Marcio Do Nascimento Magalhaes
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Local Content Policy andOpportunities for O&G Industry
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DISCLAIMER
The presentation may contain forward-looking statements aboutfuture events within the meaning of Section 27A of the Securities Actof 1933, as amended, and Section 21E of the Securities Exchange Actof 1934, as amended, that are not based on historical facts and arenot assurances of future results. Such forward-looking statementsmerely reflect the Company’s current views and estimates of futureeconomic circumstances, industry conditions, company
performance and financial results. Such terms as "anticipate","believe", "expect", "forecast", "intend", "plan", "project", "seek","should", along with similar or analogous expressions, are used toidentify such fo rward-looking statements. Readers are cautioned thatthese statements are only projections and may differ materially fromactual future results or events. Readers are referred to thedocuments filed by the Company with the SEC, specifically theCompany’s most recent Annual Report on Form 20-F, which identifyimportant risk factors that could cause actual results to differ fromthose contained in the forward-looking statements, including, amongother things, risks relating to general economic and businessconditions, including crude oil and other commodity prices, refiningmargins and prevailing exchange rates, uncertainties inherent inmaking estimates of our oil and gas reserves including recentlydiscovered oil and gas reserves, international and Brazilian poli tical,economic and social developments, receipt of governmentalapprovals and licenses and our ability to obtain financing.
We undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of newinformation or future events or for any other reason. Figuresfor 2012 on are estimates or targets.
All forward-looking statements are expressly qualified in
their entirety by this cautionary statement, and you shouldnot place reliance on any forward-looking statementcontained in this presentation.
NON-SEC COMPLIANT OIL AND GAS RESERVES:
CAUTIONARY STATEMENT FOR US INVESTORS
We present certain data in this presentation, such as oil andgas resources, that we are not permitted to present indocuments filed with the United States Securities andExchange Commission (SEC) under new Subpart 1200 toRegulation S-K because such terms do not qualify as proved,probable or possible reserves under Rule 4-10(a) ofRegulation S-X.
FORWARD-LOOKING STATEMENTS
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PRESENTATION SUMARY
1. PETROBRAS’ Business & Management Plan 2013 – 202. Supply History
3. Local Content Policy4. Supply Chain Challenges5. Foreign Investment in Brazil: Oil and Gas Industry6. Conclusions
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1 –PETROBRAS’Business and
Management Plan 2013 –
2017
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PETROBRAS TODAYFully integrated across the hydrocarbon chain
• 2.4 mm boedproduction
• 293 producti on fields
• 96% of Brazilianproduction
• 34% of global DW andUDW product ion
Explorationand Production
• 12 refineries (Brazil)
• 2.0 mm bpd refini ngcapacity
• Oil products sales inBrazil: 2,285 Kbpd
• Oil products output inBrazil:1,997 Kbpd
Downstream
• 7,641 service s tations
• 38,1% of market s hare
• 20% share of servicestations
Distribution
• 9,190 km of gaspipelines in Brazil
• NG Supply: 74.9million m³/d
• 3 LNG Regasificationterminals by 2013 with41 MMm³/d capacity
• 7,028 MW ofgeneration capacity
Gas and Power
• 24 countries
• 0.7 Bn bo e of 1P (SPE)
• 243 th. boedproduction
• 231 th. bpd refiningcapacity
International
• 3 Biodiesel Plants
• Ethanol: opening newmarkets
• Largest domesticproducer of biodiesel
• 3rd producer of ethanolin Brazil
Biofuels
(1) Adjusted according average exchange rate. Excludes Corporate and Elimination .
2012 Proven Reserves (SPE Criteria) - Brazil
Deep Water(300-1,500m)
48%
Ultra-Deep Water(> 1,500m)
36%
Onshore8%
Shallow Water(0-300m)
8%
15.73 Billion boe
2012 Proven Reserves (SPE Criteria) - Brazil
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PRODUCTION PROFILE (9Q2013)Ranked among the leading integrated energy companies
Oil mix (%) Total Production (mboe/d)4,187
2,192
2,557
1,541
1,733
2,043
1,418
1,175
1,819
972
838
537
872
1,234
1,011
915
562
1,970
1,250
1,585
871
493
1,096
1,026
781
728
1,016
681
4,749
4,162
3,807
3,126
2,604
2,536
2,514
2,201
2,145
1,753
1,566
1,553
1,553
1,429
1,239
1,212
88%
53%
67%
49%
67%
81%
56%
53%
85%
55%
54%
35%
56%
86%
82%
75%
Rosneft
ExxonMobil
PetroChina
Shell
Chevron
Petrobras
BP
Total
Lukoil
Statoil
ENI
Petronas
ConocoPhillips
Surgutneftegaz
Gazprom Neft
Sinopec
6
Source: Evaluate Energy, dez/13.
OIL GAS
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Under Implementation
US$ 207.1 Billion
Under Evaluation
US$ 29.6 Billion
+=Total
US$ 236.7 Billion
All E&P projects in Brazil and projects of the
remaining segments in phase IV
Projects for the remaining segments,
excluding E&P, currently in phase I, II and
770 projects 177 projec ts947 projects
62.3%(US$ 147.5 Billio n) 27.4%
(US$ 64.8 Billio n)
1.0%(US$ 2.3 Billio n)
1.4%(US$ 3.2 Billio n)
1.1%(US$ 2.9 Billio n)
2.2%(US$ 5.1 Billi on)
4.2%(US$ 9.9 Billio n)
0.4%(US$ 1.0 Billio n)
71.2%(US$ 147.5 Billio n) 20.9%
(US$ 43.2 Billio n)
1.1%(US$ 2.3 Billio n)
1.4%(US$ 2.9 Billi on)
0.5%(US$ 1.1 Billio n)
1.5%(US$ 3.2 Billio n)
2.9%(US$ 5.9 Billi on)
0.5%(US$ 1.0 Bilil on)
73.0%(US$ 21.6 Billio n)
1.0%(US$ 0.3 Billi on)
13.5%(US$ 4.0 Billi on)
6.4%(US$ 1.9 Billio n)
6.1%(US$ 1.8 Billio n)
Phase I: Opportunity Identification; Phase II: Conceptual Project; Phase III: Basic Project ; Phase IV: Execution
* Pbio = Petrobras Biofuel│ETM = Engineering, Technology and Materials │Other Areas = Financial, Strategy and Corporate
International ETM* Other Areas*Pbio*E&P DistribuitionDownstream G&E
2013 – 2017 BMP INVESTMENTSProjects Under Implementation x Under Evaluation
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Production Development
US$ 106.9 Billion
Post-SaltPre-SaltTransfer of Rights
Exploration
US$ 24.3 Billion
16%(24.3)
73%11%
Infrastructure and SupportExplorationProduction Development
2013 – 2017 Period
US$ 147.5 Bill ion
11%
70%24%
6%
32%
43%
25%
Aside from Exploration and Production Development, E&P infrastructure investments total US$ 16.3 Billion.
E&P INVESTMENTS
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PRODUCTION CURVE IN BRAZIL – OIL AND NGLPost-Salt, Pre-Salt and Transfer of Rights
2.0 2.0 2,0*
2.5
2.8
4.2
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Norte Pq. dasBaleias
FPSO P-58180 mbpd
RoncadorMód 3 SS P-
55180 mbpd
Piloto LulaNE
FPSO Cid.Paraty
120 mbpd
PilotoSapinhoá
FPSO Cidadede São Paulo
120 mbpdJúpiterFPSO
100 mbpd
Franco LesteFPSO
150 mbpd
BonitoJaqueta
A def in ir
Espadarte IIIFPSO
65 mbpd
FlorimFPSO
150 mbpd
RoncadorMódulo 4
FPSO P-62180 mbpd
Sapinhoá NFPSO Cid.Ilha Bela
150 mbpd
Iracema SulFPSO Cid.
Mangaratiba150 mbpd
Iracema NorteFPSO Afret.150 mbpd
Lula NorteFPSO P-67150 mbpd
Franco SWFPSO
150 mbpd
Lula SulFPSO P-66150 mbpd
Franco 1FPSO
150 mbpd
CariocaFPSO Afret.100 mbpd
Lula CentralFPSO Afret150 mbpd
Lula AltoFPSO Afret.150 mbpd
TartarugaVerde eMestiça
FPSO100 mbpd
Lula Extr. Sul+ CO S TupiFPSO P-68150 mbpd
Iara HorstFPSO P-70150 mbpd
Lula OesteFPSO P-69150 mbpd
Franco SulFPSO
150 mbpd
Franco NWFPSO
150 mbpd
Parque dosDocesFPSO
100 mbpd
Espadate IFPSO Afret.
30 mbpd
CarcaráFPSO
150 mbpd
NE de TupiFPSO
150 mbpd
Entorno IaraFPSO
150 mbpd
MarombaFPSO Afret.
60 mbpd
Iara NWFPSO
150 mbpd
SE ÁguasProfundasFPSO 100
mbpd
SulPq.BaleiasFPSO
150 mbpd
Papa-TerraFPSO P-63140 mbpd
BaúnaFPSO Cidade
de Itajaí80 mbpd
Papa-TerraTLWP P-61
Pre-salt: Concession
Post-salt
Pre-salt: Transfer of Rights
* 2013 Product ion Estimate. ** Values in MM bbl/d.
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BrazilVard Promar (PE)Estaleiro Atlântico Sul (PE)
Estaleiro BrasFels (RJ)Estaleiro OSX (RJ)Estaleiro Inhaúma (RJ)
Enseada do Paraguaçu (BA)Jurong Aracruz (ES)
Estaleiro Rio Grande (RS)
Europe
Asia-Pacific
BrazilianShipyard Technological Partner¹(Country of Origin)
Atlântico Sul (PE) Japan Marine UnitedCorporation / IHI 3 (Japan)
VARD Promar (PE) VARD - Grupo Fincantieri(Italy)
Enseada doParaguaçu (BA)
Kawasaki Heavy Industry,30% stake (Japan)
Jurong Aracruz (ES) Sembcorp, 100% stake(Singapore)
Brasfels (RJ) Keppel Fels, 100% stake(Singapore)
OSX (RJ) Hyundai Heavy Industry,10% stake (South Korea)
Inhaúma (RJ) Cosco (China) 2
Rio Grande (RS) Cosco (China)
/ IHI
¹ Company responsible for bringing technology and know-how to the shipyard, whether being or not its partner.² Through the EEP consortium.³ IHI Corporation, previously Ishikawajima-Harima Heavy Industries Co. Ltd.
MAIN BRAZILIAN SHIPYARDSPETROBRAS’ Demand is Attracting Shipyards
Several Technological Partnerships With International Shipyards
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BrasFels Shipyard – RJ
1
23
Overview of Estaleiro BrasFels in A ngra do s Reis - RJ (31/08/12).
(1) P-61 (CL:65%): HULL'S Constructio n of TOPSIDE's TLWP and integr ation (deckbo xand built mo dules in Singapore).(2) São Paulo Ci ty FPSO (CL: 65%): HULL's Conversion in China and integrati on of t he 16 mod., Built in Brasf els (5 mod), Enaval (1 mod), Thailand (8 mod) and Chi(3) Par at y Ci ty FPSO (CL: 65%): HULL's Conversio n in Sing apore and in tegration of 15 mod ules buil t in t he Brasfels (5), Nuclep (4), Enaval (2), and Singap ore (4).
• 1 Hull Constructions (P-61)
• 5 Building Modules, Topside andIntegration (São Paulo, Mangaratiba,Itaguaí, P-66, P-69) and P-61 (onlyintegration)
• 6 Drilling Rigs
FPSO Cid. Paraty:
Producing since Jun6 th , 2013
FPSO Cid. São Paulo:Producing since Jan
5 th , 2013
P-61
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FPSO Cid. Itajaí:Producing since Feb.
2nd , 2013
JURONG Shipyard (Singapore)
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Honório Bicalho Shipyard – RS
P-63: Producingsince Nov 11 th , 2013
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Rio Grande Shipyard – ERG 1 – RS
Aerial Viwe of the Estalei ro Rio Grande ERG1 – RS (06/08/13).(1) Crane with 600 tons capacity ; (2) Crane with 2,000 tons capacity; (3) Ecovix's Sheets Yard; P-55 (Hull buil t in EAS – PE); (4) Flare tower; (5) Amine drive
s Modul e; (6)Electrostatic treater; (7) High pressure separator
12
3
4
56 7
P-55: Producingsince Dez 31 st , 2013
2
• 8 Hull Constructions(“Replicantes” 1 – 8 )
• Modules Building, Topside andIntegration (P-55 )
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PRE-SALT PRODUCTION IS A REALITYProduction reached 390 thousand barrels of oil per day in Jan/14/2014
Pre-Salt ProductionOil Production record of 390 kbpd in
January, 14 th 2014
Production of 1 MMbpd operated byPetrobras will be reached by 2017 and2.1 MMbpd by 2020.
Lula Pilot production growth per well:from 15 Kbpd (Proj. approval by
Ago/2008) to 25 Kbpd
TechnologicalChallenges High Resolution Seismic: higherexploratory success
Geological and numerical modelling:better production behavior forecast
Reduction of well construction timefrom 134 days in 2006 to 70 day in2012: lower costs
Selection of new materials: lowercosts
Qualification of new systems forproduction gathering: highercompetitiveness
Separation of CO2 from natural gas indeep waters and reinjection: loweremissions and increase in recoveryfactor
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2 – Supply History
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1950 1960
Contracting of goods andservices abroad.
1970 1980
Substitution of importing, similaritylaw, nationalization, “reverse
engineering”, local market protection,contracts in Brazil.
2002
1990 2000
2003
Opening of the market to importing,globalization, international bids.Focus on competitiveness. R&D inBrazil and abroad.
Focus on the Brazilian industry.Increase of the Local Content in thegoods and services contracting(competitiveness and technological adherence).
Most of the equipmentand materials
are acquired abroad
Substitution of importedequipment and materials
Opening of theBrazilian market for
importing
HISTORY
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3 – Local ContentPolicy
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LOCAL CONTENT
PETROBRAS LOCAL CONTENT POLICY
The projects and contracts for PETROBRAS
must withstand the challenges of the StrategicPlan and maximize Local Content in competitiveand sustainable basis, accelerating thedevelopment of the markets where it operates
and guided by the ethics and continuedinnovation.
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E&PExploração e
Desenvolvimento:comprovações para
ANP para novoscontratos de
concessão, partilha ecessão onerosa
AbastNão existe exigênciade Conteúdo Local.Operadora declarameta e comprovaíndice realizado
G&ENão existe exigênciade Conteúdo Local.Operadora declarameta e comprovaíndice realizado
LOCAL CONTENT REQUIREMENTS
Minimum Local Contentrequirement at contractsfor O&G Exploration andField Development
E&P REFINERIES G&E
Minimum Local Contentrequirementaccording PetrobrasLocal Content Policy
Minimum Local Contentrequirementaccording PetrobrasLocal Content Policy
Minimum Local Content requirement for financing concession (BNDES)
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For the Country For the Oil Companies
Local Economy Diversification
Sustainable Economic Growth
Increase Country s Attractiveness for Investors
Local Productive CapacityDevelopment
Proximity between Suppliers andthe Operation
Reduced Dependence onExpatriated Workforce
Suppliers Innovation CapacityIncreased
Logistic Risks Reduction
Operating Costs ReductionEmployment and Income Generation
Local Technical Assistance Availabil ityTax Revenue Increase
Local Content
WHY LOCAL CONTENT? Advantage and Facilities to Oil Industry in Brazil
Potential Gains
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RESEARCH & DEVELOPMENTEstablishing research centers enhances long term future of Brazil as hub
Companies with R&D centers in operation, construction or plans for Brazil:
• Schlumberger
• Baker Hughes
• FMC Technologies
• Halliburton
• General Electric
• Vallourec
• Usiminas
• TenarisConfab
• Cameron
• IBM
• Technip
• Weatherford
• Wellstream
PETROBRAS’ partnerships with more than 120 universities and research centers have led Brazil to have a prominent worldwide applresearch complex
Technological Park
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HOW TO MEASURE LOCAL CONTENT (LC)
+ +=BODY
PLUG & SEATINGBONNET
VALVE
90%=
Local ContentCertificate * L
o c a
l C o n
t e n
t A c c o u n
t i n g
P r o c e
d u r e s a s
A N P R e s o
l u t i o n
1 9 / 2 0 1 3
.
£10
£100NET TOTAL SYSTEM PRICE
(NET OF TAXES)
1 X 100CL (%) =
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‘Brazilian companies’ means companies thathave manufacturing processes and after-sales
services in Brazil, thus creating jobs and
collecting taxes in the country.
BRAZILIAN COMPANIES
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25
4 – Supply ChainChallenges
<nº>/nº
SUBSEA AND DRILLING EQUIPMENT
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SUBSEA AND DRILLING EQUIPMENTChallenges & Investments
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5 – Foreign Investment Brazil: Oil and Ga
Industry
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PETROBRAS’Partners
Brazilian Trade and Investment Promotion Agencyhttp://www2.apexbrasil.com.br/en/invest-in-brazil/apex-brasil-services-to-help-you
APEX Brazil
FOREIGN INVESTMENT IN BRAZIL: O&G INDUSTRY
ONIPNational Organization of the Petroleum Industryhttp://www.onip.org.br/areas-of-activity/?lang=en
Foreign Companies Support in BrazilEmbassies, Consulates, Chambers of Commerce, etc.
Legal Guide for Foreign Investors in BrazilMinistry of External Relations
http://www.brasilglobalnet.gov.br/arquivos/publicacoes/manuais/pubguialegali.pdf
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6 – Conclusions
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PETROBRAS has a robust projects’ portfolio, which is atypical in the current globaleconomic situation;There are huge opportunities for already installed companies and newcomers in theBrazilian market of suppliers, services and engineering due to the scale provided bythe project portfolio;The Challenges to put Pre-Salt fields into operation are known and the Subsea
Equipment Industry plays a key role considering the demands;Local Content is a consolidated practice for E&P Projects;The association between Brazilian and foreign manufacturers is the best approachas to provide the solutions for technological bottlenecks.
CONCLUSIONS
<nº>/nº