The petroleum market is favorable in the mid and long term, with a relatively low cost of pre-salt production

Strengthening BUSINESS to ACHIEVE GROWTH

The corporate strategy of Petrobras, expressed in the strategic plan 2020, considers its commitment to sustainable development, based on integrated growth, profitability and social and environmental responsibility, and it is structured in the business segments of the company. Projections of the business plan 2009-2013 include investments of US$ 174.4 billion for the period and the production of 3.655 million boed of oil and gas in 2013.

The plan also takes into account in its projections: uncertainties, such as the price of petroleum, costs, dynamics of the supply and demand; geopolitical aspects (such as the global economic crisis, wars and conflicts, political tension and environmental implications) and critical resources (such as assets and services and human resources). However, the petroleum market is favorable in the mid and long term, with the cost of production of the pre-salt (in ultra-deep water) relatively low.

The development of the pre-salt area will direct the growth of production in the long term. The estimate is an rise from 219,000 bpd in 2013 to 1,815,000 bpd in 2020.

The plan also emphasizes the growth of the Brazilian domestic content in strengthening the business of Petrobras in the long term. The domestic context is responsible for the increased installed capacity (limit of production) and for developing new suppliers, which generate a positive scenario in relation to prices, availability, options and flexibility. On the other hand, from the sustainability viewpoint, the expected expansion in the Brazilian economy will tend to promote the generation of employment and income, making the domestic market more dynamic.

Petrobras also has codes and statutes to protect the interests of its shareholders and other stakeholders. In this context the company bylaws, its Code of Ethics, Directives of Corporate Governance, Code of Good Practices and that of Competitive Conduct, as well as its internal rules, are worthy of note.

CORPORATE GOVERNANCE

Petrobras is run by the Board of Directors and by the Executive Board. Responsible for the direction and top management of the company, the duties of the Board of Directors include deciding on the basic plan of organization and about the election and removal of the members of the Executive Board. It also handles establishing the general guidance of the company business – defining its mission, its strategic objectives and directives –, besides approving the strategic plan, with its respective plans for several years and annual programs of expenditure and investments. It is the duty of the Executive Board to manage the business, in line with the mission, objectives, strategies and directives established by the Board of Directors.

The tenure of the board members is one year, with the possibility of re-election without limit of the number of mandates. The Board consists of nine members elected by the General Shareholders Meeting and chaired by a member with no executive functions or other links with the company. The CEO of Petrobras is the only member with executive functions

In order to avoid any conflicting interests, there is no influence of the Executive Board in electing the members of the Board of Directors. Besides the Code of Ethics of Petrobras, issues such as loyalty and use of privileged information related to the senior management of Petrobras are dealt with in several internal policies. They include the Disclosure of Information about Relevant Facts or Acts, Negotiation with Securities, the Conduct of the Administrators and Senior Management Employees, the Indication for Job Titles of Management of Subsidiaries, affiliates and Associated Companies and Investor Relations.

The Board of Directors approved the Directives of Corporate Governance, which establish the experience and knowledge expected of a board member, as well as some requirements which must be complied with. Thus, the Board of Directors of Petrobras aims to promote the long-term prosperity of business, by adopting an active and independent posture, always taking into account the interest of all the shareholders. Although they have not yet been approved, the Directives of Corporate Governance foresee mechanisms where the Board evaluates yearly its own performance and that of the Executive Directory every six months.

The model of corporate governance of Petrobras also has a Fiscal Board, three Committees of the Board of Directors (Audit; Environment; and Remuneration and Succession), Business Committee and 12 Management Committees. The Management Committees allow the deepening and maturing of important subjects (including strategies about issues related to sustainability), besides structuring information which will be submitted to higher authorities, covering the economic, environmental and social dimensions. The Management Committees are: Downstream; Organization and Management Analysis; Internal Controls; E&P; Gas & Energy; Marketing and Brands; Human Resources; Social Responsibility; Health, Safety and Environment; Risks; Information Technology; and Petrobras Technology.