7 th March 2011

Geologist with PhD from UCWales
26 years in the industry – overseas project/company start-ups
• 3 years UK-US
• 2 years Venezuela
• 8 years Soviet Union / Russia
• 13 years Brazil
Entrepenneur – started first company in 1987
Principal firms JEBCO Seismic
Ten-to-ten Group
Petrolink
Diverse direct experience - drilling, seismic, IT, scanning & DC, HSE, training,
3D modelling, fabrication.

1997 started the setup of JEBCO Seismic Brasil Ltda
2000 – set up EIC Trade Association in Brazil and assumed directorship
2001 – sold JEBCO to Petrolink
2000-2008 Inside and outside EIC assisted directly in 40 UK oil & gas start ups in Brazil
2008-present focussed on IT/drilling sector with Petrolink. Assisting companies where possible – including as a Global Scot
Brazil experience – company setup, tax, contracts, Petrobras CRCC, importation, labour, visas, fabrication, local content, property

Set up in Aberdeen 1990 – telecoms and data distribution of drilling data
1990-2005 Gradual international expansion and focus on IT – international benchmark for drill-data interchange between operators and partners ( DDS ).
2006 – Released real-time data system PowerStream
2011 – 200+ employees spread over *** countries. Largest independent provider of realtime services worldwide. Still in hands of the original owners. Now expanding in realtime integration and logging application development. – PetroVault ,
Heavy focus on R&D and “seat of the pants” self-financed expansion.
Principal clients – Exxon, BG, Aramco, Pemex, Petrobras, Total…..
Brazil company – ISO9001, CRCC, 99.6% local content

• Set Get you up the learning curve quicker and cheaper.
• Provide you with insights, assistance and guidance.
• Help you to determine if your business is likely to be successful in the target market.
• Help your company to get started and become established in the new location.

Cultural issues import tax language market
Petrobras supplier approval visas local content costs competition
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E&P Market
Petrobras, Shell
,
BP, Chevron, BG
,
Statoil, OGX, Anadarko, Repsol, ENI,
Maersk, Exxon, El Paso, Sonangol, ONGC, Perenco,
Subsea Spenders
Petrobras, Shell, Statoil, Chevron
Development
Petrobras, Shell
(Parque das Conchas),
BP
(Devon-Polvo),
Chevron
(Frade),
El Paso
(Camarupim, Pinauna),
Statoil
(Peregrino)
Discoveries
Petrobras, Repsol, BP, Anadarko, El Paso, Shell, OGX
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Drilling
58 floaters (46 for Petrobras) currently operating
32 on order (as well as the Petrobras 28 “local” rigs in bidding) – “Sete Brasil” formed
As many as 14 to start operations in 2011
Vessel Operators: Petrobras, Daimond, Transocean,
Noble, Pride, Brasdril (Diamond), Queiroz Galvao,
Seadrill, Dolphin, Sevan, Petroserv, Odebrecht
Subsea
Big spending hike since 2010 – impact of pre-salt
Over 1000 wet trees to be ordered 2011
Business in the hands of local subsidiaries of all the principal international subsea contractors
Diamond 15
Transocean 12
Pride 8
Delba 6
Noble 6
Queiroz Galvao 6
Scahin 5
Seadrill 4
Odebrecht 3
Petroserv 3
Etesco 2
Sevan 2
Dolphin 1
9

Production Units – current operations
80 fixed platforms, 38 floating (19 FPSOs, 17 semisubs)
Vessel operators: SBM, MODEC, Prosafe, Sevan, Saipem, Petrojarl,
BWO, Maersk, Petroserv
Maintenance contractors: Engevix, PCP, Imitame, UTC, IESA, Wood
Group
Production Units – new build
7 FPSOs
2 semisubs
1 TLWP
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2010
Cidade de Santos FPSO
Direct to gasline
Dynamic Producer FPSO
Capixaba FPSO
Cidade de Angra FPSO
P-57 FPSO
Uruguai-Tambua
Canapu
Guara TLD
Baleis Franca-Cachalote
Tupi
Jubarte
2011
PMXL-1 semiaub Mexilhao
Cidade Rio das Ostras FPSO Aruana
Cidade Sao Vicente FPSO
Peregrino FPSO+2 plats
P-56 semisub
2 more presalts TLDs
Tupi NE
Peregrino (Statoil)
Marlim Sul III
MODEC
Petrobras
PetroServ
SBM
MODEC
Petrobras
Petrobras
Petrojarl
BWO
Maersk
Angra for Petrobras
Petrobras

2012
Espadarte FPSO upgrade
P-55 semisub
Cidade de Sao Paulo FPSO
Cidade de Itajai FPSO
4 presalt TLDs
2013
P-61 TLWP
P-63 FPSO
TBD FPSO
Cidade de Paraty FPSO
3 presalt TLDs
2014
P-58 FPSO
P-62 FPSO
TBD FPSO
Baleia Azul
Roncador III
Guara
Tiro-Sidon
Papa Terra
Papa Terra
Aruana
Tupi NE
Whale Park
Roncador IV
Guiama
Keppel (for SBM)
PE&RS (for Petrobras)
Angra for MODEC
Jurong (for Petrojarl)
Petrobras
Angra (for Keppel)
Rio Grade (for QUIP)
TBD
Angra (for SBM)
Rio Grande (for QG-CC)
Ipojuca PE (for QG-CC)
TBD

Petrobras Upstream
National Oil Production 1.972 million bbl/d
National Gas Production 49.548 million m 3 /d
Oil reserves
Gas reserves
11.19 billion bbl
335 billion m 3
Lift costs
Exploration acreage
US$ 9.02 /bbl
150,000 km 2
Investment plan 2009-13 US$ 175 billion
2010 investment
Production platforms
US$ 45 billion
112 (78 fixed, 34 floating)
Offshore drill rigs (floaters) 46
(Dec 2009)
(Dec 2009)
(2009)
(2009)
(Q3 2009)

OGX
Launched with US$1.3 billion capital in 2007
Public offering 2008 raised R$6.7 billion
Now have 10 drilling rigs active on 29 exploration blocks
Almost 100% success rate for first 24 wells
US$3 billion spend on drilling 2010-13 (79 wells), internally funded
Estimate first production end 2011
Forecast production 1.3 million bbl/d by 2019
48 production units over next 10 years
Supported by EBX (shipbuilding), OSX (Services) and LLX (logistics)
14

Shell
R$6 billion invested in E&P up to 2010
Production from Parque das Conchas and Bijipura-Salema fields (FPSOs)
Ongoing development BS-4
Participation in 15 exploration blocks, 7 offshore.
BP (Devon)
Production from Polvo field
Participation in 10 exploration blocks
Discoveries – Xerelete, Wahoo, Itaipu
El Paso
Share of gas production from Camarupim
Good acreage in shallow water Camamu-Almeida Basin, including Pinauna field
15

Anadarko
Wahoo discovery
Exploration acreage position with BP
Exxon
Operate the BM-S-22 presalt block in Santos – 3 dry holes
BG
Partners to Petrobras in Santos presalt
Operate 4 blocks but drilling disappointing to date
Chevron
Production from Frade field
Development in BS-4 with Shell and Papa Terra and Maromba with Petrobras
Statoil
Peregrino field development.
16

LANGUAGE
• Portuguese is the preferred language for all activities, except technical.
• English is widely understood, but an inability to sell and build client relationships in Portuguese will have a significant impact on your rate of penetration into the local market
• Countering this, the ability to communicate in English is a major benefit when dealing with technical and purchasing teams headed by ex-pats.
It is vitally important to have access to Brazilian Portuguese speakers in any serious attempt to do business in Brazil, whether they be agents, employees or venture partners
17

CONTACT WITH CUSTOMERS
• Similar to many Latin cultures, Brazilian business draws heavily on personal relationships.
• Incoming UK companies do not have the inherited family and career contacts in the market that local suppliers benefit from
• Increasing travel costs means that giving the Brazilian market enough personal attention by UK sales staff is increasingly costly
• Nothing happens quickly in Brazil. If your company is not regularly presenting to clients in Brazil, the likelyhood of quick sales and growth diminishes drastically
A good agent, partner or local employee is almost impossible to do without
KEEP THE CONTACT GOING
• Don’t leave it all to your agent – someone else will take his attention
• Brazilians need to feel they are taken seriously – listen to them
• Things are different in Brazil – remember that
18

Most major offshore exploration and production developments come with a local content percentage stipulation, both for equipment and services.
Anything since round 7 had VERY HIGH bids on Local Content
Local content – GOODS
• All local costs and mark-up count as LC – bill and profit locally and you get LC
• Any local fabrication or local parts will help – but assess costs
Local content – SERVICES
• Only labour costs considered – cost of international labour/total labour cost
Local content is audited by ANP approved auditors. Billing has to be local.
Anything less than 10% LC is = 0%.
Information on local content certification can be found on the ANP website: www.anp.gov.br
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Petrobras supplier approval is a web-based process – presenting data on technical, financial, legal, HSE, social responsibility
Nothing special, but requires time and effort to do (bureaucratic) and you must have a local legal representative.
SLOW! Petrobras have thousands of companies in backlog. Assessment can take 6 months. You need a “champion” inside Petrobras to push your cause and get it to the top of the pile.
Note:
• Petrobras supplier approval is not needed for many categories of goods and services.
• Sales to contractors by non-approved suppliers remains common. In this case, contractors approved supplier procedures are applied
21

• Brazil is notorious for difficulties and delays in importing goods
• Goods attract IPI tax, ICMS tax and Import Duty.
• Customs delays are the norm (but vary by location) & storage charges are high
• Temporary tax-free import (under REPETRO) is complex to administer. Standard temporary import may be easier – especially for your client
• Consider bonded warehousing and the use of favourable import regimes and locations (eg Vitoria FUNDAP).
• Consider a local Trading Co. They handle the paperwork and assume risks.
• Always get the documentation right before shipping (try to pre-clear)
• Running stock in bonded facilities is feasible for some businesses where premium prices for rapid delivery apply
Thorough research of importation alternatives is crucial. Your customs agent must be selected carefully
Current favourable exchange rates make imported UK goods very competitive.
22

Visas are essential for any UK worker going into Brazil. There is a certain amount of time, paperwork and inconvenience in the UK or US involved in successful issue of visas.
• Contract a visa specialist “despachante” as this is a constantly changing area and professional assistance (in all its forms) is needed.
• Cost around $1200 per visa (working visas, technical visas or crew visas) valid for 1+1 years. Always based on contracts, either with client or between local subsidiary and parent company. An INPI registered technical services contract can serve as the basis for visas for multiple employees or multiple client jobs
• Emergency temporary working visas are can be issued with 2-3 days lead time
• Currently, working visas are taking 4-6 weeks for approval
Note that vigilance at the airports is always high and entry is regularly refused
23

Tax planning must be the cornerstone of your strategy for Brazil. The tax regime as a whole in Brazil is high – but good planning will bring corporate income tax to levels lower than those in the UK
Goods - sales taxes – ICMS 18%, IPI (varies) 5%
Services - ISS 5% (or less in some municipalities or concessions)
Also “turnover” taxes PIS+COFINS 4.65% of gross (3.65% for PPR** )
Basic profit tax is 15%, with additional 9% social tax, plus additional 10% on income of over R$240k p/a – ie 34% total
Direct payments abroad attract 25% witholding tax
Company dividends are not taxed, even if remitted abroad
**Service companies can opt for PPR presumed profit regime, where taxes are paid on an assumed profit equivalent to 30% of billed value.
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Due in part to Petrobras’ effort to professionalise their supply chain, local competition is now strong – if not always competitive quality of goods or service, they normally are competitive on price.
Local companies always have the major advantage of knowing how to work with the contracting and bidding system, and know how to “handle” corruption as it arises. Recognize that corruption does exist in Brazil, though you may not always encounter it. This needs to be recognized from the outset.
Local labour taxes, labour law regulations, high wages (driven by a shortage of suitably trained personnel) and a strong R$ make local labour expensive in the offshore environment compared to expats.
Likewise locally manufactured goods are often unable to compete on price with imported goods of equivalent quality.
The expansion of the sector means that there is almost always room for new suppliers – but displacing long term Petrobras suppliers is difficult.
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• Brazil is not a cheap country. Most things now cost more in Brazil than in UK
• Expensive logistics and high cost of qualified labour have particular impact
• Business in Brazil also demands higher levels of administration effort than is normal in most markets. Company administration, accounts-tax administration, currency movements, stock administration and payroll administration all consume large amounts of time and cost.
• It often takes much longer to break into the market in Brazil than in other countries – which means start-up in Brazil is costlier than in other markets.
• Be aware of this long lead time, and the costs involved.
Reducing this lead time using a well planned local partnership or by contracting a good agent, is clearly a strong strategy
Experience shows that major investment, without first securing contracts, is often a risky strategy.
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