Message From the CEO
Here I present Petrobras’ 2009 Sustainability Report which, unlike previous years, brings together two of the company’s reports that until 2008 used to be prepared separately, the Annual Report and Social and Environmental Report, in a single publication. To Petrobras, the Sustainability Report is an essential tool for transparency in monitoring, disclosing, and rendering accounts to its stakeholders about its economic, environmental and social performance. By means of useful, clear and accurate information, the publication shows that the company’s actions are fully consistent with the commitments it has taken on.
In 2009, the consolidation of the oil and gas discoveries in the Pre-salt layer, off the Brazilian coast, coupled with successful financial funding, have allowed us to maintain our production targets. Despite the global economic slowdown, we are confident oil prices will recover, a fact that was confirmed during the year. We have intensified both our investments and the pace of our activities. This bet was proven right and allowed us to maintain, uninterrupted, the corporate strategy to expand business in an integrated manner, with profitability and in compliance with social and environmental responsibility standards.
This performance has ranked Petrobras the fourth in market value among listed global energy companies, at $199.2 billion, up twofold compared to the previous year’s mark. The company also maintained its investment grade rating and ensured, for the fourth consecutive year, its listing on the Dow Jones Sustainability Index.
The consolidated net profit in 2009 was R$29 billion, a significant result if we consider the decline in prices and oil product volumes traded on international markets. The average quoted price for Brent crude oil stood at $62.40, or 36.5% below the previous year’s price, and the worldwide demand for oil products decreased by approximately 2% compared to 2008. Despite this market downturn, we increased our investments in all oil and gas supply chain segments, totaling R$70.8 billion, a 33% increase over the previous year. Most of the resources - 44% - were earmarked for the Exploration and Production area, which received a record amount of R$30.8 billion Petrobras’ oil and gas production in Brazil and abroad averaged 2.5 million barrels of oil equivalent (boe) per day, 5.2% more than the volume produced in 2008, and this contributed to a 8.9% increase in oil exports. The proven reserves of oil, condensate, and natural gas in Brazil and abroad in the end of 2009 totaled 14.9 billion boe, according to the ANP/SPE criterion.
Petrobras' oil and gas production in Brazil and abroad averaged 2.5 million barrels of oil equivalent (boe) per day, 5.2% more than the volume produced in 2008, and this contributed to a 8.9% increase inoil exports. The proven reserves of oil, condensate, and natural gas in Brazil and abroad in the end of 2009 totaled 14.9 billion boe, according to the ANP / SPE criterion.
The year was marked by the consolidation of the success in the exploratory activity in the Pre-Salt, with production going on stream for the Extended Well Test (EWT) in the Tupi field, in the Santos Basin Formation tests were also completed in Guará and in Iara, confirming an estimated recoverable volume of 4 to 6 billion barrels of light oil and natural gas EWTs are scheduled for Guará and Tupi Nordeste, and production is expected to start in the Tupi Pilot System in 2010. These tests are extremely important because they will provide the information that is needed to define the strategy to be used to develop these areas. We reiterate that Brazil’s reserves might double if the estimated volumes of recoverable oil and gas are confirmed only in the accumulations that have been tested in the Pre-Salt.
The new exploration frontier in the Pre-Salt led the Brazilian government to propose a specific regulatory framework for oil and natural gas exploration and production in this geological layer and in other areas that might be considered as strategic. The proposal, currently pending in Congress, does not alter the terms of concession contracts that have already been signed for approximately 28% of the mapped Pre-Salt area. If approved, in addition to concessions, the new framework will consist of two other exploration and production types of contracts. The shared production system will be adopted for Pre-Salt areas that have not been tendered yet and which are considered as strategic. Petrobras will be the operator of all of these blocks and hold a minimum of 30% equity stakes in the projects. The legislative proposal also foresees the adoption of an onerous transfer of rights system, which will grant Petrobras the right to undertake exploration and production activities in certain areas of the Pre-salt, up to the limit of 5 billion barrels of oil and natural gas. For the transfer, the company would pay the Union an amount determined in accordance with best market practices. The onerous transfer proposed law also authorizes the capital increase of Petrobras, for an amount ranging from one to three times the value of the transfer. This will allow the company to expand its growing investments in solid, sustainable manner.
A total of R$16,5 billion was invested in the Downstream area in 2009, 63% more than in 2008. These resources were intended mainly to expand the refining capacity and to improve technology to convert heavy oil coming from fields in Brazil into oil products of higher value. The 11 Petrobras refineries located in the country processed 1,791 barrels per day (bpd) of feedstock and produced 1,8213bpd of oil products. Petrobras has further expanded its operations in the petrochemical sector and diversified its product portfolio by acquisitions and by building new units. It also continued investing in expanding the international market for ethanol, mostly in Asia and the United States: in 2009, exports totaled approximately 330,000 cubic meters.
During the year, Petrobras again boosted the supply of natural gas and electricity. The domestic pipeline network was increased by 729 km, totaling 7,659 km, and the second liquefied natural gas (LNG) regasification terminal in Brazil was inaugurated, with a production capacity of 20 million cubic meters per day, in the Guanabara Bay. The company’s thermoelectric generator park, composed of 17 power plants, owned or leased, reached an installed capacity of 5,476 MW. Investments in Gas & Energy added up to R$6.6 billion.
Through the International Area, Petrobras has operations in 24 countries. Due to the discoveries made in the Pre-Salt, the International Area revised its operating strategy. The new positioning seeks to complement the domestic portfolio in order to appreciate the business and contribute to the integration of the product chain. In 2009, we invested R$6.8 billion in our international activities, especially in growing the oil and gas production and refining capacities.
In the Distribution segment, the increased demand for fuels and the takeover of Companhia Brasileira de Petróleo Ipiranga afforded the company a new domestic sales record. In total, 41,841.8 cubic meters were marketed in 2009, a volume that made a significant contribution not only to the earnings of Petrobras Distribuidora topping-out at R$1.5 billion, but also to maintaining the subsidiary as the leader in the Brazilian market, holding a share of 38%. Meanwhile, a year after it was incorporated, Petrobras Biocombustível operates three biodiesel production plants, with an annual production capacity of 325,800 cubic meters and with an expansion planned for 2010, to be achieved by mergers, enhancements, and new plants.
Petrobras’ excellence in deep and ultradeep water technology and exploration, the capacity of its staff, and the adoption of best corporate governance practices afforded the company consistent results in 2009 and reinforced the confidence in the company’s future amid an adverse economic scenario. The 2009-2013 Business Plan calls for investments in the order of $174.4 billion, of which $28 billion will be directed only to develop the Pre-Salt.
Additionally, the company supports cultural, sports, social and environmental projects, in which it invested about R$464.5 million in 2009. These initiatives are embedded in Petrobras’ corporate programs, such as the Petrobras Development & Citizenship Program, the Petrobras Environmental Program, and the Petrobras Cultural Program, as well as in resource allocation to the Fund for Children and Adolescents (FIA), with a focus on guaranteeing the rights of children and adolescents.
Petrobras Strategic Plan for 2020 sets the goal of achieving levels of excellence in the energy industry with regard to the intensity of greenhouse gas emissions in processes and products. Our 2009-2013 Business Plan calls for avoiding the emissions of 4.5 million tons of CO2 equivalent in 2013. This goal will mitigate the emissions growth curve without restricting business expansions or jeopardizing the international commitments Brazil has taken-on.
The information contained in this report is part of Petrobras’ strategy to drive business and activities with social and environmental responsibility in line with the ten principles of the UN’s Global Compact. For this reason, we reaffirm our commitment to continue participating in this initiative, of which the company has been a signatory since 2003.
As a result of all of these efforts, Petrobras is rewriting the history of the Brazilian presence in the global energy scenario, ensuring considerable reserves to Brazil and giving back to the society a part of the outcome of its activities, maintaning its commitment to sustainable development.
José Sergio Gabrielli de Azevedo
President and CEO of Petrobras
