pp Scenario and Investment Opportunities

KHEN GROUP: Brazilian Economic

Khen Group assists clients with critical, high value services to create companies, and generate wealth in fast-growing Brazil

focused on development of global business in the Brazilian market

Khen Group is a solid consultancy and industrial sales firm

Markets we cover
OIL & GAS CHEMICAL PETROCHEMICAL REFINERY MARITIME SHIPYARDS WATER TREATMENT

Services we provide
SALES REPRESENTATION INITIAL BUSINESS SET UP (GREENFIELD) SITE LOCATION MVL & END USERS APPROVALS

MARKETING & SALES MANAGEMENT STRATEGIC PLANNING & PRODUCT STRATEGIES ORGANIZATIONAL CONSULTING WORKFLOW & OPERATIONAL IMPROVEMENTS PROJECT MANAGEMENT PERSONNEL

Outline
BRAZIL - Attractive Investment Destination Oil and Gas Sector and Investments Local Content Petrobras CRCC Vendor Registration Establishing a Company in Brazil

Brazils Facts
6th Largest economy in the world in terms of nominal GDP 7TH ON PPP Has the worlds THIRD largest portfolio of chartered oil tankers h t d il t k Largest consumer market in Latin America It is the world's fifth largest country, both by geographical area and by population with over 192 million people - Has an annual population growth of 2.5 million. Is the gateway to MERCOSUR Largest producer of biofuels The worlds 10th largest petroleum reserves Is the world s eighth largest producer of worlds steel (27 million tons per year).

Biggest Companies in Brazil

Brazilian Oil Market

Oil and Gas accounts for 49.1% of Brazils energy production Brazils historical underBrazil s under exploration underpins massive growth opportunities Total estimates for the reserves range from 30 to 100 billion barrels

Statistics
GDP $2.518 trillion (nominal, 2011)/ $2.309 trillion (PPP) GDP growth 7.5% (2010), 3.5% (2011), 5.0% (Projection 2012) GDP by sector agriculture: 6% industry: 28% services: 66% (2011) Inflation (CPI) 5.1% (2012) Labor force104.3 million (2011) Unemployment 6.2% (March 2012) Exports $250.8 billion (2011 est.), Imports $219.6 billion (2011 est.)

Ease of Doing Business 126th Business Rank (2012)

Platforms being built in Brazil (Modules)

Platforms 2011 FPSO P-58 FPSO P-62 P 62 FPSO P-63 FPSO Cidade de Paraty FPSO Cidade de Sao Paulo Brazil Modules Modules Modules Modules Integration at BrasFELS Modules Integration International Market Hull Hull Hull Hull Construction
Bidding- hull Keppel (Singapore) Hull Jurong (Singapore), Modules QUIP (RS) QUIP/ BW (Norway)

Schahin/ Modec and S h hi / M d d SBM/Queiroz Galvao Conversion of the hull Keppel FELS (Singapore) Schahin/ Modec and SBM/Queiroz GalvaoModules BrasFELS (RJ)

Hull

Platforms Fully Built in Brazil

Platforms 2011 TLP P-61 Brazil International Market Total Construction Floatec (Keppel FELS+ RJ Mc Dermott Modec- hire Modec- hire

FPSO Santos FPSO Angra dos Reis

Total Total

Drilling Platforms
Equipment
2 D illi Drilling platforms jackup type 7 Drilling platforms 1 Drilling platforms

Operations
Under U d construction

Brazil Total T t l

Intl Market -

Construction Rio Ri Paraguau Consortium ( ) (BA) EAS (PE) Jurong Aracruz (Sembcorp Group) EAS

Under construction Under construction Semborp Marine Under construction Sete Brasil S.A.

Hull Total

Drilling tower -

20 Drilling platforms

Total

World Shipbuilding Scenario

Brazilian participation in world orders= 3.97% FSPOs 57 4% 57.4%

Source: Clarksons- June 2011

Petrobras Business Plan Summary y

Refinery Industry
Oil production and the Brazilian market demand currently exceed refining capacity p y Demand growing by 20% in the last two years and will keep g o eep growing in the future g e uue Most refineries are expanding

Projects that sustain increased production: Petrobras

OGX Production Targets

Petrobras and OGX Investments

Petrobras invested US$ 43 billion in 2010 and has a US$ 224.7 billion (BRL 389 billion) investment plan for 2011-2015 (of 2011 2015 which 95% in Brazil), and expects to lift its oil production within Brazil from 2 to 3 million barrels per day by 2015, and to 4.9 million by 2020 E&P portfolio has around 3,000 projects OGX invested US$4.1 billion of Drilling and Signature Bonus + US$ 245 million of Seismic Campaign Total OGX cash raised to date: US$8.3 bn

New frontiers

Conc.
Petrobras has a robust project portfolio, which is atypical in the current economical situation There are tremendous opportunities for already installed companies and newcomers in the Brazilian oil & gas supply chain due to the scale provided by Petrobras and other Brazilian companies in upstream and downstream portfolio In order to carry out such portfolio, Petrobras is looking forward to establishing stable long term business relationships with all available companies that are willing to invest in Brazil (Local Content)

Local Content
Companies that win a concession to operate an oil field overall local content level, on average around 60% At least 10% of the product value must be added in Brazil for the local content to be registered The primary objective of the Brazilian local content policy is to maximize goods and services national industry content, within competitive and sustainable basis, in the implantation of oil and gas projects in Brazil and abroad. Petrobras strategic investment plan calls for 75% of equipment and services to be sourced from domestic suppliers. li
Objective To increase local employment and income

Supply Policy to Maximize LC

The Brazilian Government recognizes in the local supplying market, opportunities to improve cost effectiveness and quality standards for the present and future projects Local suppliers usually provide After Sales faster and friendlier when compared with the foreign companies Petrobras focuses on competitiveness and sustainability in the supply s ppl market (in Brazil or abroad) Bra il The Petrobras Local Content policy is connected and contributes to the Petrobras Social Responsibility Policy

Exporting to Brazil: possible but difficult

To be able to import g p goods, you need an import license y p named RADAR When the license has been granted, the company gets access t SISCOMEX the Integrated System on Foreign to SISCOMEX, th I t t dS t F i Trade Generally 25% is added in extra taxes
II, AFRMM, PIS/ COFIMS, IPI, ICMS

CRCC Registration
Corporate Register
It is a database of Brazilian and foreign companies interested in participating in bidding for Petrobras The evaluation process approval ensures the inclusion of the company in Corporate Register, obtaining the CRCC. Certificate of Registration and Classification The company then may be invited to participate in biddings. www.petronect.com.br

Cont.
1. CRCC - Registered Supplier Certification g pp RCC(Certificado de Registro e Classificao Cadastral)
Phase 1: power of attorney, commitment letter, certificate of registration, general info about the company Phase 2: companys certifications, technical specifications of the products, recommendation letters form customers, financial information, management and HSE information

2. Petrobras Master Vendor List Offshore or Onshore (MVLO/MVLOn, hereafter only called MVLO)
Based on the MVLO a Vendor List of qualified supplier is MVLO, elaborated for each project

Establishing a company in Brazil

Limitada (Ltda.) ( )
Flexible decision making mechanisms Reduced bureaucracy No audit requirements Greater confidentiality Lower operating costs makes

S.A. Freely transferrable shares More formal decisiondecision making process Easier access to external financing Must be audited once a year.

First Steps
Company name and check availability Appointment of a Brazilian National Director and Officer Select a qualified attorney-in-fact to represent each of the foreign partners, and prepare power of attorney(s) Apply for a notarized UK certificate of incorporation p y p The power of attorney and certificates of incorporation must be authenticated by a United Kingdom public notary, legalized (verified) by the Brazilian embassy in London and translated into Portuguese by a certified translator in Brazil

Cont. Document Preparation

Obtain State and County Licenses Li Fire Department clearance Register the f i foreign partners with i i the Brazilian Central Bank and get the business registration number. Provision of initial temporary registered office address Employee registration

Conclusions
Brazil offers a robust investment portfolio with no parallel in the world for the same timeframe Gas consumption is rising strongly in Brazil, with new power plants and cars tending to be gas fuelled High number of fields can be exploited commercially in Brazil and demand projects to improve the existing infrastructure New refineries, fuel quality and modernization account for 70% or USD 73.6 B of Petrobras CAPEX investments (2011-2014) Private companies should invest US$ 36 billion in E&P from 2011 2015 2011-2015 Local content demand for new projects in E&P business areas: 90% National local content policies are expected to play an increasingly important role Do your market research and consider Greenfield projects and local partnership as a way of accessing the Brazilian market