Funding Science and Technology to meet the cost C hallenge in O&G Sector

1. Funding Science and Technology to meet the cost Challenge in O&G Sector November Conference – Oct. 31st, 2016

2. Our Mission and Vision • To promote the economic and social development of Brazil; • Governmental funding of Science, Technology and Innovation; • Support for companies, universities, technological institutes and other public or private institutions; • To transform Brazil by means of Innovation. Finep: Brazil’s National Innovation Agency Finep is a Federal Government Company linked to the Ministry of Science, Technology, Innovations and Communications - MCTIC, created in 24 July 1967;

3. Finep: Brazil´s National Innovation Agency • Finep supports allstages of scientific, technological and innovation process in several sectors. InvestmentfundsandEquity Grants (non-refundableresources) EconomicSubvention Loans Pre-Incubation Incubationand Start -Up Emergingcompanies Scientific & Technology Research and Infrastructure Expansionofcompanies

4. Evolution of the Main Numbers Finep – Disbursement of Resources per Instrument Credit Grants for Research Institutes Grants for Companies

5. Finep rate x Selic rate Fev/12 Fev/13 Fev/14 Fev/15 Fev/16 Fontes: Finep, BCB-Demab e BCB-Secre * Finep rate for Pionnering Inovation

6. Loan Conditions Interest Rate - from 7,5% to 11,5% per year Grace Period – up to 48 months Total Period (grace period + amortization) – up to 144 months FINEP’s Participation – up to 90% of the projects’ budget Whatcanbefunded: • Civil works/facilities, equipment (domestic and imported), software (domestic and imported), raw materials, personnel, training, consultancy, contractors, air tickets and per diem, other.

7. Finep - Challenges • To create bridges between players: universities, high-tech companies, contractors, operators, suppliers etc. • To encourage implementation of ongoing R&D activities in companies; • To increase competitiveness of Brazilian companies; • To support entry of innovative companies into global markets; • To stimulate private investments in innovation; • To foster procedures to promote sustainability.

8. Universities and S&T Institutions Brazilian STI System: Institutions’ action zones Public Laboratories Companies Interaction Zone Recursos CNPq / CAPES / FAPs BNDES Death Valley Embrapii Applied Research Education Technology Readness Levels - TRL TechnologicalDevelopment Prototypes and Scale-up Basic Research

9. R&D in selected countries as a percentage of GDP Source: OECD. It doesn’t consider Higher education, Private non-profit and Funds from abroad.

10. Most Relevant Innovation Obstacles Source: IBGE* / Pintec** * Brazilian Statistical Institute ** Brazilian Innovation Survey

11. Oil and Gas Challenges in Brazil The developmentof a global innovativeoilandgassupplychain in Brazilis a big challengeandpre-saltis a greatopportunityto do it. • Innovationisthekeytoreducecosts, keepingproductivity, competitiveness, qualityandoperationalsafety in industry. • How Finep cancontributetoraisecompaniesinvestments in innovationprojects in O&G sector in Brazil? • Reducing financial risks for developers; • Supporting more collaborativeenvironment for innovation; • Offeringsuitable financial tools tolong-termandstrategicprojects (ex: subseafactoryconceptandindustry 4.0); • Innovationoriented policies byregulationactivity • Promotinginternationalcooperation.

12. E & P Trends: Subsea Factory Concept • Implementation in modular stages • New generation of process equipment either on platforms and seabed; • Light, simple and compact equipment solutions • Riser-free drilling • Seismic Acquisition and Processing Data in 4D (Nodes) • Integrating functionalities • Non-retrievable and long lifespan devices • Nanomaterials • Nanoparticles • Submarine power productions and distribution • New standards and operational protocols (metrology)

13. E & P – Subsea Hub’s Segments • Multiple fields of knowledge: robotics, automation, nanotechnology, new materials, instrumentation, internet of things, bigdata, distributed processing data, geology, geophysics, simulation, chemistry, HSE – health, safety and environment etc.; • Range of economic sectors: shipyard industry, IT, microelectronics, ROV industries, instruments, metallurgy, chemicals, electronics, electric, subsea engineering, monitoring, maintenance, seismic, logistics services etc.;

14. Oil and Gas - Oportunities • Important Contacts / Partnerships / Public Calls: • Operators: Petrobras, Shell and Statoil • Contractors • Innovation Norway and Research Council – MoU - BN-21 (Brazil - Norway) • BNDES • ANP • Projets (Loans) 2011 - 2015: R$ 1,5 bilhões • Pre-Salt Public Calls (Grants for Universities, Scientific and Tecnological Institutions): 2010 - 2013: R$ 160 milhões

15. JOINT PUBLIC CALL FINEP-RCN • Objective • SupportingprojectselaboratedthroughcooperationbetweenBrazilianandNorwegiancompaniesusingthecurrent financial instruments, accordingtothefollowingthematiclines: • Subseatechnologies • EnhancedOil Recovery • Environmental Technologies Final joint selection decision

16. JOINT PUBLIC CALL FINEP-RCN • Financial resources for theprojects Norway will finance Norwegian companies through RCN, while FINEP will finance Brazilian companies. • RCN: NOK 10 million, grants. (~ U$ 1.2 MM) • Finep: R$ 5 milhões, grants. (~ U$ 1.6 MM) Priorities: Small and Medium Enterprises (SMEs - Brazilian and Norwegian); The innovation projects must be developed through partnerships between Brazilian and Norwegian companies. Universities and scientific institutionsfrom both countries may also participate as service suppliers; The projects must be balanced between the participants and significant to both countries; The duration of the project can be no longer than 3 years.

17. Preliminary selection results* • Selection of 5 projects from 16 pre-proposals * The final joint selection decision will occur after the submitting request for reconsideration period , in december 7th

18. Regulatory Incentives • 1% of O&G revenue to fund R&D projects (ANP regulation); • At least 50% of the resources applied in R&D in Universities; • At least 10% of the funds should be invested in projects or programs carried out by Brazilian companies; • The remaining funds can be applied to run the project in the operator own facilities, universities or Brazilian companies; • Pedefor - Government program to stimulate competitiveness in Brazil’s oil and gas supply chain -> incentive to companies developing innovation and technology; • The end of the requirement for Petrobras to participate in at least thirty percent of all pre-salt oil exploration in the country (Senate Bill).

19. Examples of Projects supported by FINEP • Development of vessel to support submarine interventions for human shallow diving and ROV operation for submarine engineering, maintenance and repair of pipelines and risers. • Light work-over services and well intervention operations semi-submersible platform • Flow assurance technology of oil for heavy oil extraction in deepwater field. • Onshore underground storage of gas service through conversion of a depleted oil and gas field • Software development for special seismic processing and inversion of high resolution AVO (finalist of ANP Innovation Award – 2015)

20. Overcoming the Challenges • Improve capital efficiency: to ensure deepwater innovative projects success is to take the time necessary to do a adequate pre-project planning and define the right project; • Times of financial restrictions are an opportunities to housekeeping, evaluating and creating the best governance for RD&I in your firm and reflecting about innovation culture for better times; • Also, is time for colaboration: Increase the dialogue between industry, local government and technological institutions; and, • Adoption of collaborative models between operators, service providers and equipment manufacturers for the deployment of integrated deepwater technical solutions.

21. Thank you!Mauricio Alves SyrioSuperintendentmsyrio@finep.gov.br SAC: 21 2555-0555 | sac@finep.gov.br Ouvidoria: 21 2557-2414 | ouvidoria@finep.gov.br