Full Description

Petroleo Brasileiro SA-Petrobras, incorporated in 1953, is an integrated oil and gas company. During the year ended December 31, 2008, the Company’s average domestic daily hydrocarbons production was 2,176 thousand barrels of oil equivalent per day (mboe/d). Approximately 84% of its proved reserves are in fields in the offshore Campos Basin. The Company operates the refining capacity in Brazil. The Company’s domestic refining capacity is 1,942 thousand barrels per day (mbbl/d). Its domestic refining production is 1,787 mbbl/d and sales of oil products to domestic markets is 1,748 mbbl/d. The Company is also involved in the production of petrochemicals and fertilizers. The Company distributes oil products through its own BR network of retailers and to wholesalers. During 2008, the Company increased its stake in the Sierra Chata and Parva Negra blocks to 45.55% and 100%, respectively, and acquired a 13.72% stake in the El Tordillo and La Tapera-Puesto Quiroga blocks. In November 2009, the Company acquired Chevron Chile SAC, a Chilean company, which produces and markets the Texaco brand lubricants in Chile.

The Company is active in 23 countries. In Latin America, its operations extend from exploration and production to refining, marketing, retail services and natural gas pipelines. In North America, it produces oil and gas and has refining operations in the United States. In Africa, it produces oil in Angola and Nigeria, and in Asia, it has refining operations in Japan. In other countries, the Company is engaged only in oil and gas exploration. Its activities comprise five business segments: exploration and production, which includes oil and gas exploration, development and production in Brazil; supply, which includes downstream activities in Brazil, including refining, oil products and crude oil exports and imports, petrochemicals and fertilizers; distribution, which includes distribution of oil products to wholesalers and through its BR retail network in Brazil; gas and energy, which includes gas transmission and distribution, electric power generation using natural gas and renewable energy sources and biofuels operations in Brazil, and International, which includes exploration and production, supply (downstream activities, including refining, petrochemicals and fertilizers), distribution and natural gas and energy operations outside of Brazil.

Exploration and Production

During 2008, its oil and gas production from Brazil averaged 2,176 mboe/d, of which 85% was oil and 15% was natural gas. On December 31, 2008, the Company's estimated net proved crude oil and natural gas reserves in Brazil were approximately 10.3 billion barrels of oil equivalent (boe), of which 85% was crude oil and 15% was natural gas. Brazil provided 91% of its worldwide production in 2008 and accounted for 92% of its worldwide reserves at December 31, 2008 on barrels of oil-equivalent basis. In 2008, offshore production accounted for 88% of production and deepwater production accounted for 76% of production in Brazil. At December 31, 2008, the Company operated 155 wells in water deeper than 1,000 meters (3,281 feet). As of December 31, 2008, it had drilled around 322 exploratory wells in water deeper than 1,000 meters (3,281 feet). The Company’s domestic oil and gas exploration and production efforts are primarily focused on three major basins offshore southeastern Brazil: Campos, Espirito Santo and Santos.

Supply

The Company owns and operates 11 refineries in Brazil, with a total net distillation capacity of 1,942 mbbl/d. It operates infrastructure of pipelines and terminals and a shipping fleet to transport oil products and crude oil to domestic and export markets. It also imports and exports crude oil and oil product. Supply segment also includes petrochemical and fertilizer operations that add value to the hydrocarbons it produces. As of December 31, 2008, the Company’s refining capacity in Brazil was 1,942 mbbl/d and its average throughput was 1,765 mbbl/d during 2008.

The Company operates a fleet of owned and chartered vessels. These provide shuttle services between its producing basins offshore Brazil and the Brazilian mainland, domestic shipping and international shipping to other parts of South America, the Caribbean Sea and Gulf of Mexico, Europe, West Africa and the Middle East. The fleet includes double-hulled vessels, which operate internationally, and single-hulled vessels, which operate in South America and Africa only.

Distribution

Distribution segment sells oil products that are primarily produced by its Supply operations and works to expand the domestic market for these and other liquid and transportation fuels. The Company supplies and operates Petrobras Distribuidora S.A-BR, which accounts for about 34.9% of the total Brazilian distribution market. BR distributes oil products, ethanol and biodiesel, and vehicular natural gas to retail, commercial and industrial customers. During 2008, BR sold the equivalent of 698 mbbl/d of oil products to wholesale and retail customers, of which the largest portion (39.6%) was diesel. As of December 31, 2008, its BR network included 5,998 service stations (17.1%) of the stations in Brazil. The Company owned 656 of the BR stations.

Gas and Energy

The Company developed gas sources in Bolivia, the Bolivia-Brazil gas pipeline, a domestic transportation system and gas-fired electric power generation capacity. Its natural gas business comprises three activities: transportation (building and operating natural gas pipeline networks in Brazil); equity participation in distribution companies that sell natural gas to end-users, and commercialization (purchase and resale). Its natural gas transportation system in Brazil comprises two main pipeline networks: the 4,413 kilometers (2,743 mile) Malha Sudeste (Southeast Network), which connects its main offshore natural gas producing fields in the Campos and Espirito Santo basins to the markets of the Southeast Region, including Rio de Janeiro and Sao Paulo, and the 1,980 kilometers (1,231 mile) Malha Nordeste (Northeast Network), which transmits gas from onshore and offshore natural gas fields in the Northeast to consumers in that region. The Southeast Network includes the 2,593 kilometers (1,612 mile) Brazilian portion of the Bolivia-Brazil natural gas pipeline.

International

The Company has operations in 23 countries outside Brazil that encompass all phases of the energy business. During 2008, it conducted exploration and production activities in 19 countries outside Brazil (Argentina Bolivia, Colombia, Ecuador, Mexico, Peru, Venezuela, the United States, Angola, Nigeria, Tanzania, Mozambique, Senegal, India, Portugal, Iran, Pakistan, Libya and Turkey). The Company has contracted three drilling units and one platform to support its ultra deep water exploration operations in West Africa and the United States Gulf of Mexico, among other regions. In 2008, the Company’s net production outside Brazil averaged 123.6 mbbl/d of crude oil and natural gas liquids (NGLs) and 17.1 million cubic meters per day (mmm3/d) (602.6 million cubic feet per day (mmcf/d)) of natural gas. The Company’s largest operating region outside Brazil is Argentina, which represented 44.65% of its international production in 2008. It operates primarily through 67.2% interest in Petrobras Energia S.A. (PESA).