Speaker

José Sergio Gabrielli de Azevedo Chief Executive Officer Petrobras

At Tuesday's lunch Daniel Yergin, IHS CERA Chairman, welcomed Special Address speaker Jose Sergio Gabrielli de Azevedo, Chief Executive Officer, Petrobras Energia SA. Citing his company's work on energy scenarios, Mr. Gabrielli stated, "Fossil fuels will remain the primary source of energy for the foreseeable future."

Mr. Gabrielli said that demands being placed on the oil industry have evolved significantly over the past several years. In his view the new formula for meeting growing fuel demand involves several factors. The first element is additional oil production, including more intensive recovery from current oil fields; expansion of production in more challenging areas such as the presalt in offshore Brazil, the Arctic, and ultradeep water in the United States; and the expansion of production of nonconventional oils, including oil sands, shale oil, and synthetic products. The exploitation of these resources is driving increases in operational sophistication. Specifically he cited the industry's progress in operating at greater depths in offshore fields, maintaining production levels from more mature reservoirs, and coping with extreme weather conditions. "We prefer to be in the challenging environments," Gabrielli said, emphasizing Petrobras' operational expertise.

The second piece of Mr. Gabrielli's formula to meet the "new demands being placed on suppliers" comprises both supply challenges and demand-side adjustments. Supply challenges currently being addressed include high costs for rigs and equipment, the search for skilled labor, environmental and regulatory constraints, and a difficult financial and investment backdrop. Demand-side drivers include flex-fuel engines that can burn high-ethanol fuels (already common in Brazil), alternative energy sources, and improvements in logistics.

On the subject of alternative energy sources, Mr. Gabrielli cited the considerable "gap between research and development and deployment." He emphasized the growth of biofuels in the company's outlook. Petrobras expects average biofuels growth of 5.3 percent per year to 2030. However, with the growth coming off of a small base (only 0.5 percent of global primary energy demand in 2008, rising to 1 percent by 2030), biofuels will remain a regional phenomenon for some time to come.

Mr. Gabrielli closed his remarks by providing an overview of the company's prized assets, the presalt fields in deepwater offshore Brazil. Production from the presalt assets will be the foundation of the company's projected growth in total production over the next ten years. Petrobras's total production is projected to grow from 2.53 million barrels of oil equivalent per day (mboe per day) in 2009 to 3.66 mboe per day in 2013 and 5.73 mboe per day in 2020.