 billions Brazil (87%) and US$ 15,0 billions International (13%)

Business Segment Investment*Natural Gas Stream Investiment (Brazil):

US$ 18,2 billions

4,3

BiofuelCorporateDistributionPetrochemical

1%

1%

8%

63%

27%

E&P

RTC

G&E

Internacional

Distribution

11,6

1,4

0,1

0,1

5,0

US$ 112,4 billionUS$ 112,4 billion

US$ 18,2 billion on the natural gas streamUS$ 18,2 billion on the natural gas stream

US$ 6,7 billion in the Gas and Energy SegmentUS$ 6,7 billion in the Gas and Energy Segment

6,7

28

45,7

64,1

71,1 71,3 70,8

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011 2012

Parque das Conchas

Parque das Conchas

Marlim LesteP-53

Marlim LesteP-53

FradeFrade

RoncadorP-52

RoncadorP-52

RoncadorP-54

RoncadorP-54

Marlim SulMódulo 2

P-51

Marlim SulMódulo 2

P-51

Rio de JaneiroEspadarte Mód IIRio de Janeiro

Espadarte Mód II

Cidade NiteróiJabuti

(FPSO)

Cidade NiteróiJabuti

(FPSO)

Cidade de VitóriaGolfinho Mód. 2

Cidade de VitóriaGolfinho Mód. 2

Marlim SulMódulo 3 - P-56

Marlim SulMódulo 3 - P-56Albacora

(water injection)

Albacora(water injection)

Barracuda

(infill drilling)

Barracuda

(infill drilling)

Espadarte

Módulo 3

Espadarte

Módulo 3

Jubarte

P-57

Jubarte

P-57

Peroá-CangoáPeroá-Cangoá

Urucu Urucu

CanapuCanapu

MexilhãoMexilhão

Uruguá -TambaúUruguá -Tambaú

Non-associeted natural gas

Associated natural gas

CamarupimCamarupim

LagostaLagosta

Million m3d

Bacia Campos Bacia Campos

ManatiManati

PirapitangaPirapitanga

Domestic Natural Gas Supply

General view: Production, imports and pipeline grid expansion

Existing Pipeline

Pipeline beingimplemented

Manaus

Belém

Recife

Cacimbas – Catu

Caraguatatuba – Taubaté

Brasília

Catu – Itaporanga

Gasduc III

Gaspal II / Gasan II

Urucu-Coari-Manaus

Gasbel II

Japeri-Reduc

Pilar-Ipojuca

LNG Terminals

Gasbol Sul - ExpansionNatural Gas Production Basins

Salvador

Pipeline Extension

2003 – 5.804 km

2006 – 5.877 km

2007 – 6.511 km

2008 – 7.777 km

2009 – 8.620 km

2010 – 9.621 km

+ 3.817 km

Paulinia - Jacutinga

Pipeline construction

COARI – MANAUS Pipeline CATU – ITAPORANGA Pipeline

Tubes for CACIMBAS-CATU Pipeline

millions m3/dmillions m3/d21

,5 23,1

22,8

22,8 23,5 25

,1

25,0 27

,1 29,2 29,8

29,9

29,7

31,0

31,2

31,5

31,5

0

5

10

15

20

25

30

2007 2008

PlanejadoRealizado

Jan

Fev

Mar

Abr

Mai

Jun Jul

Ago

Set

Out

Nov Dez Jan

Fev

Mar

Abr

Mai

Jun Jul

Ago

Set

Out

Nov Dez

Natural Gas imports from Bolivia

PlannedActual

Flexible LNG Opportunity

The current LNG market scenario allows short term contracts, creating opportunities to this new alternative to import LNG, with reduced fixed costs.

Assist on the adjusting of the supply to the Brazilian market characteristics: Steady and continuous supply to the residential, industrial

and automotive demand. Flexible supply (guaranteed) to the power plants.

Other benefits: Faster implementation. Failure risk mitigation to the natural gas supply due to

problems on production and delays on projects under development.

Diversification of the import sources of natural gas.

Flexible LNG Terminal Concept

Regasification VesselCarrier Ship

LNG

Pier

GUANABARA BAY TERMINAL

Includes the construction of a LNG jetty, with 2 berths, inside the Bay. Regasification capacity of up to 14MMm³/d and delivery to the grid

through a 16km pipeline (submarine + on-shore).

LNG Terminal

28” PIPELINE

Terminal Location at Guanabara Bay

Pier Construction

Regasification capacity of up to 7 MMm³/d and delivery of Natural Gas to the grid through a 20km pipeline.

PECEM TERMINAL

PECÉM JETTY #2

Pecem Port

ASSEMBLAGE OF THE FIRST LOADING ARM

REGAS Vessels

Golar Spirit Delivered on: June 11th, 2008 Max. Send-out : 7 MMm³/d Storage Capacity: 129,000 m³

Golar Winter Delivery: May, 2009 Max. Send-out: 14 MMm³/d Storage Capacity: 138,000 m³

Master Agreements – MSA (short term / spot arrangement)

• Price and volume to be negotiated

• Executed with Nigeria LNG (NLNG), Sonatrach, Total, Suez, Endesa, BG, Mitsui, Marubeni, Sumitomo and Shell

• Other 20 potential suppliers – under negotiations

• Optimization of the supply for the LNG terminals

• Contracts are hybrid model between MSA (short term/spot) and SPA (long term) security + flexibility

Firm Supply Agreements

• First Cargo – BG Group

• Terminal Commissioning Cargo – BG Group

• Flexible Supply for 2008 onwards (Possibility of Cancellation and guaranteed supply)

LNG Supply Agreements

Firm Flexible:Firm Flexible:

Natural gas delivery can be suspended for a while (*), during which it will be replaced with another fuel, mostly commonly fuel oil.

Firm Inflexible: Firm Inflexible:

This cathegory bears a firm supply, with a delivery warranty from the supplier.

New Natural Gas Contract Modalities

Interruptible:Interruptible:

If necessary, delivery can be suspended for a while (*). There will be no fuel replacement in this case, but prices in this cathegory reflect that.

Preferential (Thermal Power Plants)Preferential (Thermal Power Plants)

In this cathegory, consumers (thermal power plants only) have the option to buy the natural gas when they will be consuming, subject to a previous notice.

(*) natural gas is alocated to thermoeletric dispatch

41,5%

CIGÁSCIGÁS

41,5%

83,0%

41,5%41,5%

41,5%

41,5%

41,5%

41,5%

100,0%

37,4%

41,0%

24,5%

32,0%

49,0%

34,46%

GASMARGASMAR

GASPISAGASPISA 37,25%37,25%

23,5%23,5%

GASAPGASAP37,3%37,3%

49,0%

34,46%

40%

Participation in 20 LDCs (total = 27). Market-share in 2007 = 45%

GÁS DO PARÁGÁS DO PARÁ

Source: Abegás

Natural Gas Distribution

Regulated by ANP

Production Imports Distribution Natural Gas Consumers

Thermal Power Plants

Hidro Power Plants

Transmission

Electricity Consumers

Distribution

Process

Integration between Natural Gas and Power Generation

Regulated by ANEEL

Petrobras Power Generation Units

17 Thermal Power Plants: 5,1 mil MW

RômuloAlmeida138 MW

Celso Furtado185 MW

Termoceará220 MWDUAL-FUEL

Aurel. Chaves 226 MW

Mário Lago922 MW

Gover. LeonelBrizola

1.043 MW

Fernando Gasparian370 MW

Bahia I31 MW (fuel oil)

Luís Carlos Prestes252 MW

Sepé Tiaraju160 MWDUAL FUEL

Juiz de Fora84 MW

Barbosa Lima Sobrinho386 MWDUAL-FUEL

Termocabo48 MW (fuel oil)

Araucária484 MW

Petrolina 128 MW (fuel oil)

Euzébio Rocha370 MW

Jesus SoaresPereira

340 MW

UNDER CONSTRUCTION

UNDER CONSTRUCTION

Huge investments throughout the Natural Gas chain

Need for supply and demand adequacy (strong influence from

thermal power plants dispatching)

LNG and new Natural Gas Contracts aiming at flexibility

Final Comments

CHALLENGE IS OUR CHALLENGE IS OUR ENERGY ENERGY

Thank you very much for your Attention