1. Perspectives for the Brazilian Petroleum Sector After the Transition from Petrobras Monopoly to a Competitive Environment Ivan Simões Filho ismoes@gaffney-cline.com Gaffney, Cline and Associates www.gaffney-cline.com UNCTAD IX Rio, June 8, 2004 NOT AN OFFICIAL UNCTAD RECORD

2. Gaffney, Cline & Associates GCA Worldwide Presence

3. Gaffney, Cline & Associates Midstream Petroleum Engineering Process Engineering Operations Upstream Geophysics Geology Petrophysics Reservoir Eng. Drilling Eng. Downstream Chemical Eng. Power Eng. Economics Finance, Law Strategy GCA Full Spectrum Staff

4. Gaffney, Cline & Associates Company started in Latin America in 1962 High degree of activity in all countries and knowledge/ understanding of local issues Fulltime staff comprises professionals from Argentina, Brazil, Colombia, Mexico, Trinidad & Tobago and Venezuela BRAZIL COLOMBIA VENEZUELA GUYANA SURINAME FRENCH GUIANA PERU BOLIVIA PARAGUAY CHILE ARGENTINA URUGUAY GCA in Latin America

5. Gaffney, Cline & Associates Open to Foreign Investment in the Energy Sector Closed to Foreign Investment in the Energy Sector Some Foreign Investment in the Energy Sector The 1980s World

6. Gaffney, Cline & Associates Today’s World …. is Getting Bigger Open to Foreign Investment in the Energy Sector Transition Toward Total Opening of the Energy Sector to Foreign Investment Closed to Foreign Investment in the Energy Sector Some Foreign Investment in the Energy Sector

7. Gaffney, Cline & Associates An Impressive Production Growth Brazil is the 15 th world oil producer Source: Petrobras

8. Gaffney, Cline & Associates A Growing Gas Market A Growing Gas Market But still a small proportion of the energy matrix Source: Ministry of Mines and Energy

9. Gaffney, Cline & Associates Growing Gas Proportion Natural gas participation grew 15% in 2002 Source: Ministry of Mines and Energy

10. Gaffney, Cline & Associates Some Natural Gas Issues Bolivia-Brazil gas pipeline is still operating with spare capacity –20,000,000 m 3 /day 36,000,000 m 3 /day average consumption Significant gas discoveries in several basins Recent power shortage in Northeastern region –Thermal plants could not operate due to gas shortage –Need to link regional gas pipeline networks

11. Gaffney, Cline & Associates Growing Use of Bolivia-Brazil Gas Pipeline Currently using 2/3 of its capacity

12. Gaffney, Cline & Associates Three Separate Gas Pipeline Networks Source: Petrobras

13. Gaffney, Cline & Associates 13 Years of Reserve Growth 356% reserve replacement in 2003 Source: Petrobras

14. Gaffney, Cline & Associates Impressive Reserves Growth 2.3 billion boe proved >4 billon boe proved + probable 400 million bbl light oil 365% reserve replacement

15. Gaffney, Cline & Associates Towards Self Sufficiency Brazil produces today 85% of its petroleum consumption Source: Petrobras

16. Gaffney, Cline & Associates Important Discoveries in 2003 Golfinho –BES-100 Block, Espírito Santo Basin –Light oil (>40 API) Baleia Franca –BC-60 Block, Campos Basin –Heavy oil (19 API) Mexilhão –BS-400 Block, Santos Basin –Gas and condensate

17. Gaffney, Cline & Associates Source: www.petrobras.com.br The Whale Park

18. Gaffney, Cline & Associates Jubarte Discovered Jan 2001 –1-ESS-100 well –1323 m water depth –77 Km from coast –17 API Pilot Production: 21,000 bopd –Long term production test: October 2002 –Declaration of Commerciality on December 11, 2002 –ESS-110H well (1076m in reservoir) –FPSO Seillean Development Phase 1: 45,000 bopd –4 producing wells –First oil 2005 –FPSO P-34 Development Phase 2: 150,000 bopd –21 producing wells, 6 injectors –First oil 2008 Source: Petrobras

19. Gaffney, Cline & Associates Cachalote Discovered November 2002 (ESS-116 well) –1478 m water depth –80 km from coast –19 API Eocene turbidites Declaration of commerciality December 27, 2002 One phase development –FPSO –10 wells (6 producing, 4 water injection) Source: Petrobras

20. Gaffney, Cline & Associates Radical Change in Round 5 Source: www.brasil-rounds.gov.br

21. Gaffney, Cline & Associates Decreasing Proportion of Awarded Blocks Source: www.brasil-rounds.gov.br

22. Gaffney, Cline & Associates Decreasing Competition Source: www.brasil-rounds.gov.br

23. Gaffney, Cline & Associates From State Monopoly to a Competitive Exploration Environment Source: ANP

24. Gaffney, Cline & Associates 33 Exploration Concessionaires Source: ANP

25. Gaffney, Cline & Associates Conclusions Very prospective areas –Need persistence –New plays All types of opportunities –Light oil –Heavy oil –Gas and condensate –Mature basins Need for infrastructure –Refining –Pipelines Huge market Stable macro economy

26. Gaffney, Cline & Associates Thank you