PETROBRAS

1

Petrobras and EthanolPerspectives from a Brazilian Oil Company

Ted HelmsGeneral Manager

PETROBRAS New York Office

Ethanol Finance and Investment Americas Conference

PETROBRAS

2

1,462 1,4871,356 805 975 824 378

692600

2,701 2,531 1,897 1,863 1,562 1,466 1,8951,056 4980

1,000

2,000

3,000

4,000

5,000

Exxon

Mobil BP

RD Shell

Chevro

nCon

ocoP

hillip

s²

Total

Petrob

as EniRep

sol Y

PF

Oil Gas

4,163 4,0183,253

2,668 2,537 2,290 2,2731,748

1,098

349097109138148

213220

394

0

100

200

300

400

500

Repso

l YPF

Petrob

ras

Conoc

oPhil

lipsEni

Chevro

n

Total

RD ShellBP

Exxon

Mobil

6,400

4,0262,832 2,708 2,610 2,195 2,156

1,233524

0

2,000

4,000

6,000

8,000

Eni

Repso

l YPF

Petrob

ras

Chevro

n

Conoc

oPhil

ipsTotal

BP

RD Shell

ExxonM

obil

Proved Reserves as of Dec 31, 2005 (billion boe) 2Q2006 Oil & Gas Production (thousand boed)

2005 Refining Capacity (thousand boed) 5Market Value as of September 19, 2006 (US$ billions)

Notes: Based on information from company financials and Wall Street research1 Reflects only those activities relating to the Oil Products business2 Proforma for acquisition of Burlington Resources3 Includes revisions on Bolivian reserves4 Includes volumes added from Unocal acquisition5 Includes equity in affiliates6 Based on capacity of wholly owned refineries

Petrobras: World Class Integrated Public Energy Company

4

22.4

17.6

12.9 11.9 11.8 11.7 10.76.9

3.3

0

5

10

15

20

25

Repso

l YPF³Eni

Total

Conoc

oPhillip

s²

Petrob

ras

Chevro

n

RD Shell¹BP

Exxon

Mobil

6

4

PETROBRAS

3

8691004

11321271 1336

1500 1540 1493

1800

1686 1722 1769 1806 1802 1761 1700 1766

2300

2060

0

500

1000

1500

2000

2500

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2010

Achieving Self-Sufficiency in Oil Consumption & Production

52%52% 91%91% 100100%%Production/

Consumption

Petrobras’ ProductionBrazilian Consumption

114%114%70%70%

(*) Petrobras' estimate considering an average growth of 2.6 % per year

1684

1783

Self-Sufficiency

PETROBRAS

4

Energy

Industry

Imported OilProducts

ImportedOil

Imported Gas

International OilProduction

LNG

H - Bio

DomesticNatural GasProduction

Biodiesel Oil Productssold in Brazil

InternationalSales

OtherRenewables

Infrastructure

Petrochemical Plants

Brazilian OilProduction

Brazilian Refining

Throughput

InternationalRefining

Overview of the Company's Activities

Ethanol

Expansion/future activities

PETROBRAS

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Liderar o mercado de petróleo, gás natural e derivados na América Latina, atuando como empresa integrada de energia, com expansão seletiva

da petroquímica e da atividade internacional.

Growth ProfitabilityGrowth ProfitabilitySocial and Environmental Social and Environmental

ResponsibilityResponsibility

Consolidate and increase

competitive advantages in

the Brazilian and South American

oil and oil products market

Develop and lead the domestic

natural gas market and perform in an integrated manner

in the gas and power market in South America

Selectively expand

international activities in an

integrated manner with the

Company’s business

Selectively expand interest

in the petrochemicals

market

Expand participation in biofuels market, lead the domestic

biodiesel production and increase

participation in the ethanol business

Operational, management, technological and human resources excellence

Lead the Latin American oil, natural gas, oil products and biofuels market, working as an integrated energy company, with selective expansion in petrochemical, renewable energy and

international activities.

Corporate Strategy

Corporate Strategy evolving to include International, Gas, Petrochemicals, Bio-fuels

PETROBRAS

6Note: Includes International

US$ 87.1 billion

9%4%

3% 26%

56%

3%

49.3

23.07.5

3.32.31.8

9%4%

2%

59%

24%

2%

31.0

4.712.4

1.01.0

2.3

BP 2006-10(2007-11 Period)

US$ 52.4 billion

BP 2007-11

Petrobras Investment Plan 2007-2011

E&P Downstream G&EPetrochemical Distribution Corporate

PETROBRAS

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2007-2011 Investments 2011 Target

US$ 136 MM Biodiesel Plants Availability of 855 Thous. m3/year

US$ 140MM H-Bio (Bio-Refining) Processing 425 Thous. m3/year of vegetable oil

US$ 104MM Wind Power

US$ 123MM PhotovoltaicAdditional 240 MW Installed Capacity of

Power Generation from Renewable Sources

US$ 170MM Alcohol pipelines3.5 million m3 Ethanol Exports

US$ 70MM Alcohol Vessel Project

Other Renewable Energy Sources

Investments of US$ 780 MM in development of renewable energy sources and biofuels

Renewable Energy and Biofuels (2007-2011)

PETROBRAS

8

295786

126

147

315

368

237

282777

935128

211

201

224

108

97

0

500

1000

1500

2000

2500

3000

3500

2005 2011

Natural Gas LPG Ethanol** GasolineNaphta Diesel* + QAV Fuel Oil Other

Domestic Refined Products and Natural Gas Market in BrazilTh

ousa

nd b

pd 1,766

2,1173.1% p.y

* Includes Biodiesel (2%)** Assumes 40% of gasoline market

PETROBRAS

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NGV5.5%

Gasoline (E25)79.7%

Hydrous Ethanol14.8%

Source: ANP and Gás Brasil (2004)

Consumption by Light Vehicle in Brazil

Ethanol MarketEthanol Market--share:share:

14.8% + 19.92% 14.8% + 19.92% ⇒⇒ 34.7%34.7%

Anhydrous Alcohol represents 19.92% of Vehicle consumption

PETROBRAS

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

jan/

04 feb

mar ap

r

may jun jul

aug

sep

oct

nov

dec

jan/

05 feb

mar ap

r

may jun jul

aug

sep

oct

nov

dec

jan/

06 feb

mar

Light Vehicles Sales

FFV Gasoline Diesel Oil Ethanol

Evolution of Flexfuel Automobile Productionl

PETROBRAS

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LIGHT VEHICLES FLEET(thousand units)

9,08810,463

11,399 12,01912,755

13,506 14,075 14,439 14,680 14,431

3,716

3,4713,221

2,9722,712

2,4492,230 1,996 1,820 1,678

499

546597

632686

734764 782 810

843

335 1,108

1,004807626439288

1435718

9

5

44

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Gasoline Ethanol Diesel Oil CNG FFV

FFV since 2003CNG vehicles

Gradual Replacement of Conventional Engines

PETROBRAS

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Ethanol: Learning Curve Driving Down Ethanol Prices

Trend (Rotterdam Gasoline Prices)

Prof. Goldemberg, Coelho, Nastari and Lucon - USP

Trend(Anhydrous Ethanol Prices)

More than 400 types of Sugar-Cane

PETROBRAS

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North and Central America

37%

Europe

9.8%

South America

38%

Asia

16.2%

Brazil35%

Brazil35%

The Potential to Expand World Production Is Enormous

•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

Current Market Distribution of World Consumption

PETROBRAS

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Brazil Enjoys Enormous Advantages in Ethanol Production

8.3Sugar Cane

(under Brazilian production conditions)

1.9Sugar Beet

1.3 – 1.8Corn

1.2Wheat

Energy Output / Energy InputRaw Material

1.3 – 1.84,000 liter10,000Corn

8.37,080 liter85,000Sugar Cane

Energy Output / Energy Input

Quantity of Ethanol / ha

Production / ha(kg)Raw Material

PETROBRAS

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Land use in Brazil

851370180

6197

597,626390

• Total country• Native Amazon Forest• Secondary Amazon Forest and Others • Native Forests• Pasture• Temporary Crops• Permanent Crops• Available land • Available land with low impact (*)

Area (Mha)

Type

Source: FAO, 2002 and EMBRAPA (*)

PETROBRAS

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Petrobras Will Participate Through Export Logistics

Marine Terminal Rio de Janeiro

Marine Terminal São Paulo

New Ethanol Pipeline (800 km)

New Water Wayfor Ethanol Ethanol Export

8.0 Million m3 in 2012

PETROBRAS

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Petrobras Will Use Ethanol Knowledge to Expand World Distribution

• 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.

Brazil-Japan Ethanol Inc.

PETROBRAS

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2005to

2007(2% allowable)

2008to

2012(2% required)(5% allowable)

From 2012on

(5% required)

Brazilian market0 – 5.2 million barrels

Petrobras market share0 – 1.3 million barrels

Brazilian market5.2 – 15.7 million barrels

Petrobras market share1.3 -3.8 million barrels

Brazilian market15.7 million barrels

Petrobras market share3.8 million barrels

Law 11.097/2005 – established minimal percentage for biodiesel mix in diesel

• Petrobras target for 2010: Production of 8,200 bpd of Biodiesel

Biodiesel Will Follow Ethanol Trajectory

PETROBRAS

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Bifuel Production- Two Approaches to Using Vegetable Oil

Complementary and not competitive processes

Agribusiness

Farming

Seeds

or or

or

Ethanol

Methanol

Glycerin + Others

Biodiesel

B2 or B5mixture

orDiesel

Distributors

DieselRefinery

Hydrogen Diesel Fractions

Stations

ProcessedOil

Crushing

Transerestification

PETROBRAS

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Bio-diesel Production Facilities Underway

BA

MG

CE

Montes Claros

Quixadá

semi-arid region

3 Projects Being Implemented

Capacity: 171 thousand m3/year

Investments: ~ US$ 60 million

Jobs Generations: Construction: 1,200 direct and 400 indirectOperation: 105 directRaw material production:70,000 families

Start up: 4 Q/2007

InputsFamily Agriculture: castor, cotton, and palm.Complementary: soy.

All Petrobras Biodiesel has Social Fuel Seal

Candeias

PETROBRAS

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• 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

Legal Requirements for Bio-Diesel

Voluntary Social Seal

PETROBRAS

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0.210.220.300.40R$/litroOper Cost

121085US$ MMInvestment

0.030.030.040.05R$/litroMaintenance

0.0150.020.040.11R$/litroLabor

0.040.050.080.08R$/litroDepreciation

0.020.020.020.05R$/litroEnergy

0.100.100.100.11R$/litroChemicals

100,00065,00035,00010,000Ton/yearCapacity

Laboratory US$ 500,000

Biodiesel Production Cost

Source: Dedini, Intecnial, Lurgi

PETROBRAS

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Auction Quantity(mil m3) Delivery

NOV/2005 70 JAN/DEZ/2006

MAR/2006 170 JUL/2006 TO JUN/2007

11/JUL/2006

12/JUL/2006

Ofertado 1.266Arrematado 600

10

20

30

40

JAN/DEC/2007

Biodiesel Sales in ANP´s Auction (B100 m3 )

Price (R$/L)

1,90 + ICMS

1,86+ICMS

1,75+ICMS

Voluntary Participation of Petrobras and Refap – start sales ahead of schedule

Results of Auction for Biodiesel

PETROBRAS

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H-Bio – A Complementary, Proprietary Use of Vegetable Oil

* 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

2006-2007

2008

• 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

• 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

PETROBRAS

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Continuing Research Efforts for Renewable Energy

• 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

• Budget: US$ 32 million• 66 R&D projects• 6 Research Lines

• Biofuels• Biomass• Wind

• Solar Photovoltaic• Solar Thermal• Other renewables

PS2

Slide 25

PS2 PETROBRAS S.A.; 24/5/2004