Confidential Information Memorandum

Refinaria Abreu e Lima

USD 2,100,000,000 Guarantee Facility and USD 450,000,000 Loan Facility

August, 2011

JOINT LEAD ARRANGER

JOINT LEAD ARRANGER

JOINT LEAD ARRANGER

STRICTLY PRIVATE AND CONFIDENTIAL

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Table of Contents

Administrative Confidentiality Agreement Notice to and Undertaking by Recipients Letter of Authorization Form of Commitment Advice Contact List Transaction Timetable Definitions 1. Executive Summary ................................................................................................................ 1 1.1. 1.2. 1.3. 1.4. Project Overview............................................................................................................. 1 The Agreement between Petrobras and PDVSA ............................................................. 2 BNDES Loan Requirement ............................................................................................. 2 The Transaction.............................................................................................................. 3 Summary of Terms and Conditions ......................................................................... 4 Loan Facility ........................................................................................................ 4 Guarantee Facility ............................................................................................... 5 Collateral............................................................................................................. 5 The Petrobras Direct Agreement ......................................................................... 5 Transaction Structure .......................................................................................... 6

1.4.1. 1.4.1.1. 1.4.1.2. 1.4.1.3. 1.4.1.4. 1.4.1.5. 2.

The Project ............................................................................................................................. 6 2.1. 2.2. 2.3. 2.4. Project Location .............................................................................................................. 6 Project Design and Operation ......................................................................................... 7 Refinerys Construction and Projected Investments ....................................................... 10 Sponsors Experience .................................................................................................... 13 Petrobras .............................................................................................................. 13 PDVSA ................................................................................................................. 15

2.4.1. 2.4.2. 2.5. 2.6. 3.

Oil Supply Contracts ..................................................................................................... 17 BNDES Loan ................................................................................................................ 18

Petrobras .............................................................................................................................. 19 3.1. 3.2. 3.3. 3.4. General Overview ......................................................................................................... 19 Shareholder Structure ................................................................................................... 19 Business Segments ...................................................................................................... 20 Financials ..................................................................................................................... 21

4.

PDVSA ................................................................................................................................. 22 4.1. General Overview ......................................................................................................... 22

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4.2. 4.3. 4.4. 4.5. 5.

Shareholder Structure ................................................................................................... 23 Business Segments ...................................................................................................... 23 Financials ..................................................................................................................... 24 PDVSAs Investment Plan............................................................................................. 24

Financial Projections ............................................................................................................. 25 5.1. RAL Financial Plan ....................................................................................................... 25 Investments .......................................................................................................... 25 Revenues assumptions ......................................................................................... 25 Operating Costs .................................................................................................... 26 Fixed Costs ....................................................................................................... 26 Planned Maintenance ........................................................................................ 27 Logistic Costs .................................................................................................... 27 Crude Oil........................................................................................................... 27 Projected Financial Statements ............................................................................. 29

5.1.1. 5.1.2. 5.1.3. 5.1.3.1. 5.1.3.2. 5.1.3.3. 5.1.3.4. 5.1.4. 5.2.

Revised Financial Plan ................................................................................................. 30 Foreign Exchange Rate......................................................................................... 30 Capex ................................................................................................................... 31 Commercial Operation Date .................................................................................. 31 Estimated Equity Contribution ............................................................................... 31

5.2.1. 5.2.2. 5.2.3. 5.2.4. 6.

Market Overview ................................................................................................................... 33 6.1. 6.2. 6.3. Brazilian Oil Reserves and Production .......................................................................... 33 Brazilian Refining Market .............................................................................................. 35 Brazilian Diesel Market ................................................................................................. 36

7.

Risks and Mitigants ............................................................................................................... 38 7.1. 7.2. 7.3. 7.4. 7.5. Construction ................................................................................................................. 38 Equity Contribution ....................................................................................................... 38 Operations .................................................................................................................... 39 Demand........................................................................................................................ 39 Repayment ................................................................................................................... 39

8.

Term Sheet ........................................................................................................................... 40

Appendix...................................................................................................................................... 71 Appendix A Draft Shareholders Agreement Appendix B RAL x BNDES Loan Agreement

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Figures Figure 1: Envisaged Partnership Structure and the Transaction Facilities ....................................... 4 Figure 2: Transaction Facilities Guarantee Structure ...................................................................... 6 Figure 3: Project Location .............................................................................................................. 7 Figure 4: Strategic Location............................................................................................................ 7 Figure 5: RALs Differential............................................................................................................. 9 Figure 6: Project Timeline ............................................................................................................ 11 Figure 7: Actual and Projected Refinerys Physical Construction Progress .................................... 12 Figure 8: Actual and Projected Investments (BRL million) ............................................................. 12 Figure 9: Refining Capacity (million bbls/d) ................................................................................... 13 Figure 10: Petrobras investments breakdown ............................................................................... 14 Figure 11: Petrobras historic and projected investments (annual average USD million) ................ 15 Figure 12: PDVSAs Refineries..................................................................................................... 16 Figure 13: PDVSAs Projected Investments in the Refining Segment (USD billion) ....................... 17 Figure 14: Petrobras Operating Income Composition (LTM July 2010) ......................................... 20 Figure 15: Global and Venezuelan Oil and Gas Proved Reserves ................................................ 22 Figure 16: PDVSAs Sales Composition (1H 2010) ....................................................................... 23 Figure 17: Brazilian Oil Proved Reserves and Oil Production ........................................................ 33 Figure 18: Pre-Salt map ............................................................................................................... 33 Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves ....... 34 Figure 20: Brazilian GDP and Global Oil Consumption ................................................................. 35 Figure 21: Brazilian Oil Production, Refining and Demand (000 bbls/d) ........................................ 36 Figure 22: Brazilian Energy Consumption and Diesel Consumption .............................................. 37 Figure 23: Diesel Production, Sales and Imports .......................................................................... 37 Tables Table 1: Projects Estimated Sources and Uses (BRL million from 2006 to 2016)* ....................... 2 Table 2: Loan Facility Terms & Conditions...................................................................................... 4 Table 3: Guarantee Facility Terms & Conditions ............................................................................. 5 Table 4: Refinerys Environmental Permits Status .......................................................................... 8 Table 5: Refinerys Projected Output (m3 / year) ............................................................................ 9 Table 6: Refinerys Main Construction Contracts .......................................................................... 10 Table 7: Equipments and Investments .......................................................................................... 13 Table 8: Petrobras Refineries (2009) ............................................................................................ 14 Table 9: BNDES Loan Terms & Conditions .................................................................................. 18 Table 10: Petrobras Capital Stock ............................................................................................... 19 Table 11: Petrobras Financials (USD million) ............................................................................... 21 Table 12: PDVSAs Financials (USD million) ................................................................................ 24 Table 13: Financial Plans Investments (USD million real terms) ................................................ 25 Table 14: Refinerys Projected Output (m3 / year) ........................................................................ 26 Table 15: Oil Products Commercialization .................................................................................... 26 Table 16: Projected Sales Prices (USD/m3) ................................................................................. 26 Table 17: Projected Fixed Costs (BRL000 /year) ......................................................................... 27 Table 18: Projected Planned Maintenances (BRL000/year) ......................................................... 27 Table 19: Projected Logistic Costs ............................................................................................... 27 Table 20: Projected Crude Oil Prices (USD/m3) ........................................................................... 28 Table 21: Projected Income Statement ......................................................................................... 29

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Table 22: Projected Debt Service Coverage Ratio ........................................................................ 30 Table 23: Foreign Exchange Rates .............................................................................................. 30 Table 24: Projected Investments .................................................................................................. 31 Table 25: Sources and Uses (BRL million) ................................................................................... 31 Table 26: Equity Injection (BRL million) ........................................................................................ 32 Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009) ................................................. 35

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Confidentiality Agreement
This confidential material (the Confidential Information Memorandum) is being provided to you by Banco Esprito Santo, BES Investimento do Brasil and Banco do Brasil (together, the Lead Arrangers) in connection with an actual or potential transaction and must not be used or relied upon for any purpose other than to evaluate your intention to participate in the transaction. In addition, this Confidential Information Memorandum must not be disclosed, in whole or in part to any third party, summarized or otherwise referred to except as agreed upon in advance in writing by the Lead Arrangers. The Confidential Information Memorandum is being made available only to parties who have signed and returned a non-disclosure agreement (the Confidentiality Agreement) and recipients are therefore bound by the Confidentiality Agreement in respect of all information contained herein. The information used in preparing the Confidential Information Memorandum was obtained from or through Petrleos de Venezuela S.A. (PDVSA) and PDVSA do Brasil Ltda (the Borrower), their representatives or from public sources. The Lead Arrangers assume no responsibility for independent verification of such information and have relied on such information being complete and accurate. To the extent such information includes estimates and forecasts, the Lead Arrangers have assumed that such estimates and forecasts have been reasonably prepared based on assumptions reflecting the best currently available estimates and reasonable judgments. The Lead Arrangers expressly disclaim any and all liability for any direct or indirect loss that may be based on or may arise in connection with any information contained herein, including any errors therein or omissions therefrom. The Confidential Information Memorandum is intended solely for your information and the Lead Arrangers assume no obligation to update or otherwise revise the Confidential Information Memorandum. The information and analysis contained herein constitute the Lead Arrangers present understanding which is subject to change at any time without notice. Nothing contained herein should be construed as advice of any kind including investment, tax, accounting or legal advice. The Confidential Information Memorandum has been prepared solely for informative purposes to assist you in making your own evaluation of a potential transaction and with the express understanding that it will be used for only such purpose. In all cases, you should conduct your own investigation and analysis of a potential transaction, and you should consider the advice of your own legal, accounting, tax and other advisors and such other factors that you consider appropriate. The Confidential Information Memorandum is not a recommendation, offer or solicitation to purchase or sell any security, commodity, currency or other instrument.

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Notice to and Undertaking by Recipients

This confidential material (Confidential Information Memorandum) provided herein refers to the proposed USD 2.1 billion Guarantee Facility and USD 450 million Loan Facility (together, the Transaction Facilities), that will support PDVSA do Brasil Ltdas (the Borrower) capital participation in the Refinaria Abreu e Lima S.A. (the Project), and have been obtained by Banco Esprito Santo, BES Investimento do Brasil and Banco do Brasil (together, the Lead Arrangers) from, or are based upon information supplied to the Lead Arrangers by Petrleos de Venezuela S.A. (PDVSA) and the Borrower, and other sources, and should not be construed as Lead Arrangers representation. It is further understood that PDVSA and the Borrower make no representations or warranties concerning any projections or forward-looking statements included in the Confidential Information Memorandum, except that such projections and forward looking statements have been prepared in good faith based upon assumptions and estimates management believes to be reasonable as of the date of the Confidential Information Memorandum. Whether or not such projections or forward-looking statements are in fact achieved will depend upon future events, some of which are not within the control of PDVSA and/or the Borrower. Accordingly, actual results may vary from the projections and such variations may be material. As a potential lender, you agree to conduct an independent investigation of the financial condition, creditworthiness, affairs and status of the Project and of all parties involved in the Transaction Facilities, and to base your decision whether or not to participate in the Transaction Facilities solely on such investigation. Accordingly, you hereby confirm that, in connection with your consideration of the proposed Transaction Facilities you will not rely on the Lead Arrangers with respect to the adequacy, accuracy or completeness of any information provided herewith. In addition, you hereby agree to continue to independently assess and keep under review the financial condition, creditworthiness, affairs and status of the Project and of all the parties involved in the Transaction Facilities from the date hereof until the earlier of your decision not to participate in the Transaction Facilities or your execution and delivery of an assignment agreement or your signing definitive documentation for the Transaction Facilities. A brief description of the terms and conditions of the Transaction Facilities is included in this Confidential Information Memorandum. Such description does not purport to be comprehensive and all references to agreements are qualified in their entirety by reference to the same. This notice and the enclosed confidential information are delivered to you subject to your agreement to the Confidentiality Agreement and specifically in connection with your consideration of committing in the Transaction Facilities, and neither they nor their substance shall be disclosed or used for any other purpose other than to evaluate your decision whether or not to participate in the Transaction Facilities. Your receipt of this Confidential Information Memorandum constitutes your agreement to the foregoing and the further obligation to return the material as provided in the Confidentiality Agreement, together with all copies that you may have made thereof, should you decide not to pursue this matter and to participate in the Transaction Facilities; provided, however that you shall be permitted to retain such copies of the material as you shall be required to retain (a) pursuant to applicable record retention regulations of any governmental authority having jurisdiction over you, or (b) pursuant to your internal record retention policy, provided that upon expiration of such requirements, if any, the other provisions of this paragraph concerning return or destruction of material shall apply. In addition, nothing herein shall be construed as an obligation to remove or

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erase any material contained in an automated back-up system not accessible in the ordinary course of business. BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6 andar So Paulo, SP 04358-905 Brazil Banco do Brasil S.A. Av. Paulista, 2163 6 andar So Paulo, SP 01311-933 Brazil Banco Esprito Santo S.A. Rua Braamcamp, 2 5 andar 1250-050 Lisboa Portugal

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Letter of Authorization

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Letter of Authorization

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Form of Commitment Advice

[Lender's Letterhead] [Date]

BES Investimento do Brasil S.A. Av. Brigadeiro Faria Lima, 3729 6 andar So Paulo, SP 04358-905 Brazil
Attn.: []

Banco do Brasil S.A. Av. Paulista, 2163 6 andar So Paulo, SP 01311-933 Brazil

Banco Esprito Santo S.A. Rua Braamcamp, 2 5 andar 1250-050 Lisboa Portugal

We are in receipt of your Confidential Information Memorandum (CIM), dated July 2011, prepared in connection with the proposed USD 2,100 million Guarantee Facility and USD 450 million Loan Facility (together, the Transaction Facilities), that will support PDVSA do Brasil Ltdas (the Borrower) capital participation in the Refinaria Abreu e Lima S.A. (Project) as described in the CIM. __________(Lender) hereby provides for the Transaction Facilities its commitment in the amount of USD________ million under the USD 2,550 million Transaction Facilities, allocated as follows: USD______ toward the USD 2,100 billion in the Guarantee Facility; and USD______ toward the USD 450 million in the Loan Facility. The Lender acknowledges that it has, independently and without reliance on the Lead Arrangers or any other bank, and based on documents and information about the Project and the parties involved in the Transaction Facilities as it has deemed appropriate, made its own credit analysis and decision to enter into this commitment. Our commitment is subject only to our favorable review of the credit documentation, which shall be based on the terms and conditions set forth in the CIM. The Lead Arrangers shall have no liability or responsibility to the Lender if such financing is not entered into. The Lender understands and agrees that its proposed commitment amount is subject to acceptance and allocation at the discretion of Petrleos de Venezuela S.A. and the Lead Arrangers. Sincerely, Name of Authorized Officer Title Lender Telephone Number

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Contact List
BES Investimento do Brasil Alan Fernandes
Head of Project Finance, Brazil

+55 11 3074-7494 alanf@besinvestimento.com.br +55 11 3074-7496 rgraziottin@besinvestimento.com.br +55 11 3074-7338 cpacheco@besinvestimento.com.br +55 11 3074-7463 ggalego@besinvestimento.com.br

Rogrio Graziottin
Vice President - Project Finance, Brazil

Carlos Pacheco
Vice President Client Coverage, Brazil

Guilherme Galego
Associate - Project Finance, Brazil

Banco Esprito Santo Paulo Nacif

Director International Corporate Banking Americas

+351 21 883 4579 paulo.nacif@bes.pt

Banco do Brasil Sandro Kohler Marcondes

Commercial Director, Brazil

+55 61 3310-5353 marcondes@bb.com.br +55 11 3066-9810 rpl@bb.com.br +55 11 3066-9907 nildo@bb.com.br +55 11 3066-9934 lenymarcia@bb.com.br +55 11 3066-9258 tito.silva@bb.com.br

Renato Proena Lopes

Executive Manager, Brazil

Nildo Ribeiro do Rosario Neto

Manager, Brazil

Leny Marcia Ferreira da Silva

Senior Analyst, Brazil

Tito Santos Tavares da Silva

Senior Analyst, Brazil

PDVSA Abraham Ortega

Chief Financial Officer

+58 212 708-1405 ortegaae@pdvsa.com +58 212 708-1438 bolivars@pdvsa.com

Renny Bolvar
Financing Manager

PDVSA do Brasil Ltda Srgio A. Tovar Amaro

Executive Director

+55 21 3235-0800 tovars@pdvsa.com

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Transaction Timetable
September 2011 M T W 5 12 19 26 6 13 20 27 7 14 21 28 T 1 8 15 22 29 F 2 9 16 23 30 S 3 10 17 24 S 4 11 18 25 October 2011 M T W 3 10 17 24 31 4 11 18 25 5 12 19 26 T 6 13 20 27 F 7 14 21 28 S 1 8 15 22 29 S 2 9 16 23 30 November 2011 M T 1 7 8 14 15 21 22 28 29 W 2 9 16 23 30 T 3 10 17 24 F 4 11 18 25 S 5 12 19 26 S 6 13 20 27

Holiday Key Date

Syndication Timetable September 9th, 2011 September 13th, 2011 September 27th, 2011 October 10th, 2011 November 10th, 2011 November 18th, 2011 Commitments due from Lenders Determine allocation amounts Legal documentation distributed to Lenders Lender comments due on legal documentation Sign documentation Financial Close and funding

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Definitions
ANP: Brazilian Petroleum National Agency API: the American Petroleum Institute gravity, or API, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is > 10, it is lighter and floats on water; if <10, it is heavier and sinks. bbls: Barrels of Oil bbls/d: Barrels of Oil per Day boe: Barrels of Oil Equivalent boe/d: Barrels of Oil Equivalent per Day CAGR: Compounded Annual Growth Rate E&P: Exploration and Production FPSO: Floating Production Storage and Offloading Unit GDP: Gross Domestic Product HCGO: Heavy Coker Gas Oil LNG: Liquefied Netroleum Gas LPG: Liquefied Petroleum Gas PAC: Brazilian Governments Growth Acceleration Program PSA: Production Sharing Agreement

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1. Executive Summary
1.1. Project Overview In March 2008, Petrleo Brasileiro S.A. (Petrobras) and Petrleos de Venezuela S.A. (PDVSA) (together, the Sponsors) entered into an association agreement (the Association Agreement) to construct and operate a 230,000 barrels of oil per day (bbls/d) capacity oil refinery called Refinaria Abreu e Lima (the Project, Refinery or RAL) in Recife, Brazil. The Refinery is one of the primary endeavors under the Brazilian Governments Growth Acceleration Program (PAC) aimed at improving Brazilian refining capacity, especially for diesel. The Project will be located in the Ipojuca municipality near Recife, the capital of Pernambuco, a state in the northeast region of Brazil. Petrobras, which currently owns 100% of the Refinery, is managing the construction process and has engaged, through RAL, several contracts with renowned Brazilian construction companies for the engineering, procurement, and construction of the Project. As of June 2011, 37% of the Projects physical construction had been completed. The Refinery will be comprised of two uniformly sized refining units. Unit 1 is expected to commence operations in January 2013, while Unit 2 is scheduled to commence operations in August 2013. The two units combined total refining capacity of 230,000 bbls/d is equivalent to 11% of the current Brazilian installed refining capacity. The Project will enter into oil supply contracts with each of the Sponsors, whereby the Project will source 50% of its crude oil input from Brazil and 50% from Venezuela. Approximately 70% of the Refinerys total output will be in the form of diesel, which amounts to 9.04 million m3/ of diesel production and represents approximately 20% of Brazils current diesel consumption. The Project intends to sell all of its output to the domestic market at market rates. Additionally, the Project is expected to generate more than USD 2 billion per year in federal and state tax revenue and will contribute more than 20% of Pernambucos total GDP. According to the review carried out by PDVSA (see section 5.2), total construction costs are expected to amount to BRL 28.5 billion (USD 16.3 billion) during an investment schedule that commenced in 2006 and will conclude in 2016, approximately three years after the Projects commercial operation date. As per the table below, the construction costs and associated financial costs, will be financed via BRL 17.6 billion (USD 10.1 billion) of equity contributions, a BRL 9.9 billion (USD 5.2 billion) loan (the BNDES Loan) from Banco Nacional de Desenvolvimento Econmico e Social (BNDES), the Brazilian Development Bank, and BRL 6.3 billion (USD 3.6 billion) from operational cash flows.

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Table 1: Projects Estimated Sources and Uses (BRL million from 2006 to 2016)* Source: PDVSA
Us e s Capex Debt Service (B NDES Lo an) S o urc e s B NDES Lo an Equity P etro bras P DVSA Operatio nal Cash Flo w T o tal 3 3 ,8 3 0 10 0 % T o tal

28,500 5,330

84% 1 6%

9,890 1 7,586 1 0,551 7,034 6,354 3 3 ,8 3 0

29% 52% 31 % 21 % 1 9% 10 0 %

* Preliminary figures. Updated Sources and Uses, which is under development, will be supplied by the Refinery's revised Economic and Financial Feasibility Study (see more details in section 5). The BNDES Loan was signed and disbursed to RAL in full in August 2009. The BNDES Loan has a 20 year tenor, due in March 2029, and will be repaid via semi-annual equal amortization payments following a seven year grace period. Additionally, the BNDES Loan is fully guaranteed by a Petrobras Corporate Guarantee. 1.2. The Agreement between Petrobras and PDVSA Petrobras and PDVSA signed the Association Agreement in March 2008, which states that PDVSA will participate in RALs capital structure through subscription of new shares equivalent to 40% of the Refinerys capital. The subscription will be materialized through PDVSAs wholly owned subsidiary PDVSA do Brasil Ltda., established in Rio de Janeiro. Furthermore, the Association Agreement established the conditions for PDVSAs participation in RALs capital structure, including: PDVSA commitment to: o Immediate equity injection of BRL 854 million (USD 510 million) - this amount is based on August 2009 numbers subject to inflation, and will be updated by Petrobras and certified by an independent consultant - to achieve 40% ownership of the Refinerys capital (the Initial Equity Contribution); and, o Future equity injections of BRL 6.2 billion (USD 3.6 billion), which is equivalent to 40% of the remaining BRL 15.5 billion required equity contribution. The terms and conditions of RALs governing documents upon PDVSAs equity participation in the Project: o Shareholder Agreement and Bylaws; o Projects Midterm Business Plan; and, o Oil Supply Contracts.

The Brazilian Economic Defense Administrative Counsel (CADE) has already approved the association between Petrobras and PDVSA. 1.3. BNDES Loan Requirement As previously mentioned, in August 2009, BNDES signed and fully disbursed the USD 5.2 billion BNDES Loan to RAL to finance a portion of the Project costs. The BNDES Loan is secured by a corporate guarantee from Petrobras for the full amount of the loan.

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Also, as a condition for PDVSAs capital participation in RAL, Petrobras will require PDVSA to assume 40% of the existing guarantee issued in favor of BNDES. Therefore, PDVSA will be obligated to guarantee the BRL equivalent of USD 2.1 billion of the BNDES Loan. For that reason, and in order to comply with Association Agreement and BNDES Loan requirement, PDVSA is approaching commercial banks with sufficient credit limits with BNDES, to provide guarantees to BNDES on PDVSAs behalf in the amount of USD 2.1 billion. 1.4. The Transaction Considering the above mentioned, PDVSA is seeking: Equity Financing: An up to USD 450 million senior secured bank loan to finance 80% of the Initial Equity Contribution (the Loan Facility); Bank Guarantee: USD 2.1 billion in bank guarantees to secure 40% of the BNDES Loan (the Guarantee Facility).

Banco Esprito Santo, BES Investimento do Brasil and Banco do Brasil (together, the Lead Arrangers) were mandated by PDVSA to structure the Loan Facility and the Guarantee Facility (together, the Transaction Facilities) and arrange the appropriate bank syndicate. The banks that will join the syndicate (the Lenders) are expected to commit pro-rata to the Transaction Facilities. The Lead Arrangers are committed to hold up to 50% of the Transaction Facilities as follows: Banco Esprito Santo and BES Investimento do Brasil: 25% Banco do Brasil: 25%

The structure of the Projects organizational structure and the related Transaction Facilities are illustrated in the figure below.

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Figure 1: Envisaged Partnership Structure and the Transaction Facilities

PDVSA

100%

Equity Injection (minimum of 20% the Initial Equity Contribution)

Guarantee Facility

Loan Facility

PDVSA Brasil
Funds from the Loan Facility (up to 80% of the Initial Equity Contribution)

Petrobras

40%

60%

Petrobras Corporate Guarantee (60% of the BNDES Loan)

Initial Equity Contribution (~ BRL 854 million)

Abreu e Lima Refinery

BNDES Loan (BRL 9.9 bi USD 5.2 billion)

BNDES

Lenders

Bank Guarantee (40% of the BNDES Loan)

1.4.1.

Summary of Terms and Conditions

The summary of the terms and conditions of the Transaction Facilities are presented below. A more detailed description of the terms and conditions of the Transaction Facilities can be found in the Term Sheet section. 1.4.1.1. Loan Facility The Loan Facility will have the following characteristics:
Table 2: Loan Facility Terms & Conditions

Amount Borrower Lenders Tenor Repayment Floating Rate Margin Up-Front Fee Commitment Fee

Up to USD 450 million PDVSA Brasil Ltda Lead Arrangers plus other banks to be selected by PDVSA and Lead Arrangers 5 years (2.5 year average life) Semi-annual equal principal payments 6 month Libor 550 bps per annum 100 bps 200 bps per annum payable at Financial Close and accrued from Commitment Letter Acceptance Date

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1.4.1.2. Guarantee Facility The Guarantee Facility will have the following characteristics:
Table 3: Guarantee Facility Terms & Conditions

Amount Applicant Guarantors Underlying Contract Beneficiary Tenor Commission

Up to USD 2,100 million PDVSA Brasil Ltda Lead Arrangers plus other banks to be selected by PDVSA and Lead Arrangers BNDES Loan BNDES 5 years; Renewable for consecutive 5-year tenors until the maturity of the BNDES Loan (March 2029) First 5 years: 400 bps per annum paid semi-annually in advance Thereafter: 600 bps per annum paid semi-annually in advance

Up-Front Fee Commitment Fee

20 bps 200 bps per annum payable at Financial Close and accrued from Commitment Letter Acceptance Date

1.4.1.3. Collateral The Transaction Facilities will benefit pari-passu from the following security package: Corporate Guarantee issued by PDVSA for the total amount of the Transaction Facilities; Pledge over 40% of the Refinerys shares; Pledge over 100% of the Borrowers shares; Standby Letter of Credit (SBLC) issued by Banco de Desarrollo Econmico y Social de Venezuela (BANDES) in the amount of USD 235 million; o The SBLC will be 100% cash collateralized by a time deposit in BES; and Pledge over the dividends payable by the Project to the Borrower. The dividends shall be retained as collateral, in an amount up to USD 10 million dollars, until the liquidation of the Transaction Facilities.

1.4.1.4. The Petrobras Direct Agreement The Direct Agreement to be entered into between Petrobras, the Borrower, and the Lenders (the Petrobras Direct Agreement) will include the following conditions: If Borrowers equity interest in the Project falls below 40%, then Petrobras shall:

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Provide replacement security and cause BNDES to release collateral provided by the Borrower in an amount corresponding to the Borrowers equity shortfall. o Indemnify the Lenders from any failure to accomplish the undertaking above. A call mechanism whereby, in the event of default, Petrobras will have the option to purchase and the Lenders will be obliged to sell the pledged Refinerys shares.

1.4.1.5. Transaction Structure The structure of the Transaction Facilities and related collateral package is exhibited in the figure below.
Figure 2: Transaction Facilities Guarantee Structure
Parent Company Guarantee PDVSA BANDES
Pledge over 100% of shares in PDVSA Brasil

Lenders Pledge over 40% of the Refinerys shares

PDVSA Brasil

Petrobras

USD 235 million SBLC, 100% collateralized by Time Deposit

40%

60%

Abreu e Lima Refinery Pledge over dividends up to the amount of USD 10 million dollars

Petrobras Direct Agreement

2. The Project
2.1. Project Location The Project is located in the Ipojuca municipality of the Recife metropolitan area in the state of Pernambuco, in the northeast region of Brazil (the Northeast). The Refinery is located in a 630 hectare area in the Suape Industrial and Port Complex (Suape).

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Figure 3: Project Location Source: RAL Business Plan

Refinaria Abreu e Lima

Suape is a strategic location in the center of the Northeast, acting as a hub for the cargo transportation in the region. The complex is very well connected to the primary consumption points in the Northeast region via a sophisticated network of roads and highways.
Figure 4: Strategic Location Source: RAL Business Plan

So Lus
Fortaleza Teresina

800 km 7 capitals 7 international airports 8 international ports 1 river port 30 million people 90% of the GDP of the Northeast Region

Natal Joo Pessoa Recife Suape Macei Aracaj

300 km Salvador

4 capitals 4 international airports 5 international ports 12 million people More than 35% of the GDP of the Northeast Region

2.2. Project Design and Operation The Refinery will be comprised of petrochemical units capable of performing the following processes: Atmospheric Distillation, Delayed Coking, Diesel and Naphtha Hydrotreating, Hydrogen Generation, Treatment of Amine, Caustic Regeneration Treatment, Sulfur Recovery, and Tail Gas SNOX (Emissions Abatement Unit) and ancillary units (utilities and offsite). The Refinery will also rely on conventional production units, but with the incorporation of advanced technology to process heavy crude oil, which produced high value-added products. The Project was designed following the concepts of high performance units which determines technical specifications and requirements for the achievement of the following characteristics: High reliability level

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Low maintenance cost Automation, optimization and advanced control Ecological balance Safety Low intervention requirement High quality products Production flexibility Low energetic consumption Optimized water usage Operational efficiency

The Project was designed to match quality and safety management system (QSMS) norms which establish minimum safety, environmental and health quality specifications. The Refinerys chimney will have gas sampling points, complying with the Brazilian National Environmental Councils (CONAMA) established criteria. The Refinery has already received the necessary environmental permits to start construction from the appropriate regulatory authority, and consequently, construction has commenced.
Table 4: Refinerys Environmental Permits Status Source: RAL

Permit Preliminary Permit Installation Permit Installation Permit (renewal)

# 0096/2007 00880/2007 08.09.08.007732-8

Issuing Date July 26 , 2007 August 27 , 2007 August 26 , 2009

th th th

Valid Until July 26 , 2008 August 26 , 2009 August 26 , 2011

th th th

The Project is in the process of obtaining a new operating permit from the Brazilian Petroleum National Agency (ANP). The need for the new operating permit arises from increasing the Projects refining capacity to 230,000 bbls/d, from the originally projected capacity of 200,000 bbls/d. This permit is not necessary during the construction period and is expected to be obtained well before commercial operations. The Refinery will have the capacity to process heavy crude oil with low API gravity, high acidity and an elevated content of sulfur and nitrogen into high quantities of diesel. RAL will have the highest diesel conversion capacity among all Petrobras units.

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Figure 5: RALs Differential Source: Petrobras

1 Processed Oil API Index
26

2 Refineries Solomon Index

3 Refineriess Diesel Output

70%

9,6
16

7,7

39%

Petrobras Average - 2010

RAL

Petrobras Average - 2010

RAL

Petrobras Average - 2010

RAL

The Project includes two distillation units with total nominal capacity of 35.770 m/d or 230,000 bbls/d. Each unit will have a refining capacity of 115,000 bbls/d. Unit 1 will process the Brazilian crude oil BC-16 or equivalent and Unit 2 will process the Venezuelan crude oil Carabobo 16 or equivalent. The Refinerys projected capacity is equivalent to 11% of Brazils total installed refining capacity. Additionally, the Projects diesel production, which is equivalent to approximately 70% of the Refinerys total output, will amount to 9.04 million m3/year which represents approximately 20% of the Brazilian current consumption of the product. According to the Brazilian Energy Balance, which is developed by the Brazilian Ministry of Mining and Energy, diesel was the countrys primary source of energy in 2009, accounting for 18% of the Brazilian Energy Matrix. Diesel represented 47% of the consumption of oil products in the country. The transportation sector is the main diesel consumer representing 82% of the total consumption. The Northeast was responsible for 16% of the Brazilian diesel consumption in 2009. Given that domestic diesel production does not currently satisfy demand, approximately 10% of Brazilian diesel consumption is imported. Therefore, the Refinerys production will play a significant role in making Brazil a self-sufficient diesel country in the short term, and eventual net diesel exporter in the medium to long term. In addition to diesel, the Project will produce petrochemicals and other related products such as, coke, naphtha, LPG, HCGO, Sulfuric Acid and Sulfur. Assuming a 96% utilization factor, which is managements current forecast, the Projects annual output will be as follows:
Table 5: Refinerys Projected Output (m3 / year) Source: RAL Business Plan
P ro duc t Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur T o tal Unit 1 4,580,547 339,537 787,982 307,505 358,756 70,470 1 9 9,21 6 ,4 6 4 ,0 17 Unit 2 4,465,232 429,226 1 27,51 ,1 9 243,442 83,283 1 40,940 1 02,502 6 ,5 9 2 ,14 4 T o tal 9 ,0 4 5 ,7 7 9 7 6 8 ,7 6 3 1,9 15 ,5 0 1 5 5 0 ,9 4 7 4 4 2 ,0 3 9 2 11,4 10 12 1,7 2 1 13 ,0 5 6 ,16 0

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The Project is expected to commence operations in two phases, with Unit 1 becoming operational in January 2013 and Unit 2 becoming operational in August 2013. The crude oil to be processed by the Refinery will be brought to Suape Port through high capacity ships (90.000 to 170.000 tons) and will be received by a new pier (PGL3) that is being constructed by Pernambuco Government. The pier will be connected to the Refinery by underground pipelines which will take the crude oil to the Refinery and oil products to the port (The Refinery is located 6 km from the Port). Underground pipelines will also connect the Refinery to distribution companies which supply the local market. In addition to the underground pipelines, the Refinerys output may be distributed to local and regional markets via Suapes highway network, which consists of 41 kilometers of road connecting the industrial complex to the main federal and state roads in the region, and rail system, which connects to the national rail network. 2.3. Refinerys Construction and Projected Investments The Refinery is one of the largest and most imperative endeavors under PAC, with a total projected investment of USD 16.3 billion. As of June 2011, 37% of the Projects physical construction had been completed. The Project will create approximately 20,000 direct and 150,000 indirect jobs during the construction period. As of December 2010, there were close to 20,000 people working on the Projects management and execution plan. The construction process is being managed by Petrobras. Following PDVSAs capital participation in the Project, the construction team will be managed by representatives from both Sponsors in direct portion to their ownership interest in the Project. To date, Petrobras has contracted, through RAL, several renowned Brazilian construction companies with extensive experience in the sector to execute the supply, construction and assembling of the main units of the Refinery. Below is a list of the Projects primary subcontracts:
Table 6: Refinerys Main Construction Contracts Source: RAL

Object

Scope

Contractor

Delayed Coking Unit and Caustic Regeneration Treatment Sections Hydrotreating Units and Hydrogen Generation Pipelines, Torch and Pump House

Supply, construction, assembling, tests, pre operation and assisted operation Supply, construction, assembling, tests, pre operation and assisted operation Design, supply, construction, assembling, tests, pre operation and assisted operation Supply, construction, assembling, tests, pre operation and assisted operation Design, supply, construction, assembling, tests, pre operation and assisted operation

Camargo Corra / CNEC

Odebrecht / OAS

Queiroz Galvo / IESA

Atmospheric Distillation Unit

Odebrecht / OAS

Power House and Compressed Air Unit

Alusa Engenharia

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The Project is currently in the third and final phase of its three distinct construction phases: 1. Conceptual Design: This phase occurred during September 2005 to December 2006; 2. Basic Design: This phase occurred during December 2006 to November 2009; and 3. Execution: This phase commenced in the second semester of 2007 and is expected to end in August 2014. The figure below illustrates the chronological order of the three phases and their respective tasks.
Figure 6: Project Timeline Source: RAL Implementation Report

Jan, 2009 Mar, 2009

1) Conceptual Design 2) Basic Design 3) Execution

End of the assisted operation Beginning of the operations of the Unit - 2 Beginning of the operations of the Unit - 1

Beginning of the operations of Atmospheric Distillation Unit

Construction and Assembly concentration Hiring the implementation of the producing units Phase 3 Approval Hiring the implementation of administrative buildings Hiring the implementation of Storage Tanks Hiring the implementation of the Power House

Hiring of earthmoving Phase 2 Approval

Phase 1 Approval

Aug, 2014

Aug, 2007

Aug, 2013

Nov, 2009

Sep, 2005

Dec, 2006

Dec, 2009

Dec, 2012

Jan, 2013

Mai, 2009

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Figure 7: Actual and Projected Refinerys Physical Construction Progress Source: RAL Implementation Report
100,00% 90,00% 80,00% 70,00% 60,00% 50,00%
40,00% 30,00%

20,00% 10,00% 0,00%

dez/07

fev/12

fev/07

dez/12

jul/07

jul/12

mar/09

ago/09

abr/06

mar/14

nov/05

nov/10

ago/14

abr/11

jun/15

jun/05

jun/10

As the figure above demonstrates, as of June 2011, approximately 37% of construction has been completed. At this point BRL 6.9 billion (equal to 24% of expected BRL 28.5 billion construction capex) had been invested in the Refinerys construction.
Figure 8: Actual and Projected Investments (BRL million) Source: RAL

30.000

25.000

20.000

15.000 8.802 3.075 5.000 5 2006 A 2007 A 2008 A 2009 A 2010 A 2011 P 2012 P 2013 P 2014 P 2015 P 2016 P 99 523 814
8.783

10.000

5.288 740

314

57

Investments

Accumulated Investments

nov/15

set/06

mai/08

set/11

mai/13

out/13

jan/05

jan/10

out/08

jan/15

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As of June 2011, 34% of the Refinerys equipment has been delivered on-site and an additional 48% has been contracted and ordered, while the remaining 18% are expected to be bided in the upcoming months. By the same date, 26% of the Projects total investment has been executed and 65% of the Projects construction and equipment procurement sub-contracts have been executed.
Table 7: Equipments and Investments Source: RAL Implementation Report

E quipm e nt s ( unit s - J un/ 2 0 11) Delivered Ordered Hiring P ro cess T o tal 1 76 253 94 523 34% 48% 1 8% 10 5 %

2.4. Sponsors Experience Both Sponsors have extensive experience in the construction and operation of refineries. Petrobras has a refining capacity of 2.2 million bbls/d and is responsible for 98% of the total Brazilian refining capacity. PDVSA is one of the main players in the global refining market, operating 21 refineries around the world with a total refining capacity of 3.0 million bbls/d. As seen in the graph below, together PDVSA and Petrobras have a refining capacity of 5.3 million bbls/d and rank among the largest oil refiners in the world.
Figure 9: Refining Capacity (million bbls/d) Source: PFC Energy WRMS, Petrobras and PDVSA
6,3 5,3 3,6 3,0 2,9 2,7 2,6 2,2 2,2 0,7 0,3

2.4.1.

Petrobras

As mentioned above, Petrobras controls 98% of the total refining capacity in Brazil and, as of 2009, owns the following refineries:

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Table 8: Petrobras Refineries (2009) Source: Petrobras

R e f ine rie s P aulnia - Replan (SP ) Landulpho A lves - Rlam (B A ) Duque de Caxias -Reduc (RJ) Henrique Lage - Revap (SP ) A lberto P asqualini - Refap (RS) P res. Getlio Vargas - Repar (P R) P res. B ernardes - RP B C (SP ) Gabriel P asso s - Regap (M G) M anaus - Reman (A M ) Capuava - Recap (SP ) Fo rtaleza - Lubno r (CE) P asadena - Estado s Unido s Ricardo Eliabe - A rgentina San Lo renzo - A rgentina Okinawa T o tal C a pa c it y ( '0 0 0 bbls / d) 365 279 242 251 1 89 1 89 1 70 1 51 46 53 7 1 00 31 50 1 00 2 ,2 2 3 T hro ughput ( '0 0 0 bbls / d) 324 254 256 205 1 42 1 83 1 68 1 43 39 45 6 98 24 30 45 1,9 6 2

Most of the Brazilian refining industry was constructed during the 1960s and 1970s. During this period, Petrobras invested approximately 50% of its total capex in the downstream segment. However, in the last three decades, Petrobras has focused its investments on the upstream segment, primarily in exploration and production of hydrocarbons (E&P). Petrobras invested only USD 30 billion in the downstream segment in the last decade, representing an average annual investment of only slightly more than USD 2.9 million. Consequently, much of the refining assets in Brazil are relatively outdated and in need of investment. The figure below illustrates Petrobras historical investments by segment.
Figure 10: Petrobras investments breakdown Source: Petrobras

11%

5%

1% 15%

6%
11% 4% 23%

2%

5% 13% 10% 21%

2%

43%

52%

84% 46% 42% 55% 49%

60-69

70-79

80-89

90-99

00-09

E&P

Downstream

Gas & Energy

International

Distribution

Others

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After three decades of investments focused on E&P, Brazilian oil production and demand vastly exceeds its refining capacity. In order to satisfy the growing domestic demand for oil products and to eventually develop Brazil as a net oil exporter, Petrobras has recently presented a revised investment plan to increase its refining capacity and complexity. The plan will permit Brazil to produce high value-added products by refining heavy crude oil and producing diesel and gasoline of high quality to match international standards.
Figure 11: Petrobras historic and projected investments (annual average USD million) Source: Petrobras

44.800 6.320 14.720

14.204
2.277 3.159 23.760

154

1.041

60-69

70-79

80-89

90-99

00-09

10-14 P

E&P

Downstream

Others

Petrobras projected investments in the downstream segment from 2010 to 2014 amounts to USD 73.6 billion, a substantial increase from previous years and evidence of Petrobras renewed focus on the segment. Refinaria Abreu e Lima is one the biggest Petrobras projects in the downstream segment and will account for approximately 7% of all investment in the segment. 2.4.2. PDVSA

PDVSA has interests in 21 refineries around the world, comprised of five in Venezuela, five in US, eight in Europe and three in the Caribbean. In aggregate, PDVSA has a refining capacity of 3.0 million bbls/d.

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Figure 12: PDVSAs Refineries Source: PDVSA

100% PDVSA Lake Charles Corpus Christi Lemont Saint Croix 50% PDVSA Chalmette 50% PDVSA

Dundee 50% PDVSA Eastham 25% PDVSA

Nynashamn 50% PDVSA Gothenburg 50% PDVSA

Gelsenkirchen 50% PDVSA Karlsruhe 12% PDVSA Schwedt 19% PDVSA Camilo Cienf uegos 49% PDVSA Newstadt 13% PDVSA Ref inery rented to Curacao Government 100% PDVSA

Kingston 49% PDVSA

6 Ref ineries 100% PDVSA

PDVSA is the fourth largest supplier of crude oil and refined oil products in the United States of America (US). Three of PDVSAs US based refineries are held by Citgo which is wholly owned by PDVSA. Citgo is a leading energy company engaged in refining, transportation and marketing of petroleum in the US market. Citgo is considered to be one of the largest and most complex (weighted nelson complexity index of 12.38) independent refineries in US and the sixth largest marketer of gasoline in the country (6,500 branded independent stations). PDVSA has consistently invested in the downstream segment to increase its refining capacity and its capability to process heavy crude oil and produce high value-added products. Including the Project, PDVSA plans to invest more than USD 39 billion in the refining segment during the next five years.

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Figure 13: PDVSAs Projected Investments in the Refining Segment (USD billion) Source: PDVSA

45

41 32

40
35 30 25 20

25 16
7 2

15
10

5
0

2010

2011

2012

2013

2014

2015

Local refining

Foreign refining

Accumulated Investments

2.5. Oil Supply Contracts The Refinery has established the primary terms and conditions of the oil supply contracts with each of the Sponsors (the Oil Supply Contracts) which will be signed by the parties upon PDVSAs capital participation in RAL. The Oil Supply Contracts assure that the Refinery will have the necessary oil supply to operate at its full capacity of 230,000 bbls/d. The main terms and conditions of the Oil Supply Contracts are as follows: Oil Specification: o Oil from Petrobras must be BC 16 or equivalent; o Oil from PDVSA must be CARABOBO 16, MEREY 16, DECON 16 or equivalent; Quantity: o Minimum 115,000 bbls/d to be supplied individually by both Petrobras and PDVSA o If the Refinery is operating below full capacity, the 50:50 ratio will continue to apply (i.e., neither party will be obligated to supply more oil than the other). Term: o The contract is valid from the Refinerys commercial operation date to September 30th, 2036; Crude Oil Delivery Location: o Oil will be delivered to Suape from where it will be transported to the Refinery by underground pipelines; Price: o

Price will be determined according to formulas mutually agreed by both Sponsors. These formulas have been developed based on International Crude Market Indicators, referential crudes and consider price adjustments due to crude gravity and quality;

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2.6. BNDES Loan BNDES signed and fully disbursed the BRL 9.9 billion (USD 5.2 billion) BNDES Loan in August 2009 to finance a portion of the Project costs. The BNDES Loan has the following characteristics:
Table 9: BNDES Loan Terms & Conditions

Amount Borrower Repayment Interest Rate Interest Payment Currency Index Guarantee

BRL 9.9 billion (USD 5.2 billion) Refinaria Abreu e Lima S.A. Semi-annual equal principal payments following a 7-year grace period Fixed rate of 7.43% per annum Semi-annual; No grace period BRL USD Petrobras Corporate Guarantee

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3. Petrobras
3.1. General Overview Petrobras, Brazils largest company in terms of revenue, is an integrated international oil and gas company engaged in the exploration, development and production of hydrocarbons and in the refining, marketing, transportation, and distribution of oil and a wide range of petroleum products, petroleum derivatives, petrochemicals and liquid petroleum gas. Petrobras was founded in 1953 as the Brazilian national oil company. It began operations with 15 million barrels of oil equivalent (boe) of reserves and two refineries which were transferred from the former National Council of Petroleum. The company carried out oil and gas operations on behalf of the Brazilian government until 1997 when Brazil enacted the Oil Law which opened Brazilian oil and gas markets to private competitors. Petrobras is currently one of largest companies in the world by market capitalization, with a market value of USD 237 billion as of December 2010. At the end of 2009, Petrobras had proven reserves of 12.2 billion boe. During the same year the company produced 2.2 million boe/d and refined 1.9 million boe/d. Petrobras has a dominant position in the Brazilian oil and gas market, the 10th largest oil-consuming nation. The company owns 98% of Brazils refining capacity, more than 7,000 retail stations, several pipelines, all or part of 23 gas-fired power plants, and is developing capacity in petrochemicals, ethanol, and LNG. 3.2. Shareholder Structure The Brazilian Government owns directly and indirectly 64% of Petrobras common stock and 28% of Petrobras preferred stock. Brazilian law mandates that the government own at least 50% of the voting stock and has the right to appoint majority of the directors on the Board.
Table 10: Petrobras Capital Stock Source: Petrobras
S ha re s Federal Go vernment B NDESP A R B NDES Fundo de P articipao So cial - FP S FFIE (Fundo So berano ) A merican Depo sitary Receipts (Co mmo n Shares) A merican Depo sitary Receipts (P referred Shares) FM P - FGTS P etro bras Fo reigners (RES. No 2689 C.M .N) B o vespa and Others T o tal 4,057,432,41 9 1 4,749,1 ,51 58 21 8,845,426 8,433,460 505,652,285 1 ,989,590 ,521 1 ,477,085,956 1 83,772,748 1 90,957,444 ,1 2,365,578,444 13 ,0 4 4 ,4 9 6 ,9 3 0 % 3 1.10 % 11.6 1% 1.6 8 % 0 .0 6 % 3 .8 8 % 11.6 7 % 11.3 2 % 1.4 1% 9 .13 % 18 .13 % 10 0 .0 0 %

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3.3. Business Segments Petrobras is structured along five primary business lines: E&P; Refining, Transportation and Marketing; Gas and Power; Distribution and International.
Figure 14: Petrobras Operating Income Composition (LTM July 2010) Source: Petrobras
Gas and Power Distribution 4% 4%

Refining and Marketing 27%

E&P 65%

E&P: Petrobras is engaged in oil and gas exploration and production in Brazil. Brazilian production represents approximately 90% of Petrobras total production and Petrobras production makes up an estimated 99% of total Brazilian production. Petrobras holds concessions all over Brazil, but over 84% of proven reserves are concentrated in the offshore Campos basin. Refining, Transportation & Marketing: The refining, transportation & marketing segment is primarily engaged in refining crude oil, but it also produces petrochemicals and fertilizer. Petrobras has 2.2 million bbls/d of refining capacity in Brazil, which is equivalent to 98% of Brazils total capacity. Petrobras operates 15 refineries, 11 of which are in Brazil, located primarily in the southeastern region of the country. Petrobras refineries are typically smaller and less complex when compared to its international peers. It plans to spend USD 74 billion from 2010 to 2014 to increase its refining capacity and its ability to handle lower quality crude oil while achieving higher environmental standards. Petrobras also owns a significant stake in Braskem S.A., Brazils largest petrochemical company. Distribution: Through its distribution segment, Petrobras owns more than 7,000 retail petroleum stations under the BR brand. Most of stations are operated by franchisees and ones that are owned by Petrobras are operated by third-party contractors, as required by Brazilian law. Gas and Power: The gas and power segment is engaged in the transportation and distribution of natural gas, and gas-fired electricity generation. As a source of Brazils energy needs, natural gas has grown from 4% in 1998 to 7% in 2009. Domestic production has been supplemented with imports from Bolivia and will be increasingly supplemented with LNG via its two import terminals. Petrobras owns all or part of 20 local gas distribution companies throughout Brazil. Additionally, Petrobras maintains interests in 23 thermoelectric power plants.

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International: Petrobras operates in 24 countries outside of Brazil. It has assets around the world, but it is particularly active in South America, the Gulf of Mexico, and offshore West Africa. The companys international operations are focused on oil and gas exploration and production, but also include refining and petrochemical assets located in Argentina, US, and Japan. Petrobras international operations produced 225,000 boe/d and had proven reserves of 529 million boe at the end of 2009. The company aims to leverage its experience in exploring and developing deepwater assets by assembling a global portfolio of E&P assets. However, following the discovery of its pre-salt resources in Brazil, Petrobras will reduce investment in its international assets to focus on pre-salt development.

3.4. Financials
Table 11: Petrobras Financials (USD million) Source: Petrobras
2005 Net Revenues EB ITDA EB ITDA margin Net Inco me Capex Cash & Equivalents To tal Debt Net Debt / Ebitda 56,324 1 7,638 31 % 1 0,344 1 0,365 9,871 21 77 ,1 0.6x 2006 72,347 22,923 32% 1 2,826 1 4,643 1 2,688 21 ,338 0.4x 2007 87,735 25,333 29% 1 38 3,1 20,978 6,987 21 ,895 0.6x 2008 1 8,257 1 31 ,083 26% 1 8,879 29,874 6,499 27,1 23 0.7x 2009 91 ,869 28,982 32% 1 5,504 35,1 34 1 69 6,1 57,1 32 1 .4x 2 0 10 1 20,052 32,665 27% 1 84 9,1 45,078 1 7,633 69,431 1 .6x

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4. PDVSA
4.1. General Overview PDVSA is Venezuelas largest company and ranks as one of the worlds largest vertically integrated oil and gas companies. According to Petroleum Intelligence, PDVSA is the fourth largest oil company in the world. The company is wholly owned by the Republic of Venezuela and is responsible for the countrys development and exploration of oil and gas reserves. PDVSA plays a strategic role in Venezuelas economy. In 2010, it was estimated that PDVSA accounted for 16% of Venezuelas GDP, 90% of Venezuelas exports and 55% of the countrys fiscal revenues. Venezuelas crude oil reserves are the largest in the world, estimated at 297 billion boe which equates to more than 170 years of production at current levels. However, approximately 80% of its reserves consist of extra-heavy crude oil which requires special processing. According to US Geological Survey, the undiscovered Orinoco Basin reserves in Venezuela have the potential to reach 512 billion boe. If these reserves are proven, Venezuela will own the largest oil reserve in the world.
Figure 15: Global and Venezuelan Oil and Gas Proved Reserves Source: OPEC Annual Statistical Bulletin
Venezuelas oil and gas proved reserves (billion boe)

Global oil proved reserves (billion boe)

2005 2006 264 87 1 38 15 1 1 02 98 79 41 40 37 2007 264 99 1 36 15 1 1 02 98 79 44 40 37 2008 264 17 2 1 38 15 1 1 02 98 79 44 40 37 2009 265 2 11 1 37 15 1 1 02 98 79 46 40 37

242 203 30 106 26 80

Saudi A rabia V e ne zue la

264 80 1 36 15 1 1 02 98 78 41 40 36

31
Iran Iraq Kuwait

116 29
87

129 29 172 99 211

United A rab Emirates Russia Libya

2005

2006 Oil

2007 Gas

2008

2009

Kazakhstan Nigeria

PDVSA currently produces approximately 3.0 million bbls/d of crude oil and 633 thousands boe/d of natural gas. PDVSA has interests in 21 refineries around the totaling a refining capacity of 3.0 million bbls/d. The Company currently refines around 2.7 million bbls/d. PDVSA has an extensive distribution network in the US through Citgo. In fact, PDVSA is the fourth largest supplier of crude oil and refined petroleum products in the US after Canada, Mexico and Saudi Arabia. Over 95% of PDVSAs revenues in 2009 came from the international market, including both, exports and foreign sales.

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4.2. Shareholder Structure PDVSA is 100% owned by the Venezuelan Government. 4.3. Business Segments PDVSA is structured along four primary segments: E&P, Gas, Refining, Trade and Supply and Other activities.
Figure 16: PDVSAs Sales Composition (1H 2010) Source: PDVSA
Other 1%

Gas 1%

E&P 42%

Refining Trade and Supply 56%

E&P: PDVSA has exploration activities in Venezuela and other countries such as Bolivia, Ecuador, Cuba, Argentina and Uruguay. Production activities remain located strictly in the Venezuelan territory. The E&P activities include the search for oil and gas reserves, production of oil and gas, and the transportation of oil and natural gas to refineries and fractionation plants. Refining, Trade and Supply: PDVSAs activities in Venezuela include the administration of refineries, marketing and transportation of crude oil and refined products, under the brand name PDV. The refining, trade and supply activities in the US consist of the administration of refineries and gasoline and by-products marketing, mainly on the East Coast and the Midwest regions of the country, under the brand name CITGO. PDVSA also has refining activities in the Caribbean and Europe. Gas: PDVSAs activity includes the management of gas processing plants, upgrading and commercialization of natural and liquid gas, both for industrial and household appliance, as well as its transportation, distribution, storage and sale.

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4.4. Financials
Table 12: PDVSAs Financials (USD million) Source: PDVSA
2005 Revenues EB ITDA EB ITDA margin Net Inco me Capex Cash & Equivalents To tal Debt Net Debt / Ebitda 82.91 5 22.559 27% 6.483 3.939 1 .800 3.433 0,1 x 2006 99.252 27.1 74 27% 5.452 1 .748 2.282 2.91 4 0,0x 2007 96.242 28.563 30% 6.273 1 87 3.1 3.325 1 1 6.61 0,5x 2008 1 25.465 32.837 26% 9.41 3 1 5.848 4.483 1 5.095 0,3x 2009 73.683 1 .734 1 1 6% 4.498 1 3 5.31 6.981 21 9 .41 1 ,2x 2 0 10 94.929 28.402 30% 3.202 1 3.307 6.01 7 24.950 0,7x

4.5. PDVSAs Investment Plan PDVSAs investment program is currently being undertaken via the 2010-2015 business plan called Plan Siembra Petrolera (Oil Sowing Plan). The plan outlines USD 252 billion in projects in Venezuela, the Caribbean and Latin America. Some of the key projects and goals under the plan are the following: Increase crude oil production to 4,460 million bbls/d by 2015; Expand refining capacity from 3 million bbls/d to 3.2 million bbls/d by 2015; Develop the gas sector and double production by 2015; Increase tanker capacity to add new markets for crude oil; and, Reduce domestic gasoline demand by increasing natural gas dispatch facilities for dual-fuel vehicles.

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5. Financial Projections
RAL engaged Ernst & Young to produce an economic and financial study (the Financial Plan) regarding the feasibility of the Project. The Financial Plan, dated as of April 2010, was delivered to Petrobras and PDVSA, and considers several assumptions that were considered valid and reasonable at that time. In an effort to provide an updated equity contribution forecast, PDVSA carried out a limited review of the Financial Plan in the 2011 first quarter (the Revised Financial Plan). The Revised Financial Plan (see section 5.2) was limited to updates related to foreign exchange rates, capital expenditures, and commercial operation dates. Despite the limited review carried out by PDVSA, it is important to highlight that, as a condition precedent to signing legal documentation, the Lenders will receive an updated Revised Financial Plan that considers updated projections regarding capital expenditures, crude oil and oil product prices, macroeconomic indicators, and any other assumptions that may impact the financial projections of the Refinery. 5.1. RAL Financial Plan All financial projections contained in the Financial Plan were developed in USD in real terms (i.e. does not consider inflation). The USD/BRL rate is kept constant at 2.34 for the entire projection. The main assumptions and outputs of the Financial Plan are presented below. 5.1.1. Investments

The Financial Plan considers investments of USD 13.36 billion, itemized as follows:
Table 13: Financial Plans Investments (USD million real terms) Source: Financial Plan
2006 Engineering Equipments M aterials Civil Wo rk A ssembling Others M anagement T o tal 0 1 0 0 0 0 0 2 2007 2 20 6 1 1 1 1 0 4 55 2008 1 0 99 31 57 55 2 21 276 2009 26 249 78 1 43 1 39 5 53 693 2 0 10 18 1 11 ,1 2 347 638 623 22 239 3 ,0 9 8 2 0 11 1 39 1 4 ,31 41 0 754 735 26 282 3 ,6 5 9 2 0 12 17 1 1 03 ,1 344 633 61 7 22 237 3 ,0 7 2 2 0 13 86 81 1 253 465 454 1 6 1 74 2 ,2 5 8 2 0 14 1 0 90 28 52 50 2 1 9 250 T o tal 508 4 ,7 9 7 1,4 9 7 2 ,7 5 3 2 ,6 8 6 94 1,0 2 9 13 ,3 6 3

5.1.2.

Revenues assumptions

The Financial Plan considers that Unit 1 and Unit 2 will commence operations in October 2012 and July 2013, respectively.

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The Financial Plan assumes a 96% utilization factor for the Project and assumes that 50% of the oil to be refined comes from Brazil (BC 16) and 50% comes from Venezuela (Carabobo 16 or equivalent). These assumptions result in the following annual output:
Table 14: Refinerys Projected Output (m3 / year) Source: Financial Plan
P ro duc t Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur T o tal Unit 1 4,580,547 339,537 787,982 307,505 358,756 70,470 1 9 9,21 6 ,4 6 4 ,0 17 Unit 2 4,465,232 429,226 1 27,51 ,1 9 243,442 83,283 1 40,940 1 02,502 6 ,5 9 2 ,14 4 T o tal 9 ,0 4 5 ,7 7 9 7 6 8 ,7 6 3 1,9 15 ,5 0 1 5 5 0 ,9 4 7 4 4 2 ,0 3 9 2 11,4 10 12 1,7 2 1 13 ,0 5 6 ,16 0

The Financial Plan considers that the Project will sell its entire output in the domestic market, with a substantial portion being sold in Pernambuco state.
Table 15: Oil Products Commercialization Source: Financial Plan
Ins ide P e rna m buc o State 1 0% 0% 1 00% 1 00% 1 00% 0% 1 00% O ut s ide P e rna m buc o S t a t e 90% 1 00% 0% 0% 0% 1 00% 0%

Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur

The price of oil and related products were based on the Plano Decenal de Energia 2008-2017, produced by the Brazilian Energetic Research Company (Empresa de Pesquisa Energtica). The prices illustrated in the table below include taxes.
Table 16: Projected Sales Prices (USD/m3) Source: Financial Plan
2 0 12 91 1 556 21 0 1 536 490 99 1 21 2 0 13 883 539 1 39 1 495 478 99 1 21 2 0 14 857 524 99 1 457 467 99 1 21 2 0 15 836 51 1 99 1 426 457 99 1 21 2 0 16 820 502 99 1 401 450 99 1 21 2 0 17 808 494 99 1 383 444 99 1 21 ... 808 494 99 1 383 444 99 1 21

Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur

5.1.3.

Operating Costs

5.1.3.1. Fixed Costs The table below exhibits the projected fixed costs, including materials, workforce, utilities and regular maintenance that are assumed in the Financial Plan.

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CONFIDENTIAL

Table 17: Projected Fixed Costs (BRL000 /year) Source: Financial Plan
F ixe d C o s t s M aterials Wo rkfo rce Utilities Regular M aintenance To tal 9,494 1 49,400 34,777 45,000 2 3 8 ,6 7 1

5.1.3.2. Planned Maintenance The table below exhibits the estimated annual projected maintenance cost:
Table 18: Projected Planned Maintenances (BRL000/year) Source: Financial Plan
2 0 12 P lanned M aintenance 0 2023 P lanned M aintenance 30,000 2 0 13 6,000 2024 61 ,000 2 0 14 61 ,000 2025 6,000 2 0 15 30,000 2026 336,840 2 0 16 336,840 2027 30,000 2 0 17 6,000 2028 6,000 2 0 18 6,000 2029 61 ,000 2 0 19 85,000 2030 6,000 2020 6,000 2031 360,840 2021 336,840 2032 6,000 2022 6,000 2033 85,568

5.1.3.3. Logistic Costs The Financial Plans projected logistic costs are presented in the following table:
Table 19: Projected Logistic Costs Source: Financial Plan
Oil Products (output) Diesel - Inside Pernambuco state Pipelines Diesel - Outside Pernambuco state Pipelines Suape Terminal Port Fees Naphta - Outside Pernambuco State Pipelines Suape Terminal Port Fees LPG - Inside Pernambuco state Pipelines HCGO - Inside Pernambuco state Pipelines Cost 0.4 0.4 2.5 2.7 0.4 2.5 2.7 0.4 0.4 Unit BRL/ m3 BRL/ m3 BRL/ ton BRL/ ton BRL/ m3 BRL/ ton BRL/ ton BRL/ m3 BRL/ m3 Crude Oil (raw material) BC 16 or equivalent (Domestic Oil) Pipelines and freight Suape Terminal Port Fees Carabobo 16 or equivalente (Foreign Oil) Pipelines and freight Suape Terminal Port Fees Cost 11.0 2.5 2.7 Unit BRL/ m3 BRL/ ton BRL/ ton

18.1 2.5 2.7

BRL/ m3 BRL/ ton BRL/ ton

5.1.3.4. Crude Oil Crude oil price projections were also based on the Plano Decenal de Energia 2008-2017 and are held constant from 2017 onward. The values in the following table are net of taxes.

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CONFIDENTIAL

Table 20: Projected Crude Oil Prices (USD/m3) Source: Financial Plan
2012 Crude Oil 430 2013 41 7 2014 405 2015 395 2016 388 2017 382 ... 382

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5.1.4.

Projected Financial Statements

Table 21: Projected Income Statement Source: Financial Plan

US D m illio n ( re a l t e rm s ) G ro s s R e v e nue s Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur G ro s s R e v e nue s S a le s D e duc t io ns P IS and COFINS ICM S CIDE N e t R e v e nue s C o s t s a nd E xpe ns e s M aterials Wo rkfo rce Utilities Regular M aintenance P lanned M aintenance Other Operatio nal Co sts Crude Oil Lo gistic Co sts E B IT D A EB ITDA M argin Depreciatio n E B IT Financial Result EB T Inco me Tax and So cial Co ntributio n N e t Inc o m e Net M argin 2 0 12 1 ,043 47 41 18 1 44 2 1 1,2 9 6 (34) (34) 1,2 6 2 (785) (1 ) (8) (2) (1 ) (1 ) (759) (1 3) 477 38% (271 ) 206 (1 49) 57 (6) 2 0 13 6,01 8 299 1 88 642 1 91 1 4 9 7 ,3 6 1 ( 1,4 4 4 ) (1 ,240) (204) 5 ,9 17 ( 4 ,7 5 5 ) (3) (48) (1 ) 1 (6) (3) (8) (4,587) (89) 1,16 1 20% (1 1 ,31 ) ( 15 0 ) (1 49) (298) 2 0 14 7,755 403 1 89 803 206 21 1 5 9 ,3 9 1 ( 2 ,0 5 9 ) (1 ,788) (271 ) 7 ,3 3 2 ( 6 ,3 0 3 ) (4) (64) (1 5) (9) (26) (1 ) 1 (6,049) (1 26) 1,0 2 9 1 4% (1 ,336) (307) (1 49) (456) ( 4 5 5 .5 8 ) -6% 2 0 15 7,564 393 1 89 785 202 21 1 5 9 ,17 0 ( 2 ,0 2 5 ) (1 ,754) (271 ) 7 ,14 5 ( 6 ,14 3 ) (4) (64) (1 5) (9) (1 3) (1 ) 1 (5,903) (1 26) 1,0 0 1 1 4% (1 ,336) (335) (1 49) (484) ( 4 8 3 .5 1) -7% 2 0 16 7,41 4 386 1 89 772 1 99 21 1 5 8 ,9 9 5 ( 1,9 9 2 ) (1 ) ,721 (271 ) 7 ,0 0 4 ( 6 ,16 0 ) (4) (64) (1 5) (9) (1 44) (1 ) 1 (5,788) (1 26) 844 1 2% (1 ,336) (492) (1 49) ( 6 4 1) ( 6 4 1.0 1) -9% 2 0 17 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 5 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 966 1 4% (1 ,336) (370) (1 43) ( 5 13 ) ( 5 13 .2 5 ) -7% 2 0 18 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 5 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 966 1 4% (1 ,336) (370) (1 ) 31 (502) ( 5 0 1.8 2 ) -7% 2 0 19 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 6 9 ) (4) (64) (1 5) (9) (36) (1 ) 1 (5,704) (1 26) 932 1 4% (1 ,336) (404) (1 20) (524) ( 5 2 4 .2 1) -8% 2020 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 5 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 966 1 4% (1 ,336) (370) (1 09) (479) ( 4 7 8 .9 7 ) -7% 2021 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 6 ,0 7 6 ) (4) (64) (1 5) (9) (1 44) (1 ) 1 (5,704) (1 26) 824 1 2% (1 ,336) ( 5 12 ) (97) (609) ( 6 0 9 .16 ) -9% 2022 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 6 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 965 1 4% (1 ,065) ( 10 0 ) (86) ( 18 6 ) ( 18 6 .0 9 ) -3%

5 0 .9 5 ( 2 9 8 .3 6 ) 4% -5%

US D m illio n ( re a l t e rm s ) G ro s s R e v e nue s Diesel Naphta Co ke LP G HCGO Sulfuric acid Sulfur G ro s s R e v e nue s S a le s D e duc t io ns P IS and COFINS ICM S CIDE N e t R e v e nue s C o s t s a nd E xpe ns e s M aterials Wo rkfo rce Utilities Regular M aintenance P lanned M aintenance Other Operatio nal Co sts Crude Oil Lo gistic Co sts E B IT D A EB ITDA M argin Depreciatio n E B IT Financial Result EB T Inco me Tax and So cial Co ntributio n N e t Inc o m e Net M argin

2023 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 4 6 ) (4) (64) (1 5) (9) (1 3) (1 ) 1 (5,704) (1 26) 954 1 4% (25) 929 (74) 855 (203) 6 5 1.5 1 9%

2024 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 6 0 ) (4) (64) (1 5) (9) (26) (1 ) 1 (5,704) (1 26) 941 1 4% 941 (63) 878 (209) 6 6 9 .16 1 0%

2025 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 6 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 965 1 4% 965 (51 ) 9 13 (21 7) 6 9 5 .8 1 1 0%

2026 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 6 ,0 7 8 ) (4) (64) (1 5) (9) (1 44) (1 ) 1 (5,704) (1 26) 823 1 2% 823 (40) 783 (1 86) 5 9 6 .6 1 9%

2027 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 4 6 ) (4) (64) (1 5) (9) (1 3) (1 ) 1 (5,704) (1 26) 954 1 4% 954 (29) 926 (220) 7 0 5 .4 0 1 0%

2028 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 6 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 965 1 4% 965 (1 7) 947 (225) 7 2 1.9 3 1 0%

2029 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 6 0 ) (4) (64) (1 5) (9) (26) (1 ) 1 (5,704) (1 26) 941 1 4% 941 (3) 938 (223) 7 14 .8 8 1 0%

2030 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 6 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 965 1 4% 965 965 (230) 7 3 4 .9 8 1% 1

2031 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 6 ,0 8 8 ) (4) (64) (1 5) (9) (1 54) (1 ) 1 (5,704) (1 26) 8 13 1 2% 8 13 8 13 (1 93) 6 19 .2 4 9%

2032 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 3 6 ) (4) (64) (1 5) (9) (3) (1 ) 1 (5,704) (1 26) 965 1 4% 965 965 (230) 7 3 4 .9 8 1% 1

2033 7,305 380 1 89 762 1 96 21 1 5 8 ,8 6 8 ( 1,9 6 7 ) (1 ,696) (271 ) 6 ,9 0 1 ( 5 ,9 7 0 ) (4) (64) (1 5) (9) (37) (1 ) 1 (5,704) (1 26) 930 1 3% 930 930 (221 ) 7 0 9 .0 3 1 0%

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Table 22: Projected Debt Service Coverage Ratio Source: Financial Plan
US D m illio n ( re a l t e rm s ) 2 0 12 2 0 13 2 0 14 2 0 15 2 0 16 2 0 17 2 0 18 2 0 19 2020 2021 2022

D SC R

3 .17 x

8 .5 5 x

7 .3 1x

6 .7 2 x

2 .4 1x

1.7 7 x

1.8 1x

1.7 9 x

1.9 0 x

1.6 6 x

1.9 8 x

C a s h G e ne ra t io n EB ITDA Inco me Tax and So cial Co ntributio n Changes in wo rking capital

471 477 (6) 0

1,2 7 0 1 61 ,1 1 09

1,0 8 6 1 ,029 57

998 1 ,001 (3)

841 844 (3)

964 966 (2)

966 966 -

932 932 -

966 966 -

824 824 -

965 965 -

D e bt S e rv ic e P rincipal A mo rtizatio n Interest P ayment

14 9 1 49

14 9 1 49

14 9 1 49

14 9 1 49

350 201 1 49

544 401 1 43

532 401 1 31

521 401 1 20

509 401 1 09

498 401 97

486 401 86

US D m illio n ( re a l t e rm s )

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

D SC R

1.6 9 x

1.5 8 x

1.6 6 x

1.4 3 x

1.7 3 x

1.7 7 x

3 .5 4 x

N/A

N/A

N/A

N/A

C a s h G e ne ra t io n EB ITDA Inco me Tax and So cial Co ntributio n Changes in wo rking capital

801 954 (203) 50

733 941 (209) 1

749 965 (21 7) 2

629 823 (1 86) (8)

742 954 (220) 8

740 965 (225) 1

7 17 941 (223) (1 )

737 965 (230) 2

6 10 81 3 (1 93) (9)

744 965 (230) 9

707 930 (221 ) (2)

D e bt S e rv ic e P rincipal A mo rtizatio n Interest P ayment

475 401 74

464 401 63

452 401 51

441 401 40

429 401 29

4 18 401 1 7

203 200 3

5.2. Revised Financial Plan In order to estimate the amount of equity that will have to be injected in the Refinery, PDVSA updated some of the Financial Plans assumptions. The assumptions that were updated include foreign exchange rates, capital expenditures, and commercial operation dates. It is important to highlight that these are preliminary figures and, although PDVSA does not expect significant variations, a further updated Revised Financial Plan shall be submitted to Lenders as a condition precedent to signing of legal documentation. 5.2.1. Foreign Exchange Rate

The projections for the USD/BRL exchange rate were based on figures from the Focus Report as of March 2011. The Focus Report is released weekly by the Brazilian Central Bank. The EUR/BRL exchange rate was based on projections from BES Investimento do Brasils Economic Department.
Table 23: Foreign Exchange Rates Source: Brazilian Central Bank and BES Investimento do Brasil
2006 A USD/BRL (year average) EUR/BRL (year average) 2.1 8 2.74 2007 A 1 .95 2.67 2008 A 1 .84 2.70 2009 A 1 .99 2.78 2 0 10 A 1 .76 2.33 2 0 11 P 1 .68 2.28 2 0 12 P 1 .74 2.20 2 0 13 P 1 .79 2.1 7 2 0 14 P 1 .84 2.1 9 2 0 15 P 1 .87 2.25 2 0 16 P 1 .87 2.25

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5.2.2.

Capex

Capex assumptions were updated considering the progress of the Refinerys construction as of December 2010, as well as, the estimated schedule for remaining investments based on contracts that have been executed or that are under negotiation.
Table 24: Projected Investments Source: PDVSA
2006 A USD/B RL (year average) EUR/B RL (year average) A ctual Investments (B RL millio n) P ro jected Investments (by currency) B RL (millio n) USD (millio n) EUR (millio n) P ro jected Investments (B RL millio n) T o t a l Inv e s t m e nt s ( B R L m illio n) T o t a l Inv e s t m e nt s ( US D m illio n) 2.1 8 2.74 5 2007 A 1 .95 2.67 99 2008 A 1 .84 2.70 523 2009 A 1 .99 2.78 81 4 2 0 10 A 1 .76 2.33 3,075 2 0 11 P 1 .68 2.28 2 0 12 P 1 .74 2.20 2 0 13 P 1 .79 2.1 7 2 0 14 P 1 .84 2.1 9 2 0 15 P 1 .87 2.25 2 0 16 P 1 .87 2.25 4 ,5 16 T o tal

5 2

99 51

523 284

8 14 408

3 ,0 7 5 1,7 4 8

8,403 50 1 39 8,802 8 ,8 0 2 5 ,2 4 0

8,31 9 60 1 63 8,783 8 ,7 8 3 5 ,0 4 8

5,009 36 98 5,288 5 ,2 8 8 2 ,9 5 4

701 5 1 4 740 740 402

297 2 6 31 4 3 14 16 8

54 0 1 57 57 31

2 2 ,7 8 3 15 4 420 2 3 ,9 8 4 2 8 ,5 0 0 16 ,3 3 6

5.2.3.

Commercial Operation Date

The commercial operation dates for Unit 1 and Unit 2 were updated to January 2013 and August 2013, respectively. 5.2.4. Estimated Equity Contribution

Considering the updates mentioned above, the total amount of equity injection in the Refinery is the forecast at BRL 17.6 billion (USD 10.1 billion).
Table 25: Sources and Uses (BRL million) Source: PDVSA
S o urc e s Cash Flo w fro m Operating A ctivities B NDES Lo an Equity Injectio n T o t a l S o urc e s Us e s Capex Debt Service Interest P ayment P rincipal A mo rtizatio n T o t a l Us e s Cash Flo w C a s h B a la nc e 2006 A 5 5 2006 A 5 5 2007 A 99 99 2007 A 99 99 2008 A 523 523 2008 A 523 523 2009 A 9,890 654 10 ,5 4 4 2009 A 81 4 96 96 9 11 9,634 9 ,6 3 4 2 0 10 A 2 0 10 A 3,075 681 681 3 ,7 5 6 (3,756) 5 ,8 7 8 2 0 11 P 3,575 3 ,5 7 5 2 0 11 P 8,802 650 650 9 ,4 5 3 (5,878) 2 0 12 P 9,456 9 ,4 5 6 2 0 12 P 8,783 673 673 9 ,4 5 6 2 0 13 P 2,707 3,273 5 ,9 8 0 2 0 13 P 5,288 693 693 5 ,9 8 0 2 0 14 P 1 ,953 1,9 5 3 2 0 14 P 740 71 2 71 2 1,4 5 2 501 501 2 0 15 P 1 ,768 1,7 6 8 2 0 15 P 31 4 724 724 1,0 3 8 731 1,2 3 2 2 0 16 P 1 ,406 1,4 0 6 2 0 16 P 57 1 00 ,1 725 376 1,15 8 249 1,4 8 1 T o tal 7,835 9,890 1 7,586 3 5 ,3 11 T o tal 28,500 5,330 4,954 376 3 3 ,8 3 0 1 ,481 1,4 8 1

Considering that PDVSA will be responsible for 40% of total equity, PDVSA commits to contribute BRL 7.0 billion (USD 4.1 billion), with BRL 854 million (USD 510 million) as Initial Equity Contribution and BRL 6.2 billion (USD 3.6 billion) from 2011 to 2013.

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Table 26: Equity Injection (BRL million) Source: PDVSA

2006 A To tal Equity Injectio n P D V S A E quit y Inje c t io n Initial Equity Co ntributio n Remaining P ro jected Equity Injectio n 5 2007 A 99 2008 A 523 2009 A 654 2 0 10 A 2 0 11 P 3,575 1,9 4 2 854 1 ,088 2 0 12 P 9,456 3 ,7 8 3 3,783 2 0 13 P 3,273 1,3 0 9 1 ,309 T o tal 1 7,586 7 ,0 3 4 854 6,1 80

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6. Market Overview
6.1. Brazilian Oil Reserves and Production Brazil has the 16th largest proven oil reserve in the world with 12.9 billion bbls by the end of 2009. Brazilian reserves have been consistently increasing in the last ten years, presenting a compounded annual growth rate (CAGR) of 4.7% from 1999 to 2009. In the same period, global reserves grew at an annual average of 2.1%. Brazilian oil production has been growing even more than oil reserves, presenting a CAGR of 6.6% in the last ten years.
Figure 17: Brazilian Oil Proved Reserves and Oil Production Source: ANP

Oil Proved Reserves (billion bbls)

Oil Production (million bbls)

CAGR: 4.7%
11,8 12,2 12,6 12,8 12,9 451 472 531

CAGR: 6.6%
629 638 663

8,2

8,5

8,5

9,8

10,6

11,2

712

546

541

596

401

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Onshore Offshore

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Onshore Offshore

In 2006, Petrobras discovered the first signs of oil in the pre-salt section. In 2007, a consortium formed by Petrobras, BG Group, and Petrogal discovered the Tupi field. Tupi contains substantial reserves in a pre-salt zone, 18,000 feet below the oceans surface, under a thick layer of salt. Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as Iracema, Carioca, Iara, Libra, Franco and Guara. Additional pre-salt discoveries were also announced in the Campos and Espirito Santo Basins. The total pre-salt resources are difficult to define, but specialists estimates the oil reserves at more than 36 billion bbls.
Figure 18: Pre-Salt map Source: Petrobras

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Brazils pre-salt announcements immediately transformed the nature and focus of Brazils oil sector. Moreover, the potential impact of the discoveries on the global oil market cannot be overemphasized. The scale of the potential expansion in production will test Petrobras exploration and production resources and Brazils infrastructure.
Figure 19: Global Oil Proved Reserves and estimated Pre-Salt Impact in Brazilian Reserves Source: OPEC and Anlise Energia Annual Report 2010

1st -Saudi Arabia 2nd- Venezuela 3rd- IR Iran 4th- Iraq 5th- Kuwait 6th- United Arab Emirates 7th- Russia 8th- Brazil with Pre-Salt 8th- SP Libyan AJ 9th- Kazakhstan 10th- Nigeria 11th -Qatar 12th- United States 13th- China 14th- Brazil 25 19 18 13 49 44 40 37 79 102 98 115 137 211

265

In its 2010-2014 business plan, Petrobras plans to invest USD 33 billion in pre-salt and USD 75.2 billion in post-salt production E&P activities to achieve a domestic oil production of 4 million bbls/d by 2020. More than a quarter of this production is expected to come from pre-salt oil. The Brazilian government released the proposed regulatory framework for the pre-salt reserves in August 2009. The framework consists of four acts of legislation. The first two bills were signed into law in July of 2010. The first law creates a new agency, Petrosal, to manage new pre-salt production. The second law allows the government to capitalize Petrobras by granting the company 5 billion bbls of unlicensed pre-salt oil reserves in exchange for a larger ownership share. The other two bills were approved by Congress in December 2010, but have not yet been signed into law. The first bill establishes a new development fund to manage government revenues from pre-salt oil, and the second bill lays out a new production sharing agreement (PSA) system for pre-salt reserves.

In contrast to the earlier concession-based framework, Petrobras will be the sole operator of each PSA and would hold a minimum 30% stake in all pre-salt projects. Once a final agreement is in place, Brazil is expected to hold an auction round for exploration blocks.

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6.2. Brazilian Refining Market According to ANP, as of 2009 Brazilian refining capacity amounted to 332,703 m3/day. Petrobras currently operates 11 of the 16 refineries in Brazil, most of which are located near the major demand and production centers. The largest refinery in Brazil is located in Paulnia, So Paulo with a refining capacity of 66,000 / m3 / day.
Table 27: Brazilian Refineries Nominal Capacity (m3/day - 2009) Source: ANP
R e f ine rie s ( S t a t e s ) Replan (SP ) RLA M (B A ) Revap (SP ) Reduc (RJ) Repar (P R) Refap (RS) RP B C (SP ) Regap (M G) Recap (SP ) Reman (A M ) P o lo de Guamar (RN) Rio grandense (RS) M anguinho s (RJ) Lubno r (CE) Univen (SP ) Dax Oil (B A ) T o tal 2000 56,000 47,000 36,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 1 ,728 2,000 2,200 1 ,000 3 11,2 2 8 2001 56,000 47,000 36,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 1 ,728 2,000 2,200 1 ,000 3 11,2 2 8 2002 56,000 47,000 36,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 1 ,728 2,700 2,200 1 ,000 3 11,9 2 8 2003 58,000 51 ,350 40,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 1 ,728 2,700 2,200 1 ,000 3 2 2 ,2 7 8 2004 58,000 51 ,350 40,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 1 ,728 2,700 2,200 1 ,000 3 2 2 ,2 7 8 2005 58,000 51 ,350 40,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 4,328 2,700 2,200 1 00 ,1 3 2 4 ,9 7 8 2006 58,000 51 ,350 40,000 38,500 30,000 30,000 27,000 24,000 8,500 7,300 4,328 2,700 2,200 1 00 ,1 3 2 4 ,9 7 8 2007 58,000 51 ,350 40,000 38,500 32,000 30,000 27,000 24,000 8,500 7,300 4,328 2,700 2,200 1 00 ,1 1 00 ,1 3 2 8 ,0 7 8 2008 61 ,000 46,950 40,000 38,500 35,000 30,000 27,000 24,000 8,500 7,300 4,328 2,700 2,200 1 ,300 1 00 ,1 275 3 3 0 ,15 3 2009 66,000 44,500 40,000 38,500 35,000 30,000 27,000 24,000 8,500 7,300 4,328 2,700 2,200 1 ,300 1 00 ,1 275 3 3 2 ,7 0 3

Despite being the 10th largest oil consumer in the world, Brazil is expected to experience sharp growth in demand for oil products in the coming years, primarily a result of the economys strong growth projections.
Figure 20: Brazilian GDP and Global Oil Consumption Source: IPEA and Petrobras

Brazilian GDP (BRL trillion)

18,7
3,5

Global Oil Consumption (million boe/d)

3,7

3,9

4,0

2,7

2,8

3,0

3,1

3,1

3,4

8,6
4,4

3,2 2,8 2,7 2,6 2,4 2,4 2,3 2,2 1,9 1,9 1,8 1,7 1,6 1,6

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 E P P P P

The growth of Brazils refining capacity has not kept pace with domestic demand. While Brazils oil production and demand have been growing fast in recent years, Brazils refining capacity has hardly

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increased in the last decade, presenting a CAGR of less than 1.0%. Brazils oil production and demand has overtaken refining capacity, resulting in Brazil being a net importer of refined oil products. In order to satisfy growing domestic demand for oil products, Petrobras has recently presented an aggressive plan to increase its refining capacity in order to make Brazil self-sufficient in oil products in the short term, and eventual net exporter of high value-added oil products in the medium to long term. Petrobras plans to increase the volume of oil processed domestically by 470,000 bbls/d by 2014 and by an additional 936,000 bbls/d by 2020. The companys projected investment in the refining and supply segment from 2010 to 2014 amounts to USD 73.6 billion.
Figure 21: Brazilian Oil Production, Refining and Demand (000 bbls/d) Source: Petrobras

134%
7.000 6.000 5.000 3.950 2.980 1.971 1.393 181 1.036 1.791 1.933 2.260 2.356 93% 96%

114% 100% 50% 3.196 2.794

4.000
3.000

0%
-50% -100%

2.000
1.000

0
1980 2009 2014E 2020E

-150%

A) Oil Production

B) Processed Oil

C) Demand for Oil Products

(B) / (C)

6.3. Brazilian Diesel Market Diesel is the main source of energy in Brazil. According to the Brazilian Energy Balance, diesel accounted for 18% of the Brazilian energy consumption in 2009 and represented 47% of the consumption of energy oil products in the country. The transportation sector is the main consumer of diesel representing 82% of the total domestic consumption.

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Figure 22: Brazilian Energy Consumption and Diesel Consumption Source: Brazilian Energy Balance

Brazilian Energy Consumption

Agriculture and Livestock 15%

Brazilian Diesel Consumption

Industrial 2%

Others 1%

Others 28%

Diesel 18%

Electricity 18% Natural Gas 7% Gasoline 7% Firewood 8% Sugar cane bagasse 14%
Transportati on 82%

Nowadays, Brazils diesel production is not enough to meet domestic demand thus the product is imported in large quantities. In the last five years Brazil has imported on average 10% of its domestic diesel consumption. Approximately 95% of imported diesel comes from Asia and the US.
Figure 23: Diesel Production, Sales and Imports Source: ANP

Domestic Diesel Production and Sales (million m3)

Diesel Imports (million m3)

12%

13% 5,8
8%
10%

44,8 42,9

7 ,0

44,3
6 ,0

9% 6%
5 ,0
4 ,0

5,1 3,5

41,6 39,2 39,1 39,0 39,6

41,1

3,5

5%

3 ,0

2,4

0%

38,7

2 ,0
-5 % 1 ,0

0 ,0

-1 0 %

2005 2005 2006 2007 2008 2009

2006

2007

2008

2009

Diesel Imports Diesel Production Diesel Sales Diesel Imports / Diesel Domestic Sales

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7. Risks and Mitigants

The main risks associated with the Transaction Facilities are listed below, along with the corresponding mitigants: 7.1. Construction Risk:

Delays and/or cost-overruns.

Mitigants The Sponsors have a proven track-record and possess significant construction management credentials, having constructed several refineries in the past decades. The Sponsors are two of the main players in the global refining market with 36 refineries worldwide and a combined refining capacity of 5.3 million bbls/d, equivalent to the second largest refining capacity in the world; The Refinery will consist of conventional production units and incorporate proven technologies familiar to the Sponsors; The Project has contracted several of the most renowned construction companies in Brazil, with extensive experience in the sector, to undertake certain construction and equipment procurement activities; The Refinery has all the necessary permits for its construction; and, Construction is well underway. As of December 2010, 31% of construction was complete, 20% of equipment had been delivered on site, and another 46% of equipment had been already ordered. 7.2. Equity Contribution Risk:

Delay or failure by the Sponsors to contribute equity, resulting commercial operation delay;

Mitigants Both Sponsors rank among the largest oil companies in the world; Both Sponsors maintain favorable leverage ratios and have the ability to raise funds in the capital markets; o PDVSA and Petrobras have Net Debt / EBITDA ratios of 0.6x and 1.6X, respectively. The Project is of strategic importance to both Sponsors; and, o The Refinery enables Petrobras to process large volumes of oil expected to be produced in the pre-salt area and reduce Brazils diesel imports; and, o The Refinery represents PDVSAs first significant investment in the Brazilian oil market and allows the company to process its enormous reserves of heavy crude oil. As of financial close, both Sponsors will have jointly injected more than BRL 2.1 billion in equity in the Project.

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7.3. Operations Risk:

Unsatisfactory operation due to technical problems, lack of crude oil supply (raw material) or logistic problems.

Mitigants As previously mentioned, the Sponsors have extensive experience in the refining market, being responsible for the operation of 36 refineries globally; The Project has entered into Oil Supply Contracts assuring crude oil supply until 2036; and, The Refinery is located in Suape, which provides the necessary infrastructure network to receive crude oil and distribute diesel and other refined oil products. 7.4. Demand Risk:

Low demand or low prices for oil products.

Mitigants: The Refinerys main output will be diesel, which was the main Brazilian source of energy in 2009, accounting for 18% of the Brazilian Energy Matrix, and represented 47% of the consumption of energetic oil products in the country; and, Furthermore, current domestic diesel production does not satisfy demand, and consequently, Brazil is importing 10% of diesel consumption. 7.5. Repayment Risk:

The Project and Borrower are unable to repay the BNDES Loan and the Transaction Facilities, respectively, due to lack of cash flows from the sale of oil products.

Mitigants: The Projects Minimum and Average DSCR are 1.43x and 2.91x, respectively; The Sponsors are strongly committed to the Project and will inject a significant amount of equity. Furthermore, the BNDES Loan Agreement is also guaranteed by Petrobras; The Transaction Facilities are guaranteed in full by a Corporate Guarantee issued by PDVSA; Additionally, the Transaction Facilities are also guaranteed by a pledge over 40% of the Refinerys shares and a USD 235 million cash collateralized SBLC issued by BANDES.

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8. Term Sheet
SUMMARY OF INDICATIVE TERMS AND CONDITIONS This Summary of Indicative Terms and Conditions does not constitute a binding offer by Banco Esprito Santo (BES), BES Investimento do Brasil S/A Banco de Investimento (BESI) and Banco do Brasil S.A. (BB), or any of them (the Mandated Lead Arrangers) to provide financing or to issue first demand guarantees or fianas on the terms set forth herein and, if the debt facility described herein is entered into, will be replaced by definitive Finance Documents (as defined below) and the terms set forth herein shall thereafter be without force or effect. In addition, this Summary of Indicative Terms and Conditions is subject to (i) credit committee approvals by the Lenders, (ii) satisfactory due diligence, including financial, environmental and legal, by the Lenders and their advisors (including Venezuelan counsel) and (iii) there being, in the reasonable opinion of the Mandated Lead Arrangers, no material adverse change occurring in the syndicated loan markets or in the business or financial condition of any Credit Party or the group taken as a whole or in financial, economic or political conditions generally in Venezuela or Brazil prior to the signing of the Loan Facility based upon the terms set forth herein.

A. Key Parties and Transaction

Borrower PDVSA do Brasil Ltda., a sociedade limitada formed under the laws of the Federative Republic of Brazil and owned, directly or indirectly, by the Quotaholders (PDVSA Brasil). PDV Sur S.A., a sociedad annima formed under the laws of the Bolivarian Republic of Venezuela (PDV Sur) and Deltaven S.A. a sociedad annima formed under the laws of the Bolivarian Republic of Venezuela (Deltaven), each of which is, directly or indirectly, whollyowned by the Guarantor. Petrleos de Venezuela S.A., a sociedad annima formed under the laws of the Bolivarian Republic of Venezuela (PDVSA and, collectively with the Borrower, the Credit Parties). PDVSA and those entities in which PDSVA directly or indirectly owns a majority of the issued and outstanding equity interests. Refinaria Abreu e Lima S.A., a sociedade annima formed under the laws of the Federative Republic of Brazil (RAL). The two unit, 230,000 bpd capacity petroleum refinery under construction in the Ipojuca municipality of the Recife metropolitan area of the state of Pernambuco, Brazil and to be owned by the Project Company. Petrleo Brasileiro S.A., a sociedade annima formed under the laws of the Federative Republic of Brazil (Petrobras) and PDVSA Brasil. Currently, the Project Company is wholly-owned by Petrobras. The Borrower will (a) make an initial equity contribution to the Project in the approximate amount of USD550 million through the subscription

Quotaholders

Guarantor

PDVSA Group

Project Company

Project

Sponsors

Transaction

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of new shares equivalent, after issuance, to 40% of the Project Companys total share capital (the Initial Equity Contribution) and will finance up to 80% of such equity contribution (approximately USD450 million) with the proceeds of the Loan Facility described below and (b) request the Lenders (as defined below) to issue a bank guarantee or fiana acceptable to Banco Nacional de Desenvolvimento Econmico e Social (BNDES) (with each Lenders participation therein to be in an amount of USD (or its equivalent) that is proportionate to such Lenders participation in the Loan Facility), to guarantee 40% of the obligations of the Project Company under the BNDES Loan Agreement, which guaranteed amount shall in no event exceed in the aggregate the equivalent of USD2.1 billion (the Guarantee Facility). Transaction Facilities Transaction Documents Finance Documents The Loan Facility and the Guarantee Facility.

The Finance Documents and the Equity Documents.

The Loan Facility, the Guarantee Facility, the Promissory Note, the ECSRA, and each Security Document (such instruments and agreements being, together with the Intercreditor Agreement, the Finance Documents). The RAL Fiduciary Transfer Agreement, [the PDVSA Brasil Fiduciary Transfer Agreement,] the Onshore Dividend Account Fiduciary Transfer Agreement, the Petrobras Direct Agreement, the BANDES SBLC, the BANDES Time-Deposit Account Control and Pledge Agreement and the PDVSA Guarantee. The shareholders agreement to be entered into between PDVSA Brasil, Petrobras and the Project Company (as interveniente) in relation to the Project Company. Either (a) an investment agreement to be entered into between PDVSA, Petrobras and the Project Company (as interveniente) or (b) an amendment to the ACN (as defined below), in either case (x) attaching forms (in form and substance satisfactory to the Lenders) of (i) the Estatuto Social to be adopted by the Project Company, (ii) the Project Company Shareholders Agreement, (iii) the Business Plan, (iv) the sales contract to be entered into between PDVSA and the Project Company (the "PDVSA Sales Contract") and (v) the sales contract to be entered into between Petrobras and the Project Company (the "Petrobras Sales Contract") and (y) regarding, inter alia, PDVSA Brasil's initial equity contribution to the Project.

Security Documents

Project Company Shareholders Agreement Investment Agreement

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Petrobras Direct Agreement

The direct agreement to be entered into between Petrobras, the Borrower and the Lenders providing, inter alia, (a) that if the Borrower's equity interest in the Project Company falls below 40% (a "Reduction"), Petrobras shall (i) provide all replacement security required by BNDES as collateral security for the Project Company's obligations under the BNDES Loan Agreement (and in particular, that portion of the Project Company's obligations under the BNDES Loan Agreement that corresponds to the Reduction), (ii) cause BNDES to release a portion of the collateral security provided by the Borrower for the Project Company's obligations under the BNDES Loan Agreement corresponding to the Reduction, (iii) indemnify the Lenders for any loss they may suffer arising from any failure by Petrobras to accomplish the undertaking described in subsection (ii) above and (iv) assume the obligation to pay a guarantee commission (to be defined) if Petrobras has failed to accomplish the undertaking described in subsection (ii) within [] days, (b) a call mechanism in respect of shares of the Project Company whereby upon an Event of Default or Guarantee Event of Default Petrobras will have the option to purchase (and the Lenders will be obliged to sell) such shares for a set period of time at a price to be determined and (c) for the giving of notice of any failure by the Borrower to make equity contributions or shareholder loans following a call by the Project Company to do so. The Project Company Shareholders Agreement, the Investment Agreement, the Contrato de Associao dated March 26, 2008 between Petrobras and PDVSA and the Acordo de Concluso das Negociaes dated October 31, 2009 between Petrobras and PDVSA (the "ACN"). The agreement dated as of July 30, 2009 between BNDES, the Project Company and Petrobras pursuant to which BNDES has disbursed a loan in the principal amount of the Brazilian Reais ("BRL") equivalent of approximately USD5.2 billion to the Project Company to finance the construction and commissioning of the Project. Currently, the BNDES loan is fully guaranteed by Petrobras, together with any amendment(s) thereto made in connection with the Transaction. BES, BESI and BB. The Mandated Lead Arrangers will structure the Transaction Facilities and arrange, on a "best efforts" basis, a syndicate of commercial banks acceptable to the Borrower (acting reasonably) to participate in both facilities.

Equity Documents

BNDES Loan Agreement

Mandated Lead Arrangers

Mandated Lead Arrangers [Maximum Final Hold] The Lenders

BES and BESI BB

USD[637.5] million USD[637.5] million

The Mandated Lead Arrangers and other financial institutions to be selected by the Mandated Lead Arrangers with the consent of the Borrower, such consent not to be unreasonably withheld.

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Commitment Letters

Letters issued by each Lender, in form and substance satisfactory to it, to the Borrower describing the terms and conditions of any commitment of such Lender to participate in the Transaction Facilities. TBD

Onshore Account Agent Offshore Account Bank Offshore Collateral Agent Onshore Collateral Agent Onshore Account Bank Administrative Agent Secured Parties Lenders' Advisors Technical Advisor to Lenders Legal Advisors to Lenders

BES Madeira Branch, Portugal

BES Madeira Branch, Portugal

TBD

TBD

BES Madeira Branch, Portugal and, together with each other agent and Account Bank set forth above, the Agents). Each Lender, each Agent and the Offshore Account Bank.

[]

Allen & Overy LLP (New York law) Machado, Meyer, Sendacz e Opice Advogados (Brazilian law) [] (Venezuelan law)

Credit Parties' Advisors Legal Advisors to each Credit Party Shearman & Sterling LLP (New York law) Bastos-Tigre, Coelho da Rocha e Lopes Advogados (Brazilian law) [] (Venezuelan law)

B. Loan Overview1
Loan Facility A senior, single-tranche, syndicated debt facility structured as a foreign loan (emprstimo externo or "Loan") secured by the Collateral Security described below on a pari passu basis with the Guarantee Facility.

Loan Facility provisions are subject to Venezuelan counsel input with respect to Venezuela-specific regulatory issues.

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Loan Facility Amount

An amount equal to 80% of the Initial Equity Contribution, as calculated [15] days prior to the projected Financial Closing Date, but not to exceed the BRL equivalent of USD[450] million. United States Dollars (USD) The proceeds of the Loan Facility will be used by the Borrower on the Financial Closing Date (as defined below) to fund its equity contribution to the Project Company as described under Transaction and to pay associated costs, fees and expenses. The date on which the disbursement under the Loan Facility occurs.

Currency Purpose

Financial Closing Date Availability Period

The Availability Period shall commence on the date on which each of the conditions precedent to the Financial Closing Date have been satisfied or waived. The full amount of the Loan Facility must be drawn in a single drawing no later than August 31, 2011, which date may be extended to October 31, 2011 upon an agreement to that effect between PDVSA and Petrobras. Amounts borrowed under the Loan Facility that are repaid or prepaid shall not be reborrowed. Semi-annual equal payments, with the first payment of principal to occur on the [date that is six months after the Financial Closing Date] and subsequent payments of principal to be made on the last day of each succeeding six-month period (each such date, a Payment Date). 5 years from the Financial Closing Date. To each Lender for its own account, a fee equal to its pro rata portion of an amount equal to 2.0% of the Loan Facility Amount, such fee to (a) accrue during the period from and including the date all Lenders have received a copy of their Commitment Letters duly executed by the Borrower (such date, the "Commitment Letter Acceptance Date") to but excluding the earlier to occur of (i) the Financial Closing Date or (ii) the date on which PDVSA has officially notified each Lender that the Transaction has been cancelled and (b) be non-refundable and earned, due and payable in full upon the Financial Closing Date out of the proceeds of the first disbursement, all as set forth in each Lender's Commitment Letter. To each Lender for its own account, a fee equal to its pro rata portion of an amount equal to 1.0% of the Loan Facility Amount, such fee to be non-refundable and earned, due and payable in full upon the Financial Closing Date out of the proceeds of the first disbursement, all as set forth in a fee letter to be executed by the parties. The outstanding principal of the Loan Facility will bear interest at a rate equal to the 6 month London Interbank Offered Rate (LIBOR) for the relevant interest period plus the Applicable Margin. Interest accrued shall be paid on each Payment Date starting with the first Payment Date.

Amortization

Final Maturity Date Commitment Fee

Upfront Fee

Interest Rate and Interest Periods

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Upon the occurrence and continuance of an Event of Default relating to a payment obligation, the Interest Rate shall increase by 200 basis points per annum. IFRS International accounting standards within the meaning of the IAS Regulation 1606/2002 to the extent applicable. The margin over LIBOR for the term of the Loan Facility shall be 5.5% per annum. The Borrower shall have the option to prepay the Loan Facility, in whole or in part, at any time on 3 business days irrevocable notice without premium or penalty subject to reimbursement of any applicable breakage costs. Partial prepayments shall be in multiples of USD10 million. The Borrower shall have the option to cancel the Loan Facility, in whole but not in part, at any time during the Availability Period on 3 business days irrevocable notice. With respect to any prepayment or cancellation, whether voluntary or mandatory: 1. 2. amounts prepaid or cancelled shall not be re-borrowed, and amounts prepaid shall be applied pro rata across the remaining principal installments.

Applicable Margin

Voluntary Prepayments / Cancellations

Mandatory Prepayments

To be agreed in the definitive documentation.

There will be no prepayment penalties (except LIBOR breakage costs) for mandatory prepayments. As a condition to, and effective upon, any prepayment, mandatory or voluntary, of a non-pro rata portion of a Lenders interest in the Loan Facility, such prepaid Lender shall transfer and assign to the other Lenders with remaining interests in the Loan Facility (and each such Lender shall assume) a pro rata portion of such prepaid Lenders obligations under the Guarantee Facility. Conditions Precedent to Signing Such conditions precedent as are customary for a facility of this nature including, but not limited to each of the following in form and substance satisfactory to the Lenders: 1. 2. entry into force of the Investment Agreement; entry into force of the Project Company Shareholders Agreement providing, inter alia, for the authorization of the pledge by the Borrower in favor of the Lenders of the Borrower's present and future shares of the Project Company, and otherwise in form and substance satisfactory to the Lenders; and

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3.

delivery of a revised financial model reflecting the current capex curve and macroeconomic conditions.

Conditions Precedent to Financial Closing Date

Such conditions precedent as are customary for a facility of this nature including, but not limited to each of the following in form and substance satisfactory to the Lenders: 1. 2. entry into force of the Finance Documents; receipt of corporate documents and officer certificates of the Credit Parties that, inter alia, demonstrate due authorization of the transactions contemplated by and due execution of, the Finance Documents; receipt of certified copies of all necessary approvals, consents and authorizations required by applicable law in connection with the transactions contemplated by the Finance Documents and the Project; receipt of legal opinions from New York, Brazilian and Venezuelan legal counsel to the Credit Parties and the Quotaholders; confirmation that the Agents and Lenders (and their advisors) have received (or, in the case of the Commitment Fee, the Initial Bank Guarantee Commitment Fee and the Upfront Fee, will receive out of the proceeds of the Loan Facility disbursement pursuant to irrevocable instructions of the Borrower) all fees and other amounts due and payable on or prior to the Financial Closing Date, including, to the extent invoiced at least 3 business days prior to the Financial Closing Date, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower; confirmation that all accounts contemplated herein have been established in accordance with the relevant Finance Documents; receipt of the Borrower's, the Guarantor's, each Quotaholder's and the Project Companys most recent consolidated, audited financial statements; and, with respect to the Project Company, the current calendar year's, and each subsequent year's, Project budget (showing a sources and uses of funds for all Project costs through the Project's commissioning and reaching of commercial operations, including a separate line item for equity infusions as well as a construction chronogram showing milestones in reasonable detail and anticipated Project cost expenditure as at each such milestone and to be annexed to the Loan Facility, the Guarantee Facility and the ECSRA) 2 (collectively, the "Project Budget") ;

3.

4.

5.

6.

7.

The Project Budget will set forth, in reasonable detail, the construction schedule for the Project including the expected commercial operation date as well as a timetable for equity infusions to fund such works from each of the Sponsors. Note that the Project Budget contemplated here is static.

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8.

receipt of documentation and information required under applicable know your customer and anti-money laundering rules and regulations including, without limitation, the U.S. Patriot Act; accuracy in all material respects of all representations and warranties in the Finance Documents;

9.

10. no defaults or events of default under the Transaction Documents shall have occurred and are continuing or would result from the disbursement; 11. creation and perfection of the liens over the Collateral contemplated in the Security Documents; 12. the deposit by the Borrower, into an account designated by the Lenders, of an amount equal to the difference between the Initial Equity Contribution and the Loan Facility Amount, and such amount shall be standing to the credit of such account on the Financial Closing Date;3 13. entry into force of an amendment to the BNDES Loan Agreement providing, inter alia, for (a) the authorization that the guarantees or fianas arising under the Guarantee Facility will be for the benefit of BNDES to guarantee repayment of a maximum amount of the BRL equivalent of USD2.1 billion in principal outstanding (and interest accrued thereon) under the BNDES Loan Agreement, replacing an existing Petrobras financial guarantee covering such amount and (b) the authorization of the pledge by the Borrower in favor of the Lenders of the Borrower's present and future shares of the Project Company, in form and substance satisfactory to the Lenders; and 14. subscription by the Borrower of new shares equivalent, after issuance, to 40% of the Project Company's total share capital.

To the extent that there is any shortfall in the amount contributed and the price of the new shares, the Borrower will be required to cover such shortfall.

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Representations and Warranties

The Borrower will make such representations and warranties as are customary for a facility of this nature including, but not limited to:4 1. each of the Borrower and the Project Company is duly organized and validly existing and has the full power and authority to enter into the Transaction Documents to which it is a party, and the Project Company is duly organized and validly existing and has the full power and authority to enter into the BNDES Loan Agreement and the material project documents to which it is a party or is intended to become a party to effect the construction, testing and commissioning and operations of the Project in accordance with the Business Plan (such other documents, the "Material Project Documents"); the Transaction Documents, the BNDES Loan Agreement and the Material Project Documents have been duly registered (to the extent required by law) and are in proper legal form, effective and enforceable in the relevant jurisdiction and each Finance Document to which the Borrower is a party and the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement and each Material Project Document to which the Borrower or the Project Company, as applicable, is a party constitute a legal, valid and binding obligation of the Borrower or the Project Company, as applicable, enforceable against the Borrower or the Project Company, as applicable, in accordance with its terms; neither (a) the Borrowers nor (b) the Project Company's entering into and performance of the Finance Documents (in the case of the Borrower), the BNDES Loan Agreement and each Material Project Document (in the case of the Project Company) and the Project Company Shareholders Agreement (in the case of both the Borrower and the Project Company) conflicts with applicable law, the Borrowers or the Project Company's constitutive documents or other material agreements to which it is a party, and the Borrower and the Project Company, as applicable, have obtained all necessary approvals, consents and authorizations as required by applicable law in connection with the Transaction Documents, the BNDES Loan Agreement, each Material Project Document and the Project, as applicable;

2.

3.

Lenders will include all required representations and warranties relating to (a) the Guarantor in the PDVSA Guarantee and (b) the Quotaholders in the ECSRA and/or the PDVSA Brasil Fiduciary Transfer Agreement, with cross-default provisions related thereto in the Transaction Facilities.

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4.

(a) the Borrower and (b) the Project Company are subject to civil and commercial law with respect to their obligations under the Transaction Documents (in the case of the Borrower) and the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement and each Material Project Document (in the case of the Project Company) and the execution and delivery of the documents and agreements to which each is a party constitute, private and commercial activities rather than public or governmental acts; the most recent consolidated, audited financial statements of (a) the Borrower and (b) the Project Company have been prepared in good faith, are based on reasonable assumptions and present fairly such partys financial position in all material respects; each of (a) the Borrower and (b) the Project Company has good title to all the real and personal property it purports to own and lease; there is no legal, administrative or other action current, pending or threatened that has had, or is reasonably likely to have, a Material Adverse Effect (as defined in Annex A, Part 2) on the Borrower or on the Project Company; with respect to (a) each Transaction Document to which the Borrower is party and (b) the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement and each Material Project Document to which the Project Company is a party, there is no default or event of default outstanding (or solely with respect to the Material Project Documents, of which the Borrower is aware); each of (a) the Borrower and (b) the Project Company is solvent under applicable bankruptcy or insolvency law;

5.

6.

7.

8.

9.

10. all of the (a) taxes of the Borrower and (b) the material taxes of the Project Company have been timely filed and paid except for those being contested in good faith and for which adequate reserves have been made in accordance with applicable law and accounting principles; 11. the Borrower is not subject to any withholding or documentary (stamp) taxes on or by virtue of the execution of the Transaction Documents other than as specified therein; 12. the share capital of each of the Project Company and the Borrower is fully issued as described in a Schedule and not subject to any liens other than those created under the Security Documents, and neither the Project Company nor the Borrower has any subsidiaries other than as set forth in such Schedule; no party other than the Borrower and Petrobras holds any equity rights in the Project Company;

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13. the Borrower has the ability to lawfully pay in US Dollars the total amount which is, or may become payable by it to the Lenders under each Finance Document to which it is a party; 14. the Security Documents confer and create in favor of the Secured Parties a valid and perfected first priority security interest in the Collateral, subject only to liens preferred by operation of law or any judicial order (provided that such judicial orders are in respect of immaterial amounts and/or properties); 15. the Borrowers obligations and liabilities under the Finance Documents are its unconditional and general obligations and rank at least pari passu with all of its other present or future unsecured and unsubordinated indebtedness (both actual and contingent); 16. all information provided in writing by or on behalf of the Borrower or any of its affiliates was on its date of issue true, complete and accurate in all material respects and does not contain any misstatements or omissions that would make it misleading; 17. in any proceedings in New York, Brazil or Venezuela to enforce the Finance Documents, the choice of the laws of the State of New York, Brazil or Venezuela (as applicable) as the governing law of any Finance Documents will be recognized and applied, the Borrowers irrevocable submission to jurisdiction under such Finance Documents shall be legal, valid, binding and enforceable and any judgment obtained in New York, Brazil or Venezuela will be recognized and enforceable against the Borrower and its assets in Brazil or Venezuela (as applicable) without reexamination of the merits of the underlying cause of action, subject to the limitations set forth in applicable law; 18. the Borrower has no outstanding debt (contingent or otherwise) other than Borrower Permitted Financial Indebtedness (as defined in Annex A, Part 3), and the Project Company has no outstanding debt (contingent or otherwise) other than Project Company Permitted Financial Indebtedness (as defined in Annex A, Part 3); 19. each of the Borrowers and the Project Company's waiver of immunity is valid and neither it nor its assets benefit from any immunity from final suit or judgment with respect to its obligations under the Finance Documents in the case of the Borrower, under the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement or any Material Project Document, in the case of the Borrower or the Project Company, as applicable, subject to any limitations set forth in any such waiver;

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20. the Borrower is not required to be registered as an investment company, or a company controlled by a company that is required to be registered as an investment company, within the meaning of the U.S. Investment Company Act of 1940, as amended; 21. the Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying margin stock; 22. usual and customary provisions regarding the Employee Retirement Income Security Act of the United States of America (ERISA); and 23. none of the activities of the Borrower have, and none of the borrowing of the Loan by the Borrower or the Borrower's use of the proceeds thereof will, violate any of the following: (a) the regulations of the Office of Foreign Assets Control of the United States of America Department of Treasury; (b) the U.S.A. Patriot Act of the United States of America; and (c) the Foreign Corrupt Practices Act of the United States of America. Affirmative Covenants The Borrower shall, and to the extent possible based upon its ownership interests in the Project Company and its exercise of all rights associated thereunder, shall cause the Project Company to, comply with such affirmative covenants (with "baskets" to be negotiated in the definitive documentation) as are customary for a facility of this nature including, but not limited to, covenants regarding: 1. delivery of certain information (and making customary representations and undertakings regarding the same), including, without limitation, in respect of the Borrower and the Project Company, notice of any call by the Project Company for equity contributions or shareholder loans and any failure by the Borrower and/or Petrobras to make such equity contributions or shareholder loans, financial statements, material changes in accounting or financial reporting practices, regulatory filings, no outstanding default certificates, compliance certificates and notices in respect of the following: default, material litigation, force majeure events, material governmental proceedings or investigations and, in respect of the Project Company and the Project, annual budgets, reports relating to insurance coverage, construction reports, material Project Budget variations and overruns in each case containing comparisons against the original Business Plan, and notices in respect of environmental proceedings and claims; performance of all material obligations arising under the Transaction Documents and performance of all obligations arising under the BNDES Loan Agreement and each Material Project Document; preservation of existence;

2.

3.

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4.

maintenance of good title to all real and personal property material to its business; compliance in all material respects with all applicable laws and insurance requirements and maintenance of all necessary approvals, consents and authorizations as required by applicable law and compliance in all respects with all environmental laws, in all cases in connection with the Transaction and, in the case of the Project Company, the Project; maintenance of books and records; compliance with all reporting obligations of any relevant governmental authority; consultation and inspection rights upon reasonable request and notice and maintenance of an independent accountant; timely payment and filing of all taxes, except for those being contested in good faith and for which adequate reserves have been made in accordance with applicable law;

5.

6. 7.

8.

9.

10. in respect of the Borrower, the use of proceeds of the Loan Facility; 11. in respect of the Project Company, completion of the Project in accordance with the business plan (to be annexed to the Loan Facility, the Guarantee Facility, the Project Company Shareholders Agreement, the Investment Agreement and the ECSRA and in form and substance satisfactory to the Lenders) (the Business Plan); 12. in the event of any cost overrun (whether actual or anticipated) of any line item in the Project Budget, prompt (and in any event no later than 15 days after the Borrower or the Project Company becomes aware of such cost overrun) notification by the Borrower thereof, and if any such cost overrun, when aggregated with any other cost overrun of the Project existing at such time, exceeds the amount of available and uncommitted contingency set forth in the Project Budget, delivery by the Borrower of a plan for the financing of such cost overrun in form and substance satisfactory to the Lenders and acknowledged and agreed by the Guarantor no later than 60 days prior to the date on which any required expenditures in respect of such cost overrun must be made;

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13. (a) the pledge and creation of a valid and perfected security interest over any note or instrument evidencing subordinated indebtedness of the Project Company to the Borrower or of the Borrower to any Quotaholder or the Guarantor and (b) the assignment and creation of a valid and perfected security interest over the Borrower's rights under any agreement contemplating subordinated indebtedness of the Project Company to the Borrower, and of any Quotaholders rights under any agreement contemplating indebtedness of the Borrower to any Quotaholder, in each case within 10 days of the date on which such indebtedness has occurred; 14. from the Financial Closing Date until the second anniversary of the date on which commencement of operation of the Project occurs (as such date is defined in the definitive documentation), the Borrower (a) shall provide to the Lenders and their Technical Advisor all monthly Project construction reports produced by the Project Company and/or Petrobras on a current basis and (b) shall provide all information and shall render such assistance (including facilitating Project site access and access to Project Company management) as is reasonably required to allow the Lenders' Technical Advisor to render industry-standard semi-annual Project reports; 15. the obligations of the Borrower under the Finance Documents shall at all times be secured by a valid and perfected first priority security interest in and over the Collateral subject only to liens preferred by operation of law; and 16. the obligations and liabilities under the Finance Documents shall be the Borrower's unconditional and general obligations and shall rank at all times at least pari passu with all of its other present or future unsecured and unsubordinated indebtedness (both actual and contingent). Negative Covenants The Borrower shall, and to the extent possible based upon its ownership interests in the Project Company and its exercise of all rights associated thereunder, shall cause the Project Company and, where expressly mentioned below, the Quotaholders, as applicable, to comply with such negative covenants (with exceptions, materiality and "baskets" to be negotiated in the definitive documentation) as are customary for a facility of this nature including, but not limited to, negative covenants regarding: 1. in respect of the Borrower, no further Financial Indebtedness (as defined in Annex A, Part 1) other than Borrower Permitted Financial Indebtedness; restrictions on transactions with affiliates except on arms length terms;

2.

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3.

restrictions on the creation of security interests on the assets and shares of the Borrower and Project Company (other than permitted liens to be agreed and, with respect to the Project Company, as permitted by the BNDES Loan Agreement as in effect on the date of the Loan Facility); restrictions on material amendments under the Borrower's and Project Companys constitutive documents; in respect of the Borrower, restrictions on material amendments of any of the Transaction Documents without the prior approval of the Lenders, and in respect of the Project Company, restrictions on material amendments to the Business Plan, the Project Budget, the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement or any Material Project Document without the prior approval of the Lenders, acting reasonably in consultation with their Technical Advisor; restrictions on the Borrowers and Project Companys making of any distributions or dividends except as in accordance with the Finance Documents and, in the case of the Project Company, the BNDES Loan Agreement and the Project Company Shareholders Agreement as in effect on the date of the Loan Facility; restrictions on mergers, consolidations or other fundamental changes to the Borrower or Project Company and restrictions on the sales or other dispositions of any of such parties Material Property or Material Assets (as such terms will be defined in the definitive documentation); in respect of the Borrower and the Project Company, restrictions on its business activity other than in the case of (a) the Borrower, owning the Project Company shares, entering into, and performing its obligations in accordance with, the Transaction Documents and undertaking activities as are strictly related to acting as a representative office for the Guarantor, provided that such activities shall not involve the Borrower's incurring any liability (whether contingent or otherwise), or entering into any contract or agreement, or series of contracts or agreements, with an aggregate value in excess of USD50 million or its equivalent in any other currency, or that would result in liabilities or undertakings of the Borrower at any one time outstanding of USD50 million or its equivalent in any other currency and (b) the Project Company, development, construction and operation of the Project in accordance with the Business Plan; and in respect of the Project Company, no further financial indebtedness, other than Project Company Permitted Financial Indebtedness.

4.

5.

6.

7.

8.

9.

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Events of Default

Such events of default (with cure periods to be negotiated in the definitive documentation) as are customary for a facility of this nature including, but not limited to: 1. (i) any Credit Party or any Quotaholder fails to pay when due any amount payable pursuant to a Transaction Document at the place and in the currency in which it is expressed to be payable, or the Project Company fails to pay when due any amount payable pursuant to the BNDES Loan Agreement and (ii) such amount remains unpaid for a period of 3 business days; (a) any representation or warranty of any Credit Party set forth in any Transaction Document proves to have been materially incorrect or misleading when made or confirmed or (b) any representation or warranty of any Quotaholder set forth in any Transaction Document proves to have been materially incorrect or misleading when made or confirmed and has or would be reasonably likely to result in a Material Adverse Effect, if such circumstances that rendered such representation or warranty of such Credit Party or such Quotaholder to be materially incorrect or misleading shall be continuing for more than 30 days after an officer of such Credit Party or such Quotaholder has actual knowledge thereof or receives notice thereof from the Administrative Agent or any Lender; (a) any applicable Credit Party fails to perform or observe any covenant or other obligation (other than an obligation to make payment referred to in item 1 above) as set forth in, or any default occurs under, the BNDES Loan Agreement, in each case after the expiry of any applicable cure period set forth therein, (b) any Credit Party or any Quotaholder fails to perform or observe any covenant or other obligation (other than an obligation to make payment referred to in item 1 above) as set forth in, or any default occurs under, the Transaction Documents, after the expiry of any cure period to be agreed or (c) any Credit Party fails to perform or observe any covenant or other obligation (other than an obligation to make payment referred to in item 1 above) as set forth in, or any default in respect of such party occurs under, the Project Company Shareholders Agreement or the Investment Agreement after the expiry of any cure set forth therein; the bankruptcy or insolvency of, or the commencement of bankruptcy or insolvency proceedings in respect of, any Credit Party, any Quotaholder or the Project Company (with grace periods applicable for involuntary proceedings) or the appointment of a receiver, liquidator, or similar official for all or any substantial part of the property of any such party; the rendering of monetary judgments against (a) the Guarantor in an aggregate amount exceeding USD250 million (or its equivalent in any other currency), (b) the Borrower in an aggregate amount exceeding USD 20 million (or its equivalent

2.

3.

4.

5.

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in any other currency) or (c) the Project Company in an aggregate amount exceeding USD 20 million (or its equivalent in any other currency), except, in each case, to the extent that such judgments are being diligently contested by the relevant party in good faith by appropriate proceedings and for which the relevant party has set aside adequate reserves in accordance with IFRS; 6. any Transaction Document, the BNDES Loan Agreement, the Project Company Shareholders Agreement, the Investment Agreement or any Material Project Document ceases to be in full force and effect or ceases to be a valid and binding obligation of any party thereto; any obligations of the Borrower or any Quotaholder under the Finance Documents cease to be secured by a first priority (except for any liens preferred by application of law) perfected lien and security interest in and over all of the Collateral; any of the Credit Parties or the Project Company defaults in the payment when due (after giving effect to any applicable grace period) of the principal of or the interest on, or other monetary amount is owing in respect of, any of such parties Financial Indebtedness not incurred under the Finance Documents, in an amount individually or in the aggregate exceeding (a) in the case of the Guarantor, USD250 million (or its equivalent in any other currency), (b) in the case of the Borrower, USD 20 million (or its equivalent in any other currency), or (c) in the case of the Project Company, USD 20 million (or its equivalent in any other currency); (a) the Borrower ceases to be the record and beneficial owner of at least 40% of the total share capital (together with all related economic and voting rights) of the Project Company or (b) the ratio of the total amount of capital contributions to the Project Company made by Petrobras to those made by the Borrower is not 60:40 (the total amount of capital contributions of a Sponsor being the aggregate of all equity contributions and shareholder loans made by such Sponsor after accounting for any replacement equity contributions or shareholder loans made by it on behalf of the other Sponsor, and any repayments of such replacement equity contributions or shareholder loans by the other Sponsor, in accordance with the Shareholders Agreement);

7.

8.

9.

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10. a delay of more than 60 days by the Project Company in reaching certain construction milestones in accordance with the construction schedule of the Project Budget unless the Project Company has implemented a corrective action plan acceptable to the Lenders and their Technical Advisor; 11. (a) the Borrower does not make its pro rata share of any equity contribution or shareholder loan (to the extent such shareholder loan constitutes Project Company Permitted Financial Indebtedness) to the Project Company in the amounts, and at the times, contemplated by the Project Budget or called for by the Project Company or (b) the Borrower does not exercise its right to make a replacement equity contribution or shareholder loan on behalf of Petrobras as contemplated in the Shareholders Agreement; 12. If any of the following occurs: (a) the Consolidated Tangible Net Worth of the Guarantor is, at any time, less than USD35,000,000,000; (b) the Consolidated Debt to Consolidated EBITDA Ratio of the Guarantor is more than 2.5:1; and (c) the Consolidated Interest Coverage Ratio of the Guarantor is less than 4:1. The defined terms for this section are found in Annex A, Part 1. 13. any material part of the Collateral or the property of the Project Company or the Borrower is expropriated or nationalized or any procedure for the same is commenced and not stayed or overturned within 30 days; 14. any event occurs or any condition exists that has had or would be reasonably likely to result in a Material Adverse Effect; 15. the Guarantor ceases to be the beneficial owner (directly or indirectly) of 100% of the total share capital of the Quotaholders and the Borrower, and to control each such entity; 16. the amount available under the SBLC (as defined below) is not, within 15 business days, reinstated, together with a concomitant reinstatement or top-up of the USD time-deposit referred to under part D (Collateral Security) below, in each case up to USD235 million after a payment made by BANDES and/or a liquidation of the USD time-deposit pursuant to a demand made by the Lenders; 17. there occurs any change in any treaty to which Venezuela is a party, or any new Venezuelan law or policy (or any official interpretation of any existing law or policy) or any order of any competent authority or decision of any court of competent jurisdiction which renders or purports to render any material

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provision of the ECSRA, PDVSA Guarantee or any other Transaction Document unlawful, invalid or unenforceable, and (i) has a material adverse effect on the enforceability of the obligations of the Guarantor under the ECSRA, PDVSA Guarantee or any other Transaction Document (or the ability of any creditor to realize upon any judgment or arbitral award rendered in connection therewith) or (ii) would prevent or delay the performance or observance by the Guarantor of any of its material obligations thereunder.

C. Guarantee Facility5
Bank Guarantee Each Lender shall issue an irrevocable, first-demand guarantee or fiana (a) in a face amount such that its participation in the Guarantee Facility is pro rata to its participation in the commitments under the Loan Facility and (b) for the benefit of BNDES to guarantee repayment to BNDES of a maximum amount of the BRL equivalent of USD2.1 billion in principal outstanding (and interest accrued thereon). PDVSA Brasil shall undertake to repay any amounts paid under the Guarantee Facility and the Collateral described under Collateral Security below will secure PDVSA Brasils repayment obligations equally and ratably with the obligations owing to the Secured Parties under the Loan Facility. An amount sufficient to guarantee 40% of the obligations of the Project Company under the BNDES Loan Agreement, which guaranteed amount shall in no event exceed in the aggregate the equivalent of USD2.1 billion. Each Lenders participation in the Guarantee Facility and consequently in the Transaction Facilities is subject to acceptance by BNDES. 5 years, commencing at the Financial Closing Date.

Guarantee Facility Amount

BNDES Credit Limit

First Bank Guarantee Term Initial Bank Guarantee Subsequent Bank Guarantee Subsequent Bank Guarantee Terms

The Bank Guarantee issued and valid during the period of the First Bank Guarantee Term. The Bank Guarantees issued upon the expiration of Initial Bank Guarantee. 5 years from expiry date of the Initial Bank Guarantee or the expiry date of any Subsequent Bank Guarantee.

Drawing conditions for the Guarantee Facility shall be substantially similar to the Loan Facility's CPs, including satisfactory completion of legal due diligence.

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Initial Bank Guarantee Commitment Fee

To each Lender for its own account, a fee equal to 2.0% of such Lender's commitment under the Guarantee Facility, such fee to (a) accrue during the period from and including the Commitment Letter Acceptance Date to but excluding the earlier to occur of (i) the Financial Closing Date or (ii) the date on which PDVSA has officially notified each Lender that the Transaction has been cancelled and (b) be non-refundable and earned, due and payable in full upon the Financial Closing Date out of the proceeds of the first disbursement, all as set forth in each Lender's Commitment Letter. To each Lender for its own account, a fee equal to 0.20% of such Lender's commitment under the Guarantee Facility, such fee to be non-refundable and earned, due and payable in full upon the date of issuance of the Initial Bank Guarantee, all as set forth in a fee letter to be executed by the parties. 4.0% per annum paid in advance on a semi-annual basis and calculated based on the aggregate amount outstanding under the BNDES Loan Agreement. Upon the issuance of any Subsequent Bank Guarantee, the commission shall be 5.0 % per annum also paid in advance on a semi-annual basis and calculated based on the aggregate amount outstanding under the BNDES Loan Agreement. The issuance of any Subsequent Bank Guarantee is subject to (a) no Event of Default or Guarantee Event of Default (as defined below) having occurred and (b) no event having occurred and no condition existing that has resulted in or would be reasonably likely to result in a Material Adverse Effect.

Initial Bank Guarantee Issuance Fee

Initial Bank Guarantee Commission Renewal Conditions

Guarantee Commission Stepup

Upon the occurrence and continuance of an Event of Default or Guarantee Event of Default relating to a payment obligation, the Initial Bank Guarantee Commission or the commission for the Subsequent Bank Guarantees shall immediately increase by 2.0% per annum. Representations and warranties substantially similar to those described under the Loan Facility above. Affirmative covenants substantially similar to those described under the Loan Facility above. Negative covenants substantially similar to those described under the Loan Facility above. Events of default substantially similar to those described under the Loan Facility above and cross-default to the Loan Facility for events of default relating to payment obligations (each a "Guarantee Event of Default").

Representations and Warranties Affirmative Covenants Negative Covenants

Events of Default

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Sharing

If BNDES shall make a non-pro rata draw upon any Lender's guarantee or fiana issued under the Guarantee Facility, the remaining Lenders shall make payment to such in such amount, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall make payment of the drawn amount(s) pro rata in accordance with their participation in the Guarantee Facility. PDVSA Brasil shall, within 5 days of any draw on any guarantee or fiana, repay the applicable Lender(s) in full the amount of such draw, with interest thereon calculated at the Reimbursement Loan Interest Rate (such amount owed by PDVSA Brasil, a "Reimbursement Loan"). 1 month LIBOR + 6.0% per annum; and in either case, such rate shall be subject to a 2.0% per annum step-up in case of the failure by PDVSA Brasil to repay the Reimbursement Loan within 15 days of the relevant draw on the relevant guarantee or fiana.

Loans

Reimbursement Loan Interest Rate

Voluntary Cancellation

PDVSA Brasil shall have the option to cancel the Guarantee Facility, in whole but not in part, at any time during the Availability Period on 10 business days irrevocable notice.

D. Collateral security
Generally Applicable Provisions Each pledge, grant of a lien under a security agreement, assignment, account and letter of credit referred to below shall secure, on a pari passu basis, the repayment when due to the Secured Parties of all amounts from time to time owing under the Finance Documents (including, for the avoidance of doubt, any Reimbursement Loan), the property over which a lien or security interest is granted, or regarding which an assignment occurs, the Collateral. Each Finance Document shall be in form and substance satisfactory to the Lenders. The Borrower, the Project Company and the Onshore Collateral Agent (on behalf of the Secured Parties) shall enter into a Fiduciary Transfer Agreement under Brazilian law providing for the creation and perfection of a first priority security interest in and over or for the assignment of all the Borrowers right, title and interest in, to and over, all share capital of the Project Company that is owned by the Borrower from time to time (including all related voting and economic rights, dividends and other rights and revenues derived therefrom), as well as the credit rights the Borrower has or may have against the Project Company and/or Petrobras resulting from a shareholder loan or equity contribution made on behalf of Petrobras. The shares arising from any capital increase and subscribed by the Borrower will also be subjected to the RAL Fiduciary Transfer Agreement. The Borrower, the Quotaholders and the Onshore Collateral Agent (on behalf of the Secured Parties) shall enter into a Fiduciary Transfer Agreement under Brazilian law providing for the creation and perfection of a first priority security interest in and over, or for the

RAL Fiduciary Transfer Agreement

PDVSA Brasil Fiduciary Transfer Agreement

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assignment of, all of their respective right, title and interest in, to and over, all quotas of the Borrower (including all related voting and economic rights, dividends and other rights and revenues derived therefrom), as well as the credit rights any Quotaholder has or may have against the Borrower, as a result of a Quotaholder loan. Onshore Dividend Account Fiduciary Transfer Agreement All dividends payable by the Project Company to the Borrower shall be deposited into an onshore account maintained with the Onshore Account Bank that is pledged for the benefit of the Secured Parties (the Dividend Account). No funds may be transferred from the Dividend Account to or for the account of the Borrower or its affiliates unless (a) after giving effect to such transfer, not less than the BRL equivalent of USD10 million will remain standing to the credit of the Dividend Account and (b) prior to and after giving effect to such transfer, no Default or Event of Default under the Finance Documents has or will have occurred and is or will be continuing. Banco de Desarrollo Econmico y Social de Venezuela (BANDES) shall issue a New York law-governed stand-by L/C (the SBLC) in the amount of USD235 million. The SBLC shall be subject to the [Uniform Customs and Practice for Documentary Credits 2007 Revision, International Chamber of Commerce Publication No. 600 (UCP 600)][International Standby Practices - ISP 98, International Chamber of Commerce Publication No. 590 (ISP 98)] and, to the extent not inconsistent therewith, the SBLC shall be governed by and construed in accordance with the laws of the State of New York. For the avoidance of he doubt, in the event of any conflict between the laws of the State of New York and the [UCP 600][ISP 98], the [UCP 600][ISP 98] shall prevail. The SBLC shall be (a) issued for successive periods of one (1) year until the final repayment of all obligations of the Credit Parties under the Transaction Facilities, and (b) automatically renewed by not later than 60 days prior to the expiration of each period of one (1) year and the failure to so renew for any reason by such date shall entitle the Beneficiary(ies) to draw thereunder and (c) the amount available under the SBLC shall be reinstated up to USD235 million as a consequence of any payment made by BANDES pursuant to any demand made by the Lenders (in such role, the Beneficiary of the SBLC or the Beneficiary), provided that: (1) PDVSA has reimbursed BANDES for any amounts paid, and (2) BANDES has notified the Beneficiary of such reinstatement through the Offshore Collateral Agent. The Beneficiary shall be entitled to make multiple drawings under this SBLC, provided that the total amount drawn shall not exceed the available limit at the relevant time. BANDES shall establish with the Offshore Account Bank an account in Portugal and governed by an Account Control and Pledge Agreement construed in accordance with the laws of the State of New York, USA, and shall fund such account with USD time-deposits in an amount of USD equivalent to the initial face amount of the SBLC. PDVSA shall issue in favor of the Offshore Collateral Agent for the benefit of the Lenders an unconditional, irrevocable New York lawgoverned parent company guarantee guaranteeing the prompt

BANDES Stand-by L/C

BANDES TimeDeposit Account Control and Pledge Agreement

PDVSA Guarantee

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payment and performance when due of all obligations of the Credit Parties and the Quotaholders under the Finance Documents and providing for customary representations, warranties and covenants to 6 be agreed.

E. Equity Contribution and Share Retention

ECSRA The Quotaholders, the Guarantor and the Administrative Agent shall enter into an Equity Contribution and Share Retention Agreement (the ECSRA) providing for the Quotaholders and Guarantors joint and several obligation to make equity contributions to the Borrower in an aggregate amount equal to the Borrowers obligation to provide (a) base equity as set forth in the Business Plan and called for by the Project Company in accordance with the provisions of the Project Company Shareholders Agreement and (b) equity necessary to pay interest, principal, commissions or any other amount arising from the Transaction Facilities and owing to any Secured Party. In the ECSRA the Guarantor will undertake (a) not to transfer or permit to be transferred any equity (or economic interest) in any Quotaholders to a party that is not directly or indirectly 100% whollyowned by the Guarantor, (b) not to permit the Borrower or Quotaholders to transfer or allow to be transferred any equity interest in the Borrower or in the Project Company, and (c) to maintain control over each Quotaholder and the Borrower (with control meaning the ability to direct the policies and material decisions of the relevant entity and the ownership of 51% of the record and beneficial ownership of the equity interests of such entity). Representations and Warranties The Guarantor7 shall make representations and warranties to be mutually agreed, including, but not limited to, the following additional items: 1. the Guarantor has complied with all public bidding and other requirements under applicable Venezuelan law with respect to the Transaction Documents; there is no applicable Venezuelan law that limits the Guarantors or Quotaholders ability to enter into the ECSRA or limits such agreements effectiveness or enforceability; and the Guarantor and each Quotaholder have received the requisite authorization to submit disputes under the ECSRA to resolution in the manner set forth therein, which shall include dispute resolution before an Arbitral Tribunal.

2.

3.

Affirmative Covenants Negative Covenants

Affirmative covenants by the Guarantor to be mutually agreed.

Negative covenants by the Guarantor to be mutually agreed.

The need for an aval of PDVSA to be attached to the Promissory Note of the Borrower is subject to review by Venezuelan counsel. Venezuelan counsel to review and refine reps and other provisions related to PDVSA and other Venezuelan entities.

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F. Other Finance Documents and Miscellaneous

Promissory Note The Loans will be represented by a Promissory Note, governed by Brazilian law, in an aggregate principal amount equivalent to 125% of the principal amount of all the Loans. The Lenders and Agents shall enter into an Intercreditor Agreement governed by New York law that shall, inter alia, regulate matters regarding Lender voting, the taking of enforcement actions and realization upon Collateral Security, waivers and consents, the ratable sharing of payments received across the Loan and Guarantee Facilities and other actions arising in respect of the Loan and Guarantee Facilities. The Loan and Guarantee Facility documents will contain customary provisions protecting the Lenders in the event of unavailability of funding, illegality, increased costs and funding losses and capital adequacy due to changes in law or regulations, all of the foregoing subject to customary mitigation provisions acceptable to the Borrower, the Guarantor and the Lenders. Unilateral prepayment will be permitted for affected Lenders (subject to the payment of breakage costs). The Lenders will be permitted to charge, as and to the extent incurred, any applicable reserves, regulatory charges and other regulatory requirements, applicable to their funding of LIBOR that arise as a result of changes in law after the execution of Loan or Guarantee Facility documents, it being understood that customary provisions acceptable to the Borrower, the Sponsor and the Lenders shall be included for the mitigation of the Borrowers increased costs. Taxes All payments made to the Lenders shall be made free and clear of, and without deduction or withholding for, any present or future taxes or other charges, and any and all taxes, levies or contributions imposed by the Brazilian or any other taxing authorities relating to the Loan or Guarantee Facility or payments made thereunder will be borne and paid for by the Borrower. Unilateral prepayment will be permitted for Lenders who are subject to increased costs or taxes after the Financial Closing Date (subject to the payment of breakage costs). In the event any such taxes or other charges are required to be paid under applicable law, the Borrower shall pay the full amount thereof and pay each Lender such amount as would have been payable had no such withholding been made. Expenses All reasonable costs and out-of-pocket expenses of the Lenders and Agents incurred in the due diligence regarding, and negotiation and execution of, the Transaction and the Transaction Documents or any other instruments contemplated herein or therein shall be for the account of the Borrower (whether or not the Transaction Documents are executed and the Transaction Facilities are made available to the Borrower or BNDES).

Intercreditor Agreement

Increased Costs

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Dispute Resolution

Any dispute arising under any Finance Document (other than the Brazilian law-governed Security Documents) to which any Credit Party is a party shall be finally settled under the rules of the International Court of Arbitration of the International Chamber of Commerce (the "ICC Rules") by a panel of three arbitrators (the Arbitral Tribunal) nominated in accordance with the ICC Rules. The place of arbitration shall be Paris. The arbitration shall be bilingual (Spanish and English). Any award issued by the Arbitral Tribunal shall be final and binding, and the parties shall agree that a judgment recognizing such award may be entered in any court with jurisdiction and irrevocably submit to the jurisdiction of any such court over the parties or their assets for purposes of recognizing and enforcing the award. The Credit Parties shall waive all immunities under the laws of any jurisdiction. Each Credit Party and each Quotaholder party to any Brazilian lawgoverned Security Document shall (a) unconditionally and irrevocably submit to the jurisdiction of the courts of Rio de Janeiro, State of Rio de Janeiro, Brazil for the resolution of any dispute or controversy arising under such Security Document and (b) grant to the Secured Parties the right to raise any claim against such Credit Party or such Quotaholder in relation to such Security Documents in any jurisdiction in which such Credit Party or such Quotaholder is domiciled or where any of such Credit Party's or such Quotaholder's assets are located.

Indemnification

The Borrower shall indemnify the Lenders and each other Secured Party, including their respective affiliates and officers, directors, employees, advisors and agents (the Indemnified Parties) against all losses, liabilities, claims, damages or expenses relating to their loans or commitments and their participation in the Transaction Facilities (or any Transaction Document), including, but not limited to, reasonable attorney and other professional fees and settlement costs and losses, liabilities, claims, damages or expenses arising from or relating to the environmental impact of the Project (except, in each case, to the extent that such losses, liabilities, claims, damages or expenses are found by a final, non-appealable judgment of a court of competent jurisdiction to result directly from the Indemnified Parties gross negligence or willful misconduct) but shall not include any indirect or consequential damages. Each Credit Party shall agree that, to the extent that such Credit Party or any of its assets has, at the time of execution of the Transaction Documents, or thereafter acquires, any right of immunity, whether characterized as sovereign immunity or otherwise, from any legal proceedings, to enforce or collect upon the Loans or any other liability or obligation of such Credit Party related to or arising from the transactions contemplated by any of the Transaction Documents including immunity from service of process, immunity from jurisdiction or judgment of any court or tribunal, immunity from execution of a judgment, and immunity of any of its property from attachment prior to any entry of judgment, or from attachment in aid of execution upon a judgment, such Credit Party shall irrevocably waive any such immunity and agree not to assert any such right or claim in any such

Waiver of Immunity

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proceeding. Governing Law The Finance Documents (other than any fianas under the Guarantee Facility, which will be governed by Brazilian law) shall be governed by and construed in accordance with the laws of the State of New York, USA, except that certain Security Documents and project documents will be governed by Brazilian law. The Lenders will be permitted to assign loans under the Loan Facility with prior notification and consent (such consent not to be unreasonably withheld) of the Borrower, unless there is a Default outstanding in respect of the Loan Facility, in which case no consent from the Borrower shall be required. All assignments will also require the consent of the Administrative Agent, not to be unreasonably withheld or delayed. Each assignment will be in an amount of an integral multiple of USD1 million and shall require, as a condition to its effectiveness, the assignees assumption of a pro rata portion the assignors obligations and rights under the Guarantee Facility. The Lenders will be permitted to sell participations in loans and commitments without restriction. Voting rights of participants, as established in the Intercreditor Agreement, shall be limited to matters in respect of (i) increases in commitments of such participant, (ii) reductions of principal, interest or fees payable to such participant, (iii) extensions of final maturity or scheduled amortization of the loans or commitments in which such participant participates, (iv) releases of all or substantially all of the value of the Collateral, (v) approvals of any changes in the Project Companys Project Budget and Business Plan and (vi) waivers of any breach of the ECSRA. The Borrower shall be responsible for any taxes or increased costs affecting any assignee or participant in the same amount that the assigning or participating Lender would have been affected. During the period from the date of this Summary of Indicative Terms and Conditions until such time as the Mandated Lead Arrangers receive firm commitments from financial institutions sufficient to consummate the Transaction on the terms described herein, the Borrower must not announce, enter into discussions to raise, raise or attempt to raise any other finance in the international or any relevant domestic syndicated loan, debt, bank, capital or equity market(s) (including, but not limited any bilateral or syndicated facility, bond or note issuance or private placement) without the prior written consent of the Mandated Lead Arrangers. With respect to other financings of a similar nature which are intended to be raised in the international or any relevant domestic syndicated loan, debt, bank, capital or equity market(s) (including, but not limited any bilateral or syndicated facility, bond or note issuance or private placement) by the other members of the PDVSA Group, the Borrower will ensure, subject to applicable confidentiality obligations, that such members of the PDVSA Group will coordinate with the Mandated Lead Arrangers to cause such financings to be brought to market in a manner and time frame that shall not compete with the Transaction Facilities.

Syndication and Transfers, Clear Market

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Yield Protection

Customary, for a facility of this nature, including a market disruption clause. Unilateral prepayment will be permitted for affected Lenders (subject to the payment of breakage costs).

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ANNEX A Term Sheet Part 1 Financial Definitions

Consolidated Debt

As to any person at any time of determination, all Financial Indebtedness of such person and its subsidiaries determined on a consolidated basis in accordance with IFRS. As to any person at any time of determination, the ratio of (a) such person's Consolidated Debt as of such time of determination to (b) such person's Consolidated EBITDA for the 12-month period ending on the last day of its fiscal quarter then ending, or if not then ending, most recently ended. The sum of such person's and its subsidiaries' 1. Consolidated Net Income; 2. depreciation and amortization; 3. corporate tax and other taxes on income and gains; 4. financial expenses (including interest on loans and financings, the interest component of any payments made under finance leases, commissions, fees, discounts, monetary and exchange variation on liabilities, losses on hedging agreements and other finance charges); and 5. non-operational costs and charges, minus 1. the sum of such person's and its subsidiaries' 2. financial income (including monetary and exchange variations on assets, gains on hedging agreements and other finance income); and 3. non-operational income or gains, in each case, for such period and determined on a consolidated basis in accordance with IFRS.

Consolidated Debt to Consolidated EBITDA Ratio

Consolidated EBITDA

Consolidated Interest Coverage Ratio

As to any person at any time of determination, the ratio of (a) such person's Consolidated EBITDA for the 12-month period ending on the last day of its fiscal quarter then ending, or if not then ending, most recently ended to (b) such person's Consolidated Interest Expense for the 12-month period ending on the last day of its fiscal quarter then ending, or if not then ending, most recently ended. As to any person for any period, the sum of (a) all interest incurred or accrued in respect of all outstanding Consolidated Interest Indebtedness of such person and (b) all interest capitalized or

Consolidated Interest Expense

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deferred in respect of Consolidated Interest Indebtedness of such person, in each case, during such period and determined on a consolidated basis in accordance with IFRS. Consolidated Interest Indebtedness As to any person, all Financial Indebtedness of such person and its subsidiaries for borrowed money that bears interest or otherwise accrues interest expense, determined on a consolidated basis in accordance with IFRS. As to any person for any period, the aggregate of all amounts (exclusive of all amounts in respect of any extraordinary gains but including extraordinary losses other than any extraordinary non-cash losses) which would be included as net income (loss) on the consolidated financial statements of such person and its subsidiaries, determined on a consolidated basis in accordance with IFRS. As to any person at any time of determination, the sum of all items that would be included under shareholders', partners' or members' equity on the balance sheet of such person, determined in accordance with IFRS. As to any person at any time of determination: the Consolidated Net Worth of such person, minus all goodwill and intangible assets of such person and its subsidiaries at such time of determination and determined on a consolidated basis in accordance with IFRS. Financial Indebtedness As to any person at any time of determination, any indebtedness for or in respect of the following to the extent accounted for as financial debt in the accounts of such person prepared in accordance with IFRS: 1. moneys borrowed; 2. any amount raised by acceptance under any acceptance credit facility; 3. any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; 4. the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with IFRS, be treated as a finance or capital lease; 5. receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis); 6. any amount raised under any other transaction (including any forward sale or purchase agreement, sale and sale back or sale and leaseback agreement and any amount prepaid or required to be prepaid under or in connection with any commercial contract)

Consolidated Net Income

Consolidated Net Worth

Consolidated Tangible Net Worth

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having the commercial effect of a borrowing; 7. any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account); 8. any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution in respect of an underlying liability of an entity which is not a member of the PDVSA Group which liability would fall within one of the other paragraphs of this definition; 9. without double counting, the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (1) to (8) above; and 10. any amount of any liability in respect of any of the items referred to in paragraphs (1) to (9) above of any other person which is not a member of PDVSA Group for which any security has been granted.

Part 2 Material Adverse Effect Definition

Material Adverse Effect

A material and adverse effect on (a) the business, financial condition or operations of the Borrower, or of the Guarantor, or the ability of the Guarantor or the Borrower to perform its obligations under any Transaction Document to which it is a party, (b) the business, financial condition or operations of the Project Company or the ability of the Project Company to (x) perform its obligations under the BNDES Loan Agreement or any other Material Project Document to which it is a party or (y) construct, commission and operate the Project according to the construction schedule, within the Project Budget, and in accordance with the operating phase projections set forth in the Business Plan, (c) the rights and remedies of the Lenders set forth in or intended to be established pursuant to the Finance Documents or (d) the validity or enforceability of any material provision of any Transaction Document, or the validity, enforceability, priority or perfection of the security interests under the Security Documents over any material portion of the Collateral.

Part 3 Permitted Indebtedness Definitions

Borrower Permitted Financial Indebtedness

The Loan, any Reimbursement Loan and any loan from any Quotaholder or the Guarantor to the Borrower subordinated on terms, and documented in form and substance, acceptable to the Lenders and subject to restricted payment conditions.

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Project Company Permitted Financial Indebtedness

Indebtedness permitted under the BNDES Loan Agreement as in effect as of the date of the Loan Facility including any permitted loan from the Borrower or Petrobras to the Project Company subordinated on terms, and documented in form and substance, acceptable to the Lenders.

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Appendix
A) Draft Shareholders Agreement B) RAL x BNDES Loan Agreement

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