Equipment Financing to PetrobrasThe Marlim Sul Case

Frederico LohmannJune 2004

NOT AN OFFICIAL UNCTAD RECORD

Page 2

Main Features of an Export Credit

Purpose: the Export Credit is a medium & long term financing supported by an Export Credit Agency (ECA) for the financing of imports of capital goods/services from OECD countries. ECAs may act as guarantor and/or insurer and/or direct lender

Framework: export credits are under the framework of international rules defined as the OECD consensus rules

Page 3

All Major ECAs are opened to Brazil

Spain(CESCE)

Italy(SACE)

Austria(OeKB)

Australia(EFIC)

Czech Rep.(EGAP)

France(COFACE)

UK(ECGD)

Germany(HERMES)

Canada(EDC)

USA(US Eximbank)

Finland(Finnvera)

Belgium(OND)

Norway(GIEK)

Sweden(EKN)

Netherlands(ATRADIUS)

Switzerland(ERG)

Japan(JBIC)

Korea(KEIC)

China(SINOSURE)

ECAs cover approximately USD 800 Bn of export flows each year

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Eligible Amount for ECA Financing

Contract

Exported part Local part

85% Buyer Credit Potentially Financed

NB: The financed localpart cannot exceed theamount of thedownpayment

15% downpayments not

financed

Not Financed

Total Buyer Credit

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A Competitive Source of Financing

The cost of the export credit is made of: Interest: the Borrower may have the choice between:

1) a fixed rate based on the Commercial Interest Reference Rate with some ECAs (COFACE, SACE, CESCE, EXIM...)

2) a floating rate based on the 6-m EURIBOR or LIBOR

3) other fixed market rates (through swaps)

Standard bank fees

Export credit insurance premiums, determined by the supporting ECA, now harmonised under a common country risk rating system

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Minimum Premium Benchmarks Charged By The ECAs

1.13%

2.16%

3.61%

5.36%

7.42%

9.49%

11.88%

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

1 2 3 4 5 6 7Category 1: Category 2: China/Trinidad & Tobago

Category 3: India/Mexico/Oman/Qatar Category 4: Egypt/(Iran)/Romania, Russia

Category 5: Peru/Kazakhstan/Vietnam Category 6: Azerbaijan/Brazil/Colombia/Indonesia

Category 7: Angola/Argentina/Nigeria/Turkmenistan/Venezuela*

U.S. Exim Categories(a)(Premium Rates — Flat %)

Example of U.S. Exim Premium Rates (Excluding Any Discounts)

(a) Assuming 36 month drawdown/7 years repayment/100% political risks cover, premiums paid up front.

* For category 7 countries, as a general rule, ECAs are only able to consider structured transactions with hard

currency earnings and long term export contracts.

Page 7 World Top 47 Countries by Proven Reserves 2002 (BP Report) classified by US Exim (08/04/04)

Proven Oil Reserves vs. OECD Country Classification

Cat 16%

Cat 2 21%

Cat 416%

Cat 50%

Cat 725%

Cat 329%

Cat 63%

AngolaArgentina

LibyaNigeria

TurkmenistanVenezuela

AzerbaijanBrazil

ColumbiaIndonesia

Kazakhstan

PeruVietnam

AlgeriaEgyptIran

RomaniaRussia

China Kuwait

MalaysiaUAE

OECD countries

IndiaMexicoOmanQatar

Saudi Arabia

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World Top 48 Countries by Proven Reserves 2002 (BP Report) classified by US Exim (08/04/04)

Proven Natural Gas Reserves vs. OECD Country Classification

Cat 110% Cat 2

8%

Cat 315%

Cat 450%

Cat 50%

Cat 64%

Cat 713%

OECD countries

Algeria EgyptIran

RomaniaRussia

China Kuwait

MalaysiaTrinidad &

TobagoUAE

PeruVietnam

AzerbaijanBrazil

ColumbiaIndonesia

Kazakhstan

ArgentinaNigeria

TurkmenistanUzbekistanVenezuela

IndiaMexicoOman

Saudi ArabiaQatar

Thailand

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Full Recourse Limited Recourse

Classical Structured Project

Bo

rro

we

rS

ecu

rity

Sovereign risk

Corporate risk

Corporate risk (enhanced)

Special Purpose Company

Lenders look at the borrower ’s credit-worthiness and may require a guarantee from a third party: Ministry, Financial Institution, Parent

Company . . .

Lenders look at theborrower ’s credit-worthiness and other sources of

collateral or security(e.g., existing and future $ exports)

Lenders look primarilyat cash flows generated

by the project with security on the project

assets and project revenues

Three Main Types of ECA Finance Structures

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Three Main Types of ECA Finance Structures

Classical Structured Project

Bo

rro

we

r

Sovereign risk

Corporate risk

Corporate risk (enhanced)

Special Purpose Company

Advantages 04/ 03/ 03 9:16 PM section 1, page 1 of 1

Low fees

Speedy implementation

Standard documentation

ECA standard cover forpolitical & commercial risks

04/ 03/ 03 9:14 PM section 1, page 1 of 1

Minimizes need for guarantor

Possible ECA premium reduction

May increase ECA appetite

04/ 03/ 03 9:16 PM section 1, page 1 of 1

Limited recourse

Possible ECA Premiumreduction

Flexibility for repaymentprofile & tenor

Usually outside ECA CountryRisk ceilings

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Export Credit Financing in support the Oil & Gas Industry

Experienced Users:

Petrobras

NIOC

Sonangol

Sonatrach

Gazprom

Tatneft

TNK - BP

Ecopetrol

PDVSA

Pemex

Examples of contracts supported in the past include:

Drilling contracts

Subsea equipment

Platforms/FPSOs

Pipelines

Terminals

Vessels, e.g., LNG tankers

Technology licenses

Refinery equipment

Petrochemical Plants

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Campos Basin: the Marlim Sul Oil Field

2000 m2000 m

1000 m1000 m400 m400 m

100 m100 m50 m50 m

Campos

Lagoa Feia

MARLIM SOUTH

NAMORADOPOINT A

Discovery date:

Water depth:

November 1987

1119 meters

Marlim Sul

Page 13

Marlim Sul Module 1

Module 1 Production Unit P-40 Conversion: by Jurong Shipyard Ltd Performance guarantee: Mitsubishi Oil process capacity: 23,848 m3 / day Gas Process capacity: 6 million Nm3 / day Water injection capacity: 35,000 m3 / day

Module 1 Floating, Storage and

Offloading Unit P-38 Conversion: by Jurong Shipyard Ltd Performance guarantee: Mitsubishi Oil storage capacity: 287,402 m3

Oil offloading capacity: 150,000 m3 / day

Module 1: expected CAPEX of USD 1.14 billion: 48% for the well construction, 33% for subsea equipment and 19% for others

Page 14

Marlim Sul Module 1: Concept Scheme

SHUTTLE TANKER

SHUTTLE TANKER

FSO - P-38FSO - P-38

WATER DEPTHWATER DEPTH

RESERVOIRRESERVOIR WELLWELL

WET XTREEWET

XTREE

MOORING LINES

MOORING LINES

FLEXIBLE PIPELINES & UMBILICALS

FLEXIBLE PIPELINES & UMBILICALS

OIL EXPORT PIPELINE

OIL EXPORT PIPELINE

FPU - P-40FPU - P-40

GAS EXPORT PIPELINEGAS EXPORT PIPELINE

MOORING LINES

MOORING LINES

Page 15

The Marlim Sul Finance Structure: Key Benefits

Ownership of the asset by the Petrobras Group PB Netherlands, a 100 % subsidiary of Petrobras, is both owner of the

physical asset and borrower of the credit

Taking advantage of the « Repetro » regime Preferential customs regime applying to the import of goods and

services connected to oil exploration and production

Complex project financing avoided This structured facility is interpreted by ECAs as a Petrobras credit risk

USD 68 million Structured French Buyer Credit to finance the supplies of flexible lines from Technip-Coflexip to Petrobras

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The Marlim Sul Finance Structure: Basic Scheme

1. Supply Contract

2. Rental Agreement

3. Charter Agreement

4. Sub-Charter Agreement

4a. Sub-Charter Agreement and Amendment

5. Buyer Credit Agreement

6. Security Package

4

2

5

4a

PETRO DIA(Mitsubishi)

BRASOIL

COFACE

PBNETHERLANDS

4

3

1

Rentals

Buyer CreditRepayment

s

Sub-CharterRentals

PETROBRAS

TECHNIP-COFLEXIP

SG

6

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Major advantages of the Export Credits

Attractive terms: combination of low costs with long tenors

Support from ECAs when other sources of finance may not be available

Much less volatility than bonds and syndicated loans on emerging markets

Terms of export credits tends to match the cash flow of the project

drawing period: progress payment

repayment period: semi-annual amortizations

Export Credits are "tailor made" solutions, which may be adapted to the particular needs of the project

may be used in conjunction with structured or project finance