1ER CONGRESO INTERNACIONAL DE BIOCOMBUSTIBLES The Brazilian Experience on Biofuels

1. 1ER CONGRESO INTERNACIONAL DE BIOCOMBUSTIBLES The Brazilian Experience on Biofuels Luthero Winter Moreira Downstream Area Guadalajara, Mayo 07-08, 2008.

2. Disclosure The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments.

3. Ethanol: 30 Years of Experience Fuel Ethanol Program Evolution Cellulosic Ethanol and Renewable Hydrogen Program of Emission Control (PROCONVE) Ethanol Program Implanted (BLENDS) Gasohol and Flex Fuel Cars Gasohol and Ethanol Cars (2nd oil shock) Environmental Benefits Program for Oil Imports Reduction 70’s 80´S 90´S 00´S Future

4. Brazil is the 1st country to get benefits from Ethanol Original drivers were energy security and economic attractiveness.Today environmental benefits are also a consideration. CNG ETHANOL GASOLINE 160000 Fuel demand for Otto Cycle Vehicles 140000 120000 10000 80000 60000 Accumulated effective economy:1 billion boe ~US$ 52 bi 40000 20000 Source: MME, BEN 2006 1000 BEP 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 In this period, the use of ethanol avoided 644 million tons of CO2 emissions.

5. A Brief History of Ethanol and Petrobras by the End of Oil Monopoly • 1976/1977 • PB creates the first task force to study blending operations • PB starts to convert storage tanks and tankers for ethanol transportation • 1986/1997 • PB issues over 130 papers and studies on all aspects of ethanol handling and distribution • PB consolidates over 40 internal procedures related to ethanol handling 1978/1979 - PB starts to export fuel ethanol - The first 35 PB service station pumps for ethanol are installed (SP and RJ) 1980/1981 - PB develops LUBRAX, the first lubricant for ethanol cars - PB is appointed responsible for handling the safety stock of ethanol - PB starts to produce ethene from ethanol • 1982/1983 • PB broadens its scope and encompasses internal market as well as international market for ethanol • PB concludes coastal shipping plans for ethanol 1973 OIL SHOCK Source of ethanol production data: UNICA Source of Petrobras developments: PETROBRAS

6. A Brief History of Ethanol and Petrobras after the End of Oil Monopoly 1997/2007 - PB issues over 80 new papers and studies on all aspects of ethanol handling and distribution - PB updates its internal procedures related to ethanol handling, including new technologies for Pipeline Integrity Management and dye handling 1997 - Creation of Petrobras Transporte and end of PB monopoly in the Brazilian oil market 2005 - Petrobras Transporte converts in 15 days 80,000 m3 from diesel to ethanol. It’s the first increase in storage capacity since 2003 - Petrobras Transporte has to adapt it’s logistics to handle the dyed ethanol. From that point on, there would be 3 different specifications of ethanol in the PB system • 1998/2001 • The Brazilian market starts to adjust itself to the new rules 2003 - The first contracts to follow the new rules established in 1997 for ethanol transportation in multi-product pipelines are signed 2001 - After a steep drop, the price of oil reaches its lowest point Source of ethanol production data: UNICA Source of Petrobras developments: PETROBRAS

7. Estimated Ethanol Production in 2008 – 70.5 Billion Liters North and Central America45.8% Europe 9.2% Brazil 32% Asia & Africa 12.4% South America 32.6% More than 75% of all ethanol is produced by Brazil and USA. Brazilian exports in 2007: 3.5 billion liters. World ethanol consumption is 3.7% of gasoline market. Increasing ethanol blending in the world to 10% would represent 187 billion liters. Source: F.O.Licht

8. Petrobras Partnerships to Introduce Ethanol as a Fuel • Nigeria / South Africa • :: Petrobras is providing technical cooperation in logistics • and blending know-how. • Japan • :: Recently, Petrobras has incorporated Brazil-Japan Ethanol Inc. • (Joint Venture of Petrobras and Japan Alcohol Trading); • :: The Company will import and distribute Brazilian ethanol in Japan; • :: Development of technical and commercial solutions for a reliable, long term supply of ethanol to the Japanese market; • :: Petrobras intends to introduce fuel ethanol into one of the most complex and important energy markets in the world: • • ethanol for power generation, • fuels distribution in Japanese market, • logistics for distribution of ethanol in Japan and other Asian markets.

9. R&D - Petrobras Projects on Biofuels Research on lignocellulosic ethanol (2nd generation biofuels) using sugar cane bagasse as raw material: - Pilot plant start-up: 4thQ 2007; - Demonstration plant start-up: 3rdQ 2010; - Property of process (patent already issued). HBIO: process of crude oil refining that uses vegetable oils as raw material to obtain a cleaner diesel oil by hydrogenation of a blend of diesel and vegetable oil. Biodiesel: research on new raw materials, improvement of industrial process, quality of product, and tests with engines.

10. Summary – Petrobras’ Technological Roadmaps on Biofuels HBIO Biodiesel Lignocel. Ethanol

11. Business Strategies Renewable Energy 2008-2012 Investments 2012 Target US$ 1.5 billion Investments Biodiesel Plants Availability of 938,000 m3/year H-Bio (Bio-Refining) Vegetable oil Processing 1.6 million m³/year Ethanol pipelines Export of 4.7 million m³/year of Ethanol Ethanol Project Vessel Aeolic Energy Installed Capacity of Generation of Electric Power from 365 MW Renewable Sources Solar Energy Other Sources of Renewable Energy Total avoided GHG emissions: 3.93 MM tons CO2 equivalent

12. Final Comments Petrobras will continue to invest on: development of international markets for ethanol, improvement of Brazilian export infrastructure, and R&D of new production technologies (lignocellulosic process and BTL). Petrobras’ investment on the development of feasible production technologies of 2nd generation biofuels will assure, in the long-term, the regular supply of renewable fuels, in a fully sustainable manner – regarding economical, environmental and social aspects – along the production chain. In summary, Petrobras’ investments on biofuels contribute to reduce emissions of fossil fuels, generating environmental benefits and increasing social inclusion by creation of jobs in rural areas.

13. Vision 2015 Petrobras will be an integrated energy company with a strong international presence and a leading force in Latin America, working with a focus on profitability and social and environmental responsibility.