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Biofuels Market in Brazil and the Participation of Petrobras

Biofuels Market in Brazil and the Participation of Petrobras. Historical and Recent Development of Biofuels in Brazil. Integrated Growth. Social and Environmental Responsability. Profitability.

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Biofuels Market in Brazil and the Participation of Petrobras

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  1. Biofuels Market in Brazil and the Participation of Petrobras

  2. Historical and Recent Development of Biofuels in Brazil Integrated Growth Social and Environmental Responsability Profitability Expand operations in target markets for oil, oil products, petrochemicals, gas and energy, biofuels and distribution, being a world benchmark as an integrated energy company To grow production and oil and gas reserves sustainably, being recognized for excellence in E&P operations To expand integrated operations in refining, commercialization, logistics and distribution with a focus on the Atlantic Basin Expand operations in petrochemicals in Brazil and South America on an integrated basis with the PETROBRAS Group’s other businesses Develop and lead the Brazilian natural gas market and operate on an integrated basis in the gas and electric energy markets with a focus on South America Operate on a global basis in biofuels commercialization and logistics, leading the domestic production of biodiesel and expanding participation in the ethanol segment Operational, management, technological and human resources excellence Petrochemicals E&P Downstream (RTC) Biofuels Distribution Gas & Energy Commitment to sustainable development

  3. Non-Renewable Energy World 86% Brazil - 55% Historical and Recent Development of Biofuels in Brazil Renewable Energy World 14% Brazil – 45% 1980 1979 1977 1983 1974 1973 2nd Oil Chock Ethanol dedicated vehicles participation of total vehicles sales >90% 15% Blending of ethanol to gasoline 4,5% Blending of ethanol to gasoline Brazil creates PROÁLCOOL 1st Oil Chock 2001 1992 2003 90’s 1985 1989 Rio 92: Signing of the climate change milestone End of deregulation process Ethanol blending varies between 20% - 25% of gasoline Flex-Fuel vehicles launching Ethanol blending into gasoline reaches 22% 2005 Crude oil prices fall and price of gasoline equates to that of ethanol Biodiesel National Program launching Jan 2008 Mar 2008 May 2008 2% Blending of biodiesel to diesel Aug 2008 Jul 2009 CNPE authorizes 3% blending of biodiesel to diesel Jan 2010 Ethanol consumption is bigger than gasoline July 11, oil prices rose to a new record of $147.27 4% Blending of biodiesel to diesel CNPE anticipates 5% blending mandate from 2013 to 2010

  4. The Economics of Brazilian Ethanol Supply Proalcool Program and flex-fuel vehicles were both responsible for the strong growth observed in the last 30 years Flex-fuel vehicles launching Proalcool Source: MAPA

  5. Looking Ahead domestic market growth & export opportunities ETHANOL Production, consumption and export projections of ethanol reflect great dynamism, especially the growth of domestic demand. billion liters Ethanol Domestic Demand Forecast Production Source: EPE

  6. Looking Ahead domestic market growth & export opportunities BIODIESEL Accompanying the demand for diesel, the demand for biodiesel is expected to reach 3.5 billion liters in 2017 million liters Biodiesel production Biodiesel Demand Projection (EPE) Source: EPE

  7. Looking Ahead Ethanol domestic market growth & export opportunities

  8. Historical and Recent Development of Biofuels in Brazil • PROALCOOL PRINCIPLES AND CHARACTERISTICS • On November 14, 1975 the Alcohol National Program was created with • five stated goals: • Foreign currency savings • Reducing regional income disparities • Reducing disparities in individual income • Growth of domestic income • Expansion of capital goods production

  9. Use of its nationwide logistical and retail infrastructure to assure that the blend and the pure ethanol could reach all the country Development of technical solutions for adequate handling of ethanol, including its transportation by multi-product pipelines and storage Formulation of gasoline to receive the blend of ethanol R&D of solutions regarding quality of product, effects of blend and pure ethanol on the engines and materials etc Instrumental, on behalf of the government, in centralizing acquisitions of huge volumes of ethanol to regulate the domestic market Historical and Recent Development of Biofuels in Brazil

  10. The Economics of Brazilian Ethanol Supply • ETHANOL INDUSTRY HAS IMPROVED AND BECOME MORE SUSTAINABLE SINCE IT WAS FIRST ESTABLISHED • Sugar-energy sector: US$ 28.1531 billion (almost 2%of GDP) • Increased productivity (as ethanol yields) • *Mapping the sugarcane genome • Power generation with sugarcane bagasse (1/3 of the plant) • Use of the vinasse as a fertilizer • Production of 9.2 units of energy per unit of fossil fuel energy • Recognized as an advanced biofuel, it emits more than 60% less ~ 7 thousand liters/ha ~ 2 thousand liters/ha Source: MAPA

  11. The Economics of Brazilian Ethanol Supply • NUMBERS OF THE BRAZILIAN SUGARCANE INDUSTRY • 434 Plants¹ • 70,000 Sugarcane growers • The 15 largest producers of ethanol represent only 37% of total production • 1.28 million People formally employed² • 1,042 Municipalities directly benefited • GDP of the sugarcane sector: US$ 28 billion • Foreign revenue: US$ 9.8 billion (2009) • Participation in Brazilian energy matrix: 18% (> Hidroelectricity) • Avoided CO2 emissions: > 600 million tons since 1975³ • Source: UNICA (1-Position on 07/12/2010; 2-Data of 2008 from Rais (Relação Anual de Informações Sociais do Ministério do Trabalho e Emprego); 3- Neves, Marcos Fava et. al, (2009) -Mapeamento da cadeia sucroenergética)

  12. Historical and Recent Development of Biofuels in Brazil ETHANOL PLANTS IN BRAZIL Ethanol Plants Operational: 434 plants Total: 27 billion liters/year

  13. Ethanol (billion liters) Production Domestic Demand Exports Source: AGE/MAPA Looking Ahead domestic market growth & export opportunities

  14. Looking Ahead Biodiesel domestic market growth & export opportunities

  15. Historical and Recent Development of Biofuels in Brazil MOTIVATIONAL PRINCIPLES FOR THE CREATION OF BRAZILIAN BIODIESEL PROGRAM • Introduction of a new sustainable renewable fuel • Diversifying the Energy Matrix • Reduction in imports of diesel and oil • Employment creation and income • Fixing families in the countryside • Expansion of sustainable agriculture • Utilization of soil unsuitable for food crops • Offering an environmentally friendly fuel Castor-Oil Plant African Oil Palm Sunflower Soy Cotton

  16. Cottonseed Animal Fat Soy Historical and Recent Development of Biofuels in Brazil • BRAZILIAN VEGETABLE OIL PRODUCTION • Soy: large-scale farming, helped make Brazilian Biodiesel Program possible • Castor beans production: helping family farming • Jatropha, Macauba, Sunflower and Others: small scale or still in development • Animal Fat: the second largest feedstock for brazilian biodiesel • Palm oil in the north region: the new frontier Source: EPE

  17. Social Fuel Stamp Granted to producers who: • Buy raw material from family agriculture in the minimum percentage of: • 15% North and West-center region • 30% Other regions • Do negotiated contracts with family farmers, consisting: • The contractual period • The value of buying criteria and adjustment of contract price • The delivery terms of raw material • The safeguards of each party • Identification and agreement of a representation of farmers who participated in the negotiations • Ensure training and technical assistance to family farmers. Source: MDA

  18. Historical and Recent Development of Biofuels in Brazil BIODIESEL PLANTS IN BRAZIL Biodiesel plants authorized by ANP Operational: 63 Commercialization: 42 Total: 4,5 billion liters/year B5: 2,4 billion liters/year Plants in the Social Pact (k m³/y) Plants not in the Social Pact (k m³/y)

  19. 0 Petrobras and Biofuels

  20. PETROBRAS - BUSINESS PLAN 2010-2014 • The segment of biofuels will receive U$ 3.5 billion, operating in production, logistics and marketing of biofuels and participating in the value chain in Brazil and abroad, working in an integrated manner. • The strategy in the ethanol segment was redirected to the acquisition of shares in order to become a major player in the market, ensuring the field of technology for sustainable production of biofuels. Production capacity of biodiesel in Brazil Ethanol Production Export of ethanol

  21. BIODIESEL and ETHANOL PLANTS 4 Biodiesel Units in operation • Quixadá (CE) • Candeias (BA) • Montes Claros (MG) • Marialva (PR) 10 Ethanol units in operation: • Guarani: 7 in SP and 1 in Moçambique • Total (MG) • Nova Fronteira (GO)

  22. Project Belém Project Pará BIODIESEL PLANTS Semiarid region of Brazil • Candeias (BA), Quixadá (CE) and Montes Claros (MG) • 2008/09: 150.000 tonnes/year (50.000 tonnes/year each plant) • Dec,2009: 300.000 tonnes/year (100.000 tonnes/year each plant) • Sept/10: duplication of Candeias: + 100.000 tonnes/year • South region of Brazil • Marialva • May,2010: 60.000 tonnes/year (PBIO owns 50% of the plant of 120.000 tonnes/year capacity) New Projects • Belém project (Portugal) • 2014:300.000 tonnes/year of palm oil biodiesel • Pará project • 2013: 120.000 tonnes/year of palm biodiesel • Guamaré – RN (30% - castor oil) • 2011: 55.000 tonnes/year • (9,6% of semiarid production) Overall processing capacity (2010) ~ 475.000 tonnes/year

  23. ETHANOL PLANTS SANTA LUZIA Greenfield project GO GO SÃO MARTINHO BOA VISTA MG GUARANI VERTENTE TOTAL BAMBUÍ GUARANI CRUZ ALTA GUARANI TANABI GUARANI MANDÚ GUARANI ANDRADE GUARANI SÃO JOSÉ SP GUARANI SEVERÍNIA SP GUARANI SENA ( Mozambique – AFRICA) Overall Crushing Capacity (2010) ~ 20 million tonnes of sugarcane Overall Ethanol Production (2010) ~ 890.000 m3

  24. December 22, 2009: Petrobras Biofuels announced its entry into the ethanol segment, by acquiring 40.4% of Usina Total S.A. Plant capacity: production of 103.000 m3 of ethanol and 9.8 MW of electric power of 9.8 MW. Petrobras Investment: R$ 150 MM that will be used to expand the unit to 203.000 m3 of ethanol and 38.5 MW of electricity. The other portion will be invested in machinery and equipment to achieve the goal of 100% of mechanized harvesting of sugarcane in 2012. PARTNERSHIP: USINA TOTAL

  25. PARTNERSHIP: TEREOS • A strategic investment • Petrobras Biocombustível announced in April, 2010 it was forming a strategic partnership with Tereos Internacional to jointly invest in Guarani and become a leading player in the Brazilian sugarcane industry. • A strategic investment that provides Petrobras Biocombustível with a significant stake in a market leader; • The capital increase strengthens Guarani’s balance-sheet and provides the company with new resources and expertise for its growth. • Total investment of R$2.2 Bn in Guarani Investment by Petrobras Biocombustível of R$1.6 Bn over next 5 years (R$682 MM already invested) with an option to reach a stake of up to 49% in Guarani; • Option for Tereos Internacional to invest up to R$600 MM of new equity in Guarani in the 12 months following Petrobras Biocombustível’s initial investment in Guarani. JV post-merger structure 26.3% to 49.0% 73.7% to 51.0%

  26. PARTNERSHIP: SÃO MARTINHO • June, 21 2010: Petrobras announced a strategic partnership with Grupo São Martinho S.A. for the growth of ethanol production in the Midwest region of Brazil, State of Goiás. • A new company will be created, called Nova Fronteira Bioenergia S.A., which controls the Usina Boa Vista, currently in production, and the greenfield project called SMBJ Agroindustrial S.A., both located in Goiás. • Petrobras investment: R$ 420.8 MM to Petrobras Biocombustível acquire 49% stake in the new company. • The investment will be used to expand production of the new society, especially Usina Boa Vista. With the investments already made and implemented, it will have its milling capacity expanded from the current 2.5 million tonnes of sugarcane to 7 million tonnes in the 2014/15 season.

  27. Senador Canedo Export Logistics 1 Multi-product pipeline Existent 2 Ethanol pipeline Study concluded 3 Ethanol pipeline In study 4 Barges Study concluded Uberaba MG 3 Presidente Epitácio Ribeirão Preto MS Araçatuba 2 4 REDUC RJ SP REPLAN Anhembi Taubaté 1 Ilha D’ água REVAP São Sebastião PR

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