Annual Report
2017
—
2
SUMMARY
3
Message from the Chairman of
the Board of Directors 03
Message from the
CEO of Petrobras 05
ABOUT THE REPORT
7
MATERIALITY
8
SAFETY
9
OVERVIEW AND
BUSINESS MODEL
15
Who we are 16
Where we are 17
How we generate value 18
Business Model 19
EXTERNAL
CONTEXT
64
OUR
CAPITALS
20
Human 21
Intellectual 27
Social and Relationship 34
Natural 43
Productive 50
Financial 54
BUSINESS
PERFORMANCE
70
Exploration and Production
of Oil and Gas 71
Refining and Natural Gas 78
Consolidated Financial
Performance 97
STRATEGIES AND
PERSPECTIVES
GOVERNANCE AND
COMPLIANCE
99
Strategic Planning 100
Business and Management
Plan 2018-2022 103
Management System:
Evolution Project 108
109
Corporate
Governance 110
Ethics 117
Compliance and
Internal Controls 118
RISKS AND
OPPORTUNITIES
122
Risk Management 123
Crisis Management 125
Opportunities 125
OTHER
INFORMATION
127
Annexes 128
Acknowledgments 129
Glossary 130
Management and Editorial Staff 132
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 3
Message from
the Chairman
of the Board of
Directors
It is with great pleasure that I present Petrobras’ first
Integrated Report. This Report is more than just
a new – and improved – way to report our results,
performance and expectations. It also reflects an
evolution in our management and in the way we plan
our activities.
When producing oil, natural gas, electricity or any
other product, we should no longer think only in
financial and operational terms. We must view
these processes as a whole, including the inputs
(tangible and intangible) and products, both used
and generated, and the impacts caused in the various
stakeholders with which we relate.
We are committed to the fundamental concept
of Integrated Reporting, demonstrating how the
company has created value in the past and which
elements are available to its management to continue
to add value to the company, to those who interact
with us, to our customers, suppliers and shareholders.
The practice of presenting the company in an integrated
way is an essential step in this process, since when
preparing the report we have to consider all aspects of
the company, listing achievements, analyzing gaps and
identifying opportunities to improve.
As a former member and current ambassador of the
International Integrated Reporting Council (IIRC), I
share the long-term view that we are moving towards
a world where Integrated Thinking is increasingly
rooted in business management, and where the cycle
of Integrated Thinking and Reporting will ensure
financial stability and sustainability.
“The way we work and
the impact we generate
are just as important as
our results.”
Nelson Carvalho
Chairman of the Board of Directors
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 4
Sustainability is not only related to environmental
protection. Sustainability is durability, survival –
mainly in relation to business and financial health –
and growth. Integrated Thinking is a critical variable
in the culture of corporations that want to stay
relevant; and Integrated Reporting is the result of
implementing Integrated Thinking practices.
Reporting and management go hand in hand. While
building and reading this document, I was pleased
to see all of the progress we have already made
and are still making, strengthening our governance
structure, lowering our total recordable injury,
delivering consistent financial and operational
results, implementing changes in human resource
management, reducing and extending our debt,
optimizing our asset portfolio, valuing our shares,
and gradually overcoming all of the main obstacles
that have affected and still affect us, among many
other improvements.
The advancements incorporated into our Bylaws
foster a responsible administration of the State-
owned company, and a greater balance of rights
for all shareholders, through mechanisms where
the minority shareholders are heard and their
legitimate intentions are discussed and expressed
in a transparent manner. The decision of placing
safety alongside financial deleveraging as the key
metrics of our Business and Management Plan is
also a symbol of this Thinking, that the way we work
and the impact we generate are as important as the
results we achieve.
In addition, we have included initiatives related to the
transition to a low-carbon economy and the digital
transformation in the review of our Strategic Plan,
strengthening our commitment to evolve with the
society, generating long-term value.
As you will see herein, a lot has already been
accomplished, although we recognize there is still
much to be done. And it is this commitment with
constant evolution that moves us – and I would like
to invite our entire workforce to fight with us to move
everyone at Petrobras – every day.
Thank you.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
5
heads held high, seeking to do what is necessary, in the
right way. But we also know that there is still much to be
done, and we are fully committed to continue pursuing the
goals of our business plan.
Our safety culture is being consolidated day after day.
The total recordable injury (TRI), which measures the
number of injuries per million hours worked, continued
decreasing, from 1.63 in 2016 to 1.08 in 2017, reaching the
level of the best companies in the industry. This evolution
meant a reduction of approximately 1,700 injured workers
in the period between 2015 and 2017. And we want to do
even more. In 2018, we have the challenge of limiting TRI to
1 injury per million hours worked at risk.
We regret, and we do it with great sorrow, that we could not
avoid fatal injuries. In 2017, we lost six employees and one
went missing. We will continue making our best efforts to
prevent this from happening again.
Under the financial perspective, we worked hard in
managing our debt, which allowed us to decrease its size,
reduce the interest rates and extend deadlines, aligning
our amortization schedule with the maturation period of
our projects.
In the operational area, we reached – for the third
consecutive year – our production target, ratifying the
predictability of our forecast. In Brazil, our average
production of oil reached, for the fourth consecutive year, a
historical record: in 2017 it reached 2.15 million barrels per
day, an increase of 0.4% over the previous year.
Message from the
CEO of Petrobras
Reporting is an exercise of reflection, an opportunity
to assess what has been done and what is yet to be
done. This is what Petrobras’ first Integrated Reporting
provides us. We have developed the Annual Report,
presenting comprehensive information on the company
(previously disclosed in the Management Report) along
with Sustainability information, focusing on social and
environmental dimensions. These two integrated and
complementary documents present the highlights of
2017 and our vision for the future.
And the first reflection the 2017 Integrated Reporting
provides us is that we have reached a new moment at
Petrobras. We are leaving behind the remains of the crisis
that shook us in the recent past and moving forward,
“We are paving a
consistent path for
the sustainability of
our company”
Pedro Parente
Petrobras CEO
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 6
Regarding our own production of natural gas, in 2017 we
reached the unprecedented amount of 79.6 million cubic
meters per day. With that, our total production in the
country reached 2.65 million barrels of oil equivalent per
day – volume 0.9% higher than 2016. This is a brand new
record for Petrobras.
We increased the frequency of adjustments of diesel and
gasoline prices for it to be more adherent to the market.
We have also lighten up the adjustments to residential LPG
– with no loss of profitability to our company – meeting
the needs of our consumers. These are certainly important
lessons for a company that was a monopoly for decades:
operating in a competitive environment and thinking
about their clients.
The full operation of our new management system
provided us excellent cost-reduction results, which allows
us to implement and monitor, with discipline and method,
our strategic plan and our annual business plan. For the
first time, these plans are consistently integrated, ensuring
the company’s strategic goals to be translated into
concrete actions and targets, thus allowing us to reach
the desired results.
outweigh our cost of capital. Our portfolio’s “breakeven
price” presented a reduction of USD 43/barrel in 2014 to
USD 29/barrel in 2018 1.
Under the Partnership and Divestment Program, one of
the pillars for the management of our asset portfolio and
to ensure the necessary resources for our investments,
it is important to emphasize the initial public offering 2
performed by Petrobras Distribuidora in November 2017,
the largest IPO in the Brazilian stock exchange since 2013;
and the strategic partnership with Statoil, the Norwegian
company, that will provide technology to increase the oil
recovery rate of our reservoirs.
The changes we promoted in our management system
and in our decision-making processes made Petrobras
more robust and reliable, culminating with the admission
of the company in the Corporate Governance Program for
State-Owned Companies and the request for admission to
Level 2 in corporate governance at B3. In addition, we have
implemented a number of actions for strengthening our
internal control environment and were able to eliminate all
significant deficiencies and material weaknesses identified
in recent years.
In addition, we continue to increase the efficiency and
effectiveness of our investments. It is always good to bear
in mind that we operate in a capital-intensive industry, with
long maturation deadline for its investments. The cost
reductions and the increased effectiveness of our
investments have provided continuous decreases in our
lifting and refining costs, and in the so-called “breakeven
price”, which is the value of a barrel of oil from which the
net result of our exploration and production investments
And moving forward also means looking at what is yet to
come. One of our key strategies is to prepare the company
for a future based on a low carbon economy: what we are
doing to reduce emissions, increase the use of natural gas
as a cleaner source of energy, develop new technologies
and expand the studies on renewable energy. We have
voluntarily joined the Oil and Gas Climate Initiative
(OGCI), the most important initiative in the industry
to reduce emissions.
We have restructured our oil exploration portfolio following
value leverage and risk reduction strategies through
partnerships. We have purchased ten new exploration
blocks, adding 11.4 thousand km 2, approximately 17%,
to our portfolio, with an investment of BRL 2.9 billion in
signing bonuses. We will almost double, on average, the
number of exploration wells drilled per year, from 15 wells in
2016 and 2017 to 29 wells from 2018 to 2022.
We are surely on the right path. The path of hard, efficient
and competent work, which brings righteous results and
generates value for shareholders, employees and the
society as a whole. We are paving a consistent path for
the sustainability of our company, and we know this is
an ongoing process. I would like to emphasize, and also
thank, the commitment of our workforce, which has been
relentless in seeking the aforementioned results.
Finally, and not least importantly, I reiterate that we do
not tolerate any form of fraud or corruption and we do not
accept the practice of ethical deviations. These principles
govern our workforce, the Executive Board and the Board of
Directors, and we shall not stray from them.
This Reporting is an attempt to increase the transparency
and dialogue with our stakeholders. Therefore, I would
like to invite you all to interact with us, providing any
suggestions for improvement you may have.
Thank you!
1 According to 2014/2018 and 2018/2022 Strategic Plans
2 Initial Public Offering (IPO)
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES About the report
The Integrated Reporting promotes a more cohesive and efficient approach in the development of corporate
reports, aiming at improving the quality of the information made available to the providers of financial capital,
seeking to explain how the organization generates value over time and providing subsidies to capital allocation in
a more efficient and productive manner. This publication (2017 Annual Report), along with the Sustainability 2017
and the Financial Statements form the basis of our Integrated Reporting.
Until 2017 we presented the Management Report with the highlights from the previous fiscal year. This year, with
the 2017 Annual Report, we have moved forward with the reporting process, aiming at improving the transparency
and connectivity of the information provided and demonstrating how value is generated over time. Therefore, the
2017 Annual Report seeks not only to comply with the current legislation, such as Law No. 6404 and the guidelines
from the Brazilian Securities and Exchange Commission (CVM), but also with the principles and content elements
recommended by the Integrated Reporting framework from the International Integrated Reporting Council (IIRC).
In addition, the financial information contained in this report was prepared in accordance with the International
Financial Reporting Standards (IFRS) and the accounting principles adopted in Brazil by the Accounting
Pronouncements Committee (CPC).
This report was validated by our Executive Board and approved by our Board of Directors, which authorized its
publication. In addition, the independent auditor (KPMG) read the information contained herein, in the context of
the audit standards related to the company’s financial statements for the fiscal year ended on December 31, 2017
as included in its report on such financial statements issued on March 14, 2018.
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Materiality
7
NOTICE TO THE READER
This document contains forecasts reflecting only the
expectations of our directors. The words “anticipates”,
“believes”, “expects”, “forecast”, “intends”, “plans”,
“projects”, “aims”, “shall” and other similar terms are
intended to identify such forecasts, which evidently
involve risks or uncertainties foreseen or not by
the company.
Therefore, the future results of our operations may differ
from current expectations, and the reader must not rely
exclusively on the information contained herein.
The company does not undertake to update such
predictions upon receipt of new information or
future developments.
In case there are differences between the english and
portuguese versions of this report the portuguese
shall prevail.
We would like to receive your questions regarding this
report and your suggestions for the next edition.
Contact us through our website
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Materiality
Materiality
The materiality matrix is the result of the identification,
evaluation and prioritization of relevant issues that
impact our ability to create value in the short, medium
and long term. At the beginning of 2017, we reviewed our
materiality by mapping the relevant topics by determining
the expectations of our stakeholders, public opinion polls,
market indexes, ratings, internal debates with experts,
governance committee meetings and interviews with
senior management.
The identified topics were then assessed by the senior
management and by a group of managers and market
analysts through the application of questionnaires on
the impact of each topic on our business, as well as its
relevance to investors and other stakeholders. As a result
of this process, 22 material themes were identified:
The topics of safety,
commitment to life and
financial deleveraging are
at the top of the list of
material topics, aligned to our
Strategic and Business and
Management Plans.
8
RESEARCH,
DEVELOPMENT AND
INNOVATION
PARTNERSHIPS AND
DIVESTITURES
COMMUNICATION AND
RELATIONSHIP WITH
STAKEHOLDERS
TRANSFER
OF RIGHTS
NEGOTIATION
AIR EMISSIONS
AND CLIMATE
STRATEGY
CAPEX
EFFICIENCY
LAVA JATO
OPERATION
SUPPLIER
MANAGEMENT
PRICE
POLICY
RESERVES
REPLACEMENT
DEVELOPMENT OF THE
PRE-SALT
COMPLIANCE, ETHICS,
PREVENTION AND
ANTI-CORRUPTION
IMPACT OF THE OIL
PRICE AND EXCHANGE
RATE
GOVERNANCE
SAFETY AND
COMMITMENT TO LIFE
FINANCIAL DELEVERAGING
MANAGEMENT
OF CRITICAL
RESOURCES
OPERATIONAL
EFFICIENCY
AND COST
REDUCTION
RISK
MANAGEMENT
BUSINESS
STRATEGY
LOSS OF THE
INVESTMENT
GRADE
REGULATORY
FRAMEWORK
AND LOCAL
CONTENT POLICY
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ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 9
SAFETY
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Safety is avalue acknowledged in our Strategic and
TOTAL RECORDABLE INJURY – TRI
Business and Management Plans.
With the purpose of materializing this value into
strategic objectives and, above all, prioritize actions
aimed at the improvement of safety practices, a set of
actions were established so as to involve the entire
workforce. This chapter will present these actions in
detail, showing the priority of the safety theme at all
levels, processes and activities.
Since 2015, the company adopts the Total Recordable
Injury (TRI) as one of its key metrics being monitored
by senior management. The adoption of this index had
the purpose of allowing the comparison of our safety
results with those from other companies of the same
size operating in the same industry. By adopting
criteria similar to the one recognized and adopted by
world-class oil and gas companies, we can establish
comparative mechanisms to check our safety
performance and, based on the results of several
operating units, plan applicable preventive and
mitigating actions for each area.
In our 2017-2021 Strategic and Business and
Management Plans, our goal was to reduce TRI in 36%,
decreasing from 2.15 in 2015 to 1.4 in 2018. However,
our TRI in 2017 was already at 1.08. This number
represents a reduction of about 1,700 workers injured
in the period between 2015 and 2017.
2.15
1.63
1.08
1.00
2015
2016
2017
2018
Average of the main companies in the industry
The 2018-2022 Business and Management Plan defined
an alert threshold for TRI of 1.00. This result places us
at the same level as the best oil and gas companies in
the world in terms of safety. In order to maintain the
conditions for continuously reducing the safety metrics,
the 2017-2018 cycle of the Commitment to Life Program
started in October 2017, with 19 macro actions detailed
into 65 actions based on the safety of processes,
incorporated to principles and guidelines benefiting not
only safety, but also health and environment.
10
19
Macro Actions
65
Actions
30
Safety actions
21
Environment actions
14
Health actions
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
11
TRI’s evolution is a direct consequence of the
• implementation of the practice of holding a conference
• review of the Systematics for Selecting Goods and Services
implementation of several initiatives for the promotion
immediately after fatal accidents with the entire leadership;
Providers, so as to ensure that the contractors are able to
of our safety culture, with emphasis to the Commitment
• implementation of the Conduct Treatment Systematics with
face the risks to which they will be exposed;
to Life Program; the safety trainings; the emergency
different approaches for error and violation, including the
• improvement of the HSE management in investment projects.
preparation and response; and the Health, Safety and
valuing of positive practices or attitudes;
Environment (HSE) Management Assessment Program.
• review of the Management Assessment Process with a focus
Learning from experience
on process safety and risk management, establishing the
COMMITMENT TO LIFE PROGRAM
obligation of correcting critical deviations;
This is a set of initiatives focusing on preventing
indicators to monitor the HSE performance, incorporated into
accidents and preserving life, launched in October 2016,
the annual assessment of executive managers.
to strengthen the safety guidelines at all stages of the
process and, thus, reduce accidents and standardize
Understanding of hazards and risks
• adoption of proactive process safety and management practice
practices. These initiatives have been structured based
on the results of our HSE management assessments
and the root causes identified in the process of
investigating accidents in recent years. The internal
actions related to the 2016-2017 cycle were 100%
implemented. The Program has the following pillars:
Commitment to safety
• review of the Health, Safety and Environment Policy,
highlighting the commitments to reduce the risks to
the safety and health of the people and strengthen
the safety of processes;
• development and implementation of the Continuous Training
Program of Internalization of Golden Rules;
• development of the Process Safety Training Program and its
basic concepts for the leadership of operational areas.
Risk management
• uniform practices among the company’s areas;
• application of digital technology solutions in
risk management;
• improvement of contingency management and
change management;
• changes to the process of implementing Fatal Accident
Investigation Committees, which are now appointed by
the director of the business area where the accident
took place and developed by an executive manager from
another business area, with the participation of the HSE
executive manager. In this way, we have expanded and
disseminated the learning through out the company;
• execution of Petrobras HSE Congress in August 2017,
with the participation of more than 1,000 members of the
workforce, enabling the dissemination of good practices,
the exchange of experiences and debates on the main
issues related to our HSE and contingency processes.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 12
Other actions were implemented to support the reduction of TRI, such as:
(i) re-establishment of the HSE Executive Committee with the participation
of executive managers from all operational areas; (ii) review of the Behavioral
Audit Standard, establishing accomplishment goals by the leadership; (iii)
implementation of the Daily Summary with key safety indicators, distributed
to the leadership; (iv) inclusion of the “Commitment to Life” competence
in the annual assessment of the entire workforce; (v) strengthening of
the Managerial Inspections in order to identify points for improvement in
the activities or in the safety of the facilities; (vi) promotion of integration
between task supervisors and executors, aiming to identify training or
improvement opportunities of the execution procedures; (vii) development
and implementation of the HSE Communication Plan.
SENIOR MANAGEMENT MONITORING OF ACTIONS
The senior management takes active participation in the Commitment
to Life Program, whether through a systematic follow-up in executive
management meetings, Executive Board and Board of Directors, or
participating in training aimed at leaders, thus consolidating the HSE
culture at Petrobras.
The Board Visits Program was created in 2016. Through that Program,
members of our Board of Directors make technical visits to our
operating units with the purpose of checking the dissemination of the
safety culture, such as the knowledge and practical use of the Golden
Rules on daily tasks, through behavioral audits on our workforce. During
2017, the Board of Directors made technical visits to the Duque de
Caxias Refinery (Reduc) in Rio de Janeiro, to the Operations Units of
Rio Grande do Norte and Ceará and to the Jurong Aracruz Shipyard, in
Espírito Santo. In 2018, visits are planned to Transpetro and Petrobras
Distribuidora facilities. Our CEO and executive officers also carry out
technical visits and behavioral audits.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 13
SAFETY TRAINING
Golden Rules Training: the Commitment to Life Program
has established, among other actions, the training and
16 thousand people related to the HSE, operation,
maintenance, inspection and engineering areas. Training
Incident Command System (ICS) Training: incident
management training designed for integrated action of
internalization of the Golden Rules for the entire workforce,
includes the recognition of risks, the implementation of
stakeholders in the emergency response actions such
mobilizing over 185 thousand workers in 2017. The Golden
protection layers in relation to known risks, operational
as companies, environmental agencies, firefighters, and
Rules have been created from the root causes of most of
safety and process safety.
the fatal accidents that took place in the company over the
past decade, aiming at the prevention of accidents.
Conduct Treatment Training: e-learning training with the
purpose of assisting the manager in understanding and
civil defense. In 2017, more than 1,000 employees were
trained in the ICS methodology. In the exploration and
production segment, exercises were carried out following
Process safety training: training focusing on the safety
of processes and target audience of approximately
applying the HSE Conduct Treatment. Target audience of
the methodology, including the participation of
approximately 7 thousand leaders.
public agencies.
ALCOHOL AND
OTHER DRUGS
Never work under the influence of
alcohol or other drugs.
TRAFFIC SAFETY
Respect traffic laws and practice defensive driving.
Use the seatbelt, respect speed limits,
do not use cell phone and
never drive after drink alcohol.
ATTENTION TO CHANGES
Pay attention to the risks of change. Only carry out any
change that involves persons, facilities, materials or
procedures after review and approval.
PERSONNEL PROTECTIVE EQUIPMENT
Always use PPE as recommended.
SAFE POSITIONING
Do not access isolated area.
Never stand under a suspended load or
between vehicles, stationary or moving.
Keep yourself in safe and secure locations.
GOLDEN
RULES
WORK PERMIT
Only perform tasks with a valid work permit, issued
at workplace and with its full understanding.
ENERGY ISOLATION
Only perform tasks in equipments or facilities
after making sure that all energies sources
have been isolated safely.
WORK AT HEIGHT
Only perform tasks at heights using
safety harness anchored on a safe
and predetermined place.
CONFINED SPACE
Only enter in confined space if authorized,
equipped and with specific training.
EXPLOSIVE ATMOSPHERES
Never enter in explosive atmosphere place.
Always obey the alarms and signaling.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 14
EMERGENCY PREPARATION AND RESPONSE
HSE MANAGEMENT ASSESSMENT PROGRAM
Among the exercises held in 2017, we emphasize the one held at the Operation Unit in Espírito Santo
The HSE Management Assessment Program is a proactive,
involving a complex scenario and field actions. The scenario of a major accident was designed to test
independent and integrated assessment process to evaluate
and improve all our emergency response and crisis management structures. In addition to the Incident
the compliance with the requirements established in the HSE
Management Team (IMT) and the local response structure, the Business Support Team (BST), comprised
Management System.
of the executive officer of the affected area and company managers, was also mobilized. The Crisis
Management Team (CMT) was also activated, with the participation of the CEO, officers and executive
The findings identified during the assessments are classified
managers. An exercise at that level involved different areas such as Exploration and Production; Refining
as critical, severe, moderate, and mild. Action plans are
and Natural Gas; Production and Technology Development; Health, Safety and Environment; Corporate
established, with deadlines for remediation taking into
Risks; Communication and Brands; Social Responsibility; Investor Relations; Legal; Intelligence and
consideration the criticality level.
Corporate Security; Shared Services; Information Technology and Telecommunications; among other.
This process is monitored during critical analysis meetings with
the senior leadership.
FATAL ACCIDENTS
4. Accident with contractor's employee on December 2, 2017:
crushing during movement of pipes on drillship, at
preliminary warning in order to start the scope analysis
regarding the incident and implementing emergency
Despite our best efforts in the quest for continuous
the Gulf of Mexico in the United States.
actions for blocking similar occurrences. According to
improvement in the safety culture and management,
the standard, we held the investigation and analysis
in 2017 we registered and lament the occurrence of six
On December 18, a man overboard accident took place,
process under the coordination of executive managers
fatal accidents:
with the person missing. We are waiting for the legal term
and multidisciplinary team in order to identify
1. Accident with employee on February 6, 2017:
car crash on highway in Rio de Janeiro;
2. Accident with contractor's employee on May 23, 2017:
fall during cargo handling, in Rio Grande do Norte;
3. Accident with three contractor's employee on June 9, 2017:
steam boiler explosion on drillship, in Rio de Janeiro;
for the appropriation of the accident.
the causes of the accidents. We consolidated and
disclosed actions that may prevent the recurrence
In all fatal accidents, the first action was for leaders of
of such accidents. The lessons learned from the
the units involved in the accidents to provide personal
accidents are discussed in forums involving managers
support to the families of the affected employees. The
and disclosed to our workforce.
leaders involved in the occurrences immediately disclosed
the information to the senior management, issuing a
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 15
Who
we are
16
Where
we are
17
How we
generate value
18
OVERVIEW AND
BUSINESS MODEL
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Who we are
We are a publicly-traded company that has
the purpose of providing the energy to move
society to achieve its potential. Through the
unique technical capability of our workforce,
we operate in the exploration and production,
refining, natural gas, power, logistics,
marketing, distribution, petrochemical,
fertilizer, and biofuel segments.
VISION
VALUES
PURPOSE
16
AN INTEGRATED ENERGY
COMPANY FOCUSED
ON OIL AND GAS THAT
EVOLVES WITH SOCIETY,
CREATING HIGH VALUE AND
WITH UNIQUE TECHNICAL
CAPABILITY
RESPECT FOR LIFE,
PEOPLE AND THE
ENVIRONMENT
ETHICS AND
TRANSPARENCY
OVERCOMING
AND CONFIDENCE
RESULTS
MARKET
DRIVEN
PROVIDE THE ENERGY
THAT MOVES THE
SOCIETY TO ACHIEVE
ITS POTENTIAL
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Where we are
MAIN EXPLORATION, PRODUCTION AND REFINING ASSETS
FOZ DO AMAZONAS /
PARÁ-MARANHÃO
BARREIRINHAS
PARNAÍBA
2
3
CEARÁ AND
POTIGUAR
4
PARAÍBA/
PERNAMBUCO
5
RECÔNCAVO
SERGIPE AND
ALAGOAS
CAMAMU/ALMADA
AND JEQUITINHONHA
6
7
PARANÁ
8
9
10
PELOTAS
ESPÍRITO SANTO,
CAMPOS AND
SANTOS
SÃO PAULO
PARANÁ
1
SOLIMÕES/
AMAZONAS
1
2
REMAN
(ISAAC SABBÁ)
LUBNOR
(REFINARIA
LUBRIFICANTES E
DERIVADOS DO NORDESTE)
3 RPCC
(POTIGUAR CLARA CAMARÃO)
4
5
6
7
8
RNEST
(ABREU E LIMA)
RLAM
(LANDULPHO ALVES)
REGAP
(GABRIEL PASSOS)
REDUC
(DUQUE DE CAXIAS)
RPBC
(PRES. BERNARDES)
REVAP
(HENRIQUE LAGE)
REPLAN
(PAULÍNIA)
RECAP
(CAPUAVA)
9
REPAR
(PRES. GETÚLIO VARGAS)
SIX
(SHALE MANUFACTURING UNIT)
10
REFAP
(ALBERTO PASQUALINI)
Oil industry leaders in Brazil, with
activities in Argentina, Bolivia,
Colombia, United States, Mexico,
Nigeria, Paraguay and Uruguay.
RIO DE
JANEIRO
SANTOS
BASIN
17
ESPÍRITO
SANTO
REGULATORY
FRAMEWORK
CONCESSION
TRANSFER OF RIGHTS
PRODUCTION SHARING
CAMPOS
BASIN
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 18
How we generate value
In our business model, we demonstrate how we use resources and processes to create value for our stakeholders,
how we analyze the external context and how we evolve in management, governance and business strategies.
The resources used in our production process, presented in our business model, were classified into six categories
according to the International Integrated Reporting Council (IIRC) capital model. Therefore, our capitals represent the
inputs and are affected by our activities in the value generating process.
Our human capital
is comprised by
our employees
working with safety,
technical capacity,
competence and
experience, ethics,
accountability and
compliance.
Our intellectual
capital is
comprised of
our recognized
technical capacity,
development of
new technologies
and intellectual
property.
Our social and
relationship capital is
formed by the interactions
with our stakeholders.
These interactions are
strengthened through
our dialog channels, our
social investments and
our brand and reputation
management initiatives,
seeking to strengthen the
bonds of trust with society.
Our natural capital
is composed of renewable
and non-renewable
environmental resources
used in or affected by
our production process,
especially our oil and
gas reserves, in addition
to water resources,
ecosystems and
biodiversity.
Our productive
capital consists of our
industrial units and
the entire
infrastructure we
use in our productive
activity, with
emphasis to the
platforms, refineries
and logistical assets.
Our financial
capital is composed
of the available
financial resources,
whether our own or
from third parties,
allocated to our
productive activity.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
RELATÓRIO ANUAL 2017
PETROBRAS
SEGURANÇA
NOSSOS CAPITAIS
DESEMPENHO DOS NEGÓCIOS
VISÃO GERAL E
MODELO DE NEGÓCIOS
CONTEXTO EXTERNO
ESTRATÉGIAS
E PERSPECTIVAS
GOVERNANÇA
E CONFORMIDADE
OUTRAS
INFORMAÇÕES
RISCOS E OPORTUNIDADES
191
Business Model
OUR
RESOURCES
APPLED TO
OUR PROCESSES
RESULT
IN PRODUCTS
OIL AND GAS
Production
(million barrels of oil equivalent
per day)
2.77
OIL PRODUCTS
Domestic market
sales
(million barrels per day)
NATURAL GAS
Domestic market
sales
(million m³per day)
POWER
Domestic market
sales
(thousand MW average)
1.94
57.0
3.84
HUMAN
N° of Employees
(thousand)
INTELLECTUAL
RD&I Investiments
(R$ billion)
62.7
1.8
N
O
I
T
C
U
D
O
R
P
D
N
A
N
O
I
T
A
R
O
L
P
X
E
G
REFININ
CULTU
R
E C
H
PARTN
E
R
S
H
IP
A
N
G
E
CAPE
X E
F
S
A
N
D
N A T U R A L G A S
NATURAL
Reserves*
(billion barrels of oil
equivalent)
9.8
RELATIONSHIP
Petrobras holding
suppliers with transactions
(thousand)
11
PRODUCTIVE
Propety, Plant and
Equipment
(R$ billion)
FINANCIAL
Net Debt
(R$ billion)
584.4
280.8
STRATEGY
C
Y
B
I
O
F
U
E
L
S
F
I
C
I
E
N
C
Y
S
A
D
F
I
V
E
S
E
T
Y
T
M
E
N
T
S
C
O
M
P
M
A
N
A
G
E
M
E
N
T S
YSTEM
O
P
E
X E
FFICIEN
ETITIVE PRIC
E
P O W E R
LOGISTIC
COMMERCIALIZATION
DIS
T
RIB
U
TIO
N
P
E
T
R
O
C
H
E
M
I
C
A
L
S
F
E
R
T
I
L
I
Z
E
R
AND POTENTIAL
IMPACTS
SAFETY
Total Recordable
Injury Frequency Rate
(TRI )
1.08
ENVIRONMENT
Spill
(m³ )
Greenhousa Gas
Emissions
(million ton CO2 eq)
35.8
67.0
AND ADD
216.0
R$ billion in
VALUE to:
STATE AND
SOCIETY
Federal Taxes
(R$ billion)
72.4
EMPLOYEES
Salaries
(R$ billion)
17.2
State and Municipal
Fringe and
Unemployment
Benefits
(R$ billion)
11.7
Taxes
(R$ billion)
46.2
Taxes Abroad
(R$ billion)
-1.3
INVESTORS
AND OTHERS
Return on Third-party
Capital** (R$ billion)
69.4
Return on Shareholders�
Equity*** (R$ billion)
0.4
Total Shareholder Return
3%
* SEC criterion.
** Includes financial institutions and suppliers (rental and affreightment expenses).
*** Includes return to others shareholders of companies consolidated in Petrobras Financial Statements.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
20
Human
21
Intellectual
27
Social and
Relationship
34
Natural
43
Productive
50
Financial
54
OUR CAPITALS
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 21
Human
Capital
Our human capital is comprised by our employees working
with safety, technical capacity, competence and experience,
ethics, accountability and compliance.
In recent years our management went through major
changes that had impact on the management of our
human capital. As a result of such changes, the staff
was restructured and a transformation process started
in the way we manage such capital, taking into account
that people is what makes the existence, innovation and
sustainability of our business possible.
EDUCATION LEVEL OF EMPLOYEES
AT PETROBRAS HOLDING (%)
Education Level of Employees
2
TOTAL EMPLOYEES AT THE PETROBRAS SYSTEM
43
56
Higher Education
2
11
16
71
78,470
6,856
14,740
56,874
68,829
62,703
3,638
13,936
51,255
1,810
13,914
46,979
2015
2016
2017
Parent company
Subsidiaries in Brazil Subsidiaries abroad
Elementary
Education
Secondary
Education
Higher
Education
Graduation Post-Graduation Master’s Degree PhD
In 2017, the review of our Human Resources Policy was approved, which has the key principle of valuing
people. A new HR operating model was also implemented, with the purpose of providing services and
solutions in people management in an integrated and proactive manner, adding value to our results.
Therefore, there are several initiatives in progress, such as the staff suitability, employee development,
and other management initiatives, such as career development, succession, working regimes and cultural
transformation, in addition to those aimed at the safety and health of our workforce.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES STAFF SUITABILITY
From our Business and Management Plan, we planned our personnel requirements and adjusted our staff through actions such as the
2014 and 2016 Voluntary Separation Incentive Programs (PIDV), new hires and internal movement programs.
22
New hires and dismissals
TURNOVER Petrobras Holding
PIDV 2014 and 2016
4,395 (PIDV 4,278)
EXPLORATION AND
PRODUCTION AREA
161
2017
2016
2015
2014
2013
158
244
876
726
1,099
1,947
6,444 (PIDV 6,269)
2,013 (PIDV 1,607)
4,820 (PIDV 4,287)
REFINING AND
NATURAL GAS AREA
PRODUCTION AND
TECHNOLOGY
DEVELOPMENT AREA
OTHER AREA
17
30
49
1,994 (12%)
4,438 (27%)
3,930 (24%)
The total amount of employees
at Petrobras Holding that have
6,079 (37%)
already left the company due to the
2014 and 2016 PIDVs was 16,441
until December 31, 2017. The total
severance pay paid in 2017 due to
the PIDVs was of BRL 5.5 billion, with
financial return of BRL 10.9 billion in
avoided costs until December 2017.
Dismissals
New Hires
Dismissal To be made dismissal
The dismissals through the PIDVs
changed the distribution of time with
the company ranges, as well as the
age pyramid, thus creating a more
balanced professional profile. This
new profile is important for our growth
in terms of personal resources and
knowledge management.
TIME WITH THE COMPANY Petrobras Holding (%)
After the adjustments to our staff made in recent
2017
2016
2015
2014
2013
37
39
48
50
51
40
33
18
14
9
23
28
34
36
40
0 to 9 year 10 to 19 years 20 years or more
years, this process is starting a new cycle, with
occasional adjustments.
In 2017, two Public Selection Processes were
published for eight secondary-education and nine
higher-education professions, totaling 271 vacancies
published so as to adapt our staff to fulfill our goals.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 23
Mobiliza
OTHER HUMAN CAPITAL MANAGEMENT INITIATIVES
We also use the concept of “career in Y” where, in addition
to the existing positions, there are managerial roles, with
In view of the challenges in our Business and Management
The structuring of our human resources initiatives were
the focus on managing people, processes and businesses,
Plan, in 2016, we transformed the Employee Internal
based on internal inputs such as ambience survey and
and specialist roles, where the professional is expected to be
Movement Program (Mobiliza) into an ongoing process.
strategic drivers from the Business and Management
able to apply, improve and disseminate knowledge.
Mobiliza, which is exclusive to employees without
Plan, as well as external inputs (benchmarks, studies and
managerial roles, allows the adjustment of the staff at the
market research).
units, making the necessary skills available and generating
In 2017 we started reviewing the managerial and specialist
roles, seeking to adjust those roles to the company’s new
career development opportunities to the employee
The following HR initiatives were implemented in 2017:
challenges in qualitative terms, enabling the allocation
through mobility.
MOBILIZA PROGRAM (PUBLISHED X PROVIDED OPPORTUNITIES)
Career progression: progression takes place through
the level advancement modes (evolution within the
of professionals according to the required profiles for
the managerial and specialist roles. Since the PIDV the
review was essential for the specialist roles, since these
39%
228
89
57%
266
151
853
54%
458
category range) or promotion (category change – Junior,
professionals play a strategic role in the promotion and
Full-Fledged and Senior).
dissemination of knowledge.
2015
2016
2017
AMBIENCE SURVEY RESULT
Published Opportunities Provided Opportunities
% Provided
Simultaneously to the staff suitability process, we
implemented knowledge management and people
development initiatives with the purpose of minimizing
any impact on the productivity of our human capital and
add value to such capital.
For further information on these initiatives,
please refer to Intellectual Capital.
The Ambience Survey measures our
organizational climate. In its last issue, in 2016, it
had the participation of 64% of the workforce at
Petrobras Holding.
The Employee Satisfaction Index (ISE) results
show a decrease in the favorability factor. Training
and development, communication and benefits
were the factors presenting the greatest negative
impact on ISE.
EMPLOYEE SATISFACTION
INDEX RESULTS* (% FAVORABILITY)
69
69
70
70
2013
2013
2014
2014
60
60
2016
2016
* Ambience survey was not applied in 2015 and 2017.
2016 survey carried out at the beginning of 2017.
On the other hand, the Organizational Commitment
Level (NCO), an indicator launched in the 2016
Ambience Survey, reached 88% favorability, indicating
the workforce is highly committed to our challenges.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 24
Management succession: in 2017, we held internal
selection processes for executive positions in line with
Cultural transformation: in order to promote the
required cultural changes to obtain the organizational
our Executive Appointment Policy and in accordance
results, the Cultural Management project was launched
with Law No. 13.303/2016 (Law of State-Owned
at the end of 2016. The project aims to adapt our
Companies). In addition, in December, our Board of
organizational culture starting from the leadership in
Directors approved the “Executive Talent Bank”, as
order to align the behaviors of the workforce to the new
well as the methodology and systematics for its use,
strategic challenges, reinforcing values such as safety,
enabling effective governance on the strategy for
results, efficiency, meritocracy, simplicity and compliance.
selecting our executives. A project is currently being
Therefore, we seek a strong and relevant culture to
developed to extended the new methodology to all
support the inherent challenges to our strategies,
managerial functions. The purpose of this project
ensuring our sustainability and good reputation.
is to identify and select professionals to managerial
positions, by means of selection processes promoting
The project considers three steps in its strategy: Turning
meritocracy and the continuous provision of
Point Culture, Prosperity Culture and Sustainability
leadership, encouraging the self-management of their
Culture. In its first phase, the Turning Point Culture that
careers and valuing the professional trajectory.
started in 2017 focused on the leadership.
For further information on human capital initiatives,
please refer to Sustainability 2017.
Working regimens: the optional reduction of the
workday, with proportional remuneration adjustment,
allies the interests of the company and its employees
and came into effect in 2017. This option was made
available to employees in the administrative regime,
working flexible hours and with no gratified role. This
is not a final option, it is valid for one year and can be
automatically renewed for the same period, if there is
no opposition of the employee or immediate manager.
With the opening of the registrations at the beginning
of April 2017, 556 employees started working a six-
hour daily shift.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 25
KEY BENEFITS GRANTED TO EMPLOYEE
Health Care and Pharmacy Discount
We provide a supplementary health care plan, the
In 2017, the beneficiaries totaled 270,998 between active
and retired employees and their family members, with
We offer benefits compatible with the size of the
Multidisciplinary Health Assistance (AMS), which provides
the disbursement of BRL 2.38 billion, being BRL 2.25
company, seeking to value our employees. Everyone is
medical, hospital and dental care to all active and retired
billion the cost with AMS and BRL 139,24 million the cost
entitled to the same benefits, regardless of positions or
employees and their family members through co-insurance
with Pharmacy Discounts. The total collection amounted
roles. Private pension plans, health care and pharmacy
from the employees.
discounts feature among the main benefits.
to BRL 557.57 million, with BRL 516.34 million collected
from co-insurance and AMS fees, and BRL 41.23 million
The AMS benefit also covers complementary programs
collected from the beneficiaries of the Pharmacy Plan.
Private pension plans
We sponsor two private pension plans: Petrobras
such as the Pharmacy Discount Program, which allows the
free acquisition of medication upon a monthly contribution
System Petros Plan (PPSP), a defined benefit pension
from the participants.
plan closed to new admissions, and Petros-2, a variable
contribution plan, in force since 2007. Together, those
plans cover 96.5% of our employees.
RENEGOTIATION OF THE PETROS PLAN
The Petrobras System Petros Plan is undergoing a restructuring process due to the BRL 27.3 billion
deficit (as of December, 2017). The restructuring will be made along 18 years and must be made by
all participants – active, retired and pensioners – and also by the sponsors – Petrobras, Petrobras
Distribuidora and Petros –, in the same proportion as the usual contributions made from 2013 to 2015, as
set forth in the legislation.
Petrobras’ contribution for the first year is estimated at BRL 1.4 billion, and it decreases over the years.
Such amount is already provisioned in our financial statements.
At the moment, there are legal discussions on the matter being held by Fundação Petros de Seguridade
Social and accompanied by Petrobras.
For further information on the benefits granted to
employees, please refer to Sustainability 2017 and
Financial Statements (note 22).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 26
OCCUPATIONAL HEALTH AND SAFETY
LABOR LITIGATION
Safety
Our Strategic Plan emphasizes the “respect for life” as a core value and due to its importance, this topic is being addressed in
the Safety chapter.
Health
Our health management is also developed through the Commitment to Life Program, together with programs for the
Prevention of Occupational Risks, Occupational Health Medical Control and Health Promotion, in an integrated approach
on health, safety, environment and occupational hygiene.
Despite our efforts in the management of our human
capital, we have labor litigations provided in our
financial statements, mainly related to:
(i) review of the calculation methodology on the
complement to the minimum compensation by level
and regime;
(ii) difference in calculating the reflexes of overtime
and weekly rest period; and
(iii) individual proceedings from outsourced parties.
The planning of actions aimed preventing and promoting health is guided by the results from data collected annually from
occupational tests, associated to the characteristics and risks of the employees’ activities. In 2017, approximately 3.8% of
health leaves are related to the actual work.
PROVISIONED LABOR CONTINGENCIES
(BRL MILLIONS)
For further information on safety, the Commitment to Life Program
and the health programs, please refer to Sustainability 2017.
3,323
3,995
4,513
2015
2016
2017
LABOR CONTINGENCIES NOT PROVISIONED
(BRL MILLIONS)
22,071
23,547
23,825
2015
2016
2017
For further information on labor contingencies,
please refer to Financial Statements (note 30).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Intellectual
Capital
Our intellectual capital is comprised of our
recognized technical capacity, development of
new technologies, and intellectual property.
27
The expansion of our borders, with the production
PEOPLE DEVELOPMENT
the sharing of knowledge, and especially,
achieved in the pre-salt layer, is a huge milestone
for us, accomplished through the expansion of the
Training and development
technical capacity throughout the years, allowing the
overcoming of challenges and the development of
Our human resources development model aims at
in the retention of generated knowledge through the
registration and publication of technical papers, lessons
learned and good practices.
technologies, thus reflecting the value of this capital.
improving our capacity for critical analysis and innovation,
In 2017, we invested BRL 33.15 million in the training
focusing on the improvement of the skills required for our
of our employees, a 56% decrease in relation to 2016.
Knowledge not only can be found in documents,
activities, prioritizing knowledge that is critical to the
In addition to the focus on these new modalities, the
books, databases and information systems, but also in
business and allowing employees to seek self-development.
decrease in the number of employees, in particular due to
business processes, group practices and experiences
PIDV, has also reflected in the decrease of the amounts
accumulated by the people. And that is precisely where
We have reviewed how on-site and external training
invested in staff training.
the knowledge management practices come into play,
sessions are applied, applying even more resources to new
mobilizing knowledge by sharing experiences and
knowledge development and sharing modalities, such as
lessons learned.
e-learning training courses, video-conference broadcasts,
training at the work place, mentoring, tutoring, technical
Within our knowledge management framework, we
rotation, practice communities, among others. Those new
have improved our intellectual capital through people
modalities, broadly applied in the market, have shown
and technology development.
positive results in terms of employee coverage, quality in
For further information on our employees, please refer to
Human Capital and Sustainability 2017.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 28
PARTICIPATION IN TRAINING
407,013
In 2017, a total of 407 thousand participations
196,030
248,903
163,267
13,473
19,290
143,710
26,980
78,213
200,017
15,267
191,729
2015
2016
2017
e-Learning Workplace Training On-Site
Petrobras University
were registered, with 259 thousand being
exclusively from Petrobras employees, an average
of 6 training sessions per employee, half of
them in the e-learning mode. There has been a
considerable increase in the participation in the
e-learning courses, with emphasis to the courses
on Golden Rules, and Ethics and Conduct Guide,
the latter with over 59 thousand participants at
Petrobras Holding.
Contributing to the maintenance and development of our technical capacity, aligned with the best practices in the
One of the unique selling point of Petrobras University is
the execution of technical-educational services, an initiative
that bridges the gap between Petrobras University and the
market and the strategic planning drivers, in 2017, the new philosophy and operation model of Petrobras University was
operational areas, providing direct return to the business and
approved, focusing on new solutions that add value to the company.
Adjust the service portfolio.
Systematize and intensify the practice
of technical-educational services.
Deploy the corporate process of
knowledge certification.
NEW PHILOSOPHY
AND OPERATION
MODEL AT
PETROBRAS
UNIVERSITY
Expand the leadership’s
and specialists’ capacity at
all organizational levels.
Strengthen training at
secondary education level.
Resume investment in the
development of human
resources, both in Brazil and
abroad, in critical areas that
support the achievement of
our strategic planning goals.
reinforcing its role in the generation of value to the company
units. In this process, technicians at Petrobras University work
with the units in the resolution of technical and management
issues, with the purpose of applying the knowledge generated
in designing or upgrading training actions. The new
philosophy also proposes a greater integration of Petrobras
University with our research and development center in order
to ensure synergy between the technological development
and the training actions.
In 2017, more than 200 technical-educational services
were developed in the several areas of the company,
generating more than 300 publications, such as articles
for journals and congresses, Master dissertations, Ph.D.
theses and technical softwares.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Sharing of knowledge and information
CONECTE
This is our collaboration network, which has the purpose of encouraging the sharing of information
and knowledge through the creation of communities that enable the organization of team work or the
structuring of projects.
PRACTICE COMMUNITIES
Organizational approach that consists in the formation of groups from the same knowledge area that meet
on-site or online to share experiences, ideas, practices, and lessons learned for troubleshooting.
PETROBRAS MENTORING PROGRAM
Mentoring is a structured development relationship between a more experienced employee and a less
experienced one, focusing on the sharing of “Petrobras knowledge”, in other words, the technical, cultural, value
and relationship network skills.
KNOWLEDGE INVENTORY
Tool that allows the employee to identify and record the relevant activities and knowledge
in order to promote the sharing of knowledge.
INTEGRATED PROCESSES AND STANDARDIZATION SYSTEM (SINPEP)
SINPEP has the purpose of disclosing our policies, guidelines and procedures, as well as providing employees
with a tool to query and manage approximately 38,000 standards in a single system, which features all the
standards associated with our processes , including our policies.
29
More than 2 million
accesses by approximately
47,000 people
23 Active practice
communities, with the participation
of 11,350 employees
26 employees
involved
3,692 inventories
90% developed within the scope of the
Voluntary Separation Incentive Plan –PIDV,
a mandatory requirement of the program
40 macro processes
and approximately
1,750 processes mapped
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES RESEARCH, DEVELOPMENT & INNOVATION
The Research, Development and Innovation (RD&I) projects add value to our intellectual capital,
contributing to the profitability of our business and to the technological advancement of the oil
and gas sector.
RD&I INVESTMENT (BRL MILLION)
2015
2016
2017
2,024
1,826
1,831
In 2017, we maintained the same
investment level of 2016.
Our RD&I activities are coordinated by our Research and Development Center Leopoldo Américo Miguez de Mello
(Cenpes), which has the purpose of developing technologies to enable the achivement of our Business and
Management Plan, as well as anticipating trends and investing in technology routes aligned with our Strategic
Planning. In order to do this, Cenpes has 1,301 employees, 92% with exclusive dedication to the RD&I area.
We have several partnerships focusing on the development of technologies to meet the challenges of our operations.
For further information on our partnerships with academic
institutions, please refer to Sustainability 2017.
30
TECHNOLOGIES AND GAINS
The RD&I project portfolio is designed from the
technological focuses, which represent our
strategic choices in technology.
2017 Technological Focuses
• Process safety, integrity and reliability of plants
and equipment
• Protection of our value in environmental and
social matters
• Opening of new exploratory frontiers
• Reducing the risk of investment decisions associated
with the uncertainty of reservoirs
• Increase in the reservoir recovery factor
• Reduction of the oil price breakeven point and of the
operating cost
• Assets decommissioning
• Flexibility of the downstream productive chain
• Value aggregation to downstream products
• Productive processes optimization and efficient
use of energy
• Integration and optimization of the logistic chain
• Transition to low-carbon matrix
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 31
Some of the major technological solutions and results in 2017, originated from our investments in people,
processes and technology, were:
TECHNOLOGICAL SOLUTIONS AND RESULTS
PROJECT
IMPACT
ADDED VALUE
Application of Icaro Software
Water injection optimization at the Albacora Leste field
Incorporation of 6.56 million additional barrels of oil
equivalent to the reserves in that field
Equipment for
assessing chemical products
Multiphase pumping
(simultaneous pumping of liquids and gases)
Identification of products causing obstruction in umbilicals
Estimated gains of USD 30 million
30% increase in oil production in a mature onshore field
Gains of BRL 10 million per year
New incrustation inhibitor
Incrustation control in heat exchangers at
FPSO Cidade de Angra dos Reis, in pre-salt
Gains of BRL 95 million per year
Water injection without removing sulfate on P-58
30% increase in operational efficiency in P-58 platform by injecting
untreated water
5,5 million additional barrels of oil
Diverless Bell Mouth Tecnology
Reduction in the use of divers in the interconnection of wells
Gains of USD 3.2 million per FPSO
Cooling water collector made from
relief oversleeves
Application of Core software
(Oil and resources schedule)
Alternative to imported rigid pipes
Savings of BRL 4.5 million at P-25
Rigs management optimization for Libra and Libra 2 fields
Potential savings of BRL 3 million
Perola System, system
for internal inspection of pipelines
Laser system for the identification of internal corrosions and changes in the
thickness or geometry of the pipelines
Cost reduction of BRL 260,000
by the application in a reformer furnace
Improvement on the analysis of structural integrity
of metallic pipes, allowing the revalidation of repairs
Extension of usage time of metallic pipes at the PCE-1 platform for three more years,
with the possibility of new revalidation in 2020
Savings of BRL 2 million
Review of the models for the refining
planning tools
Better oil allocation decisions
Revenue increase of USD 23 million per year
Reduction of instabilities at the hydro treatment
units flows
Reduction of economic losses due to flow and load quality limitations
Estimated gains of BRL 160 million per year
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 32
INTELLECTUAL PROPERTY
PATENT APPLICATION IN BRAZIL AND ABROAD
42
4
9
29
27
1
8
18
24
5
10
9
38
7
31
38
5
17
16
20
5
15
Brazil
Abroad
Brazil
Abroad
Brazil
Abroad
2015
2016
2017
Exploration and production
Refining and natural gas
Renewable energies
Until the end of 2017, we had a total of 966 active patents in Brazil and
1,712 active patents abroad.
AWARDS AND RECOGNITIONS
• Top of Mind Award, from Folha de São Paulo, in the
category Brand that represents Brazil, Top Fuel and
• Institutional Investor Award, an American research
institution that recognized our work in investor
In 2017, the constant search for overcoming challenges
Top Lubricating Oil. This recognition reinforces the
relations in all seven award categories for oil, gas and
has led to our recognition in several areas. The following
importance of our presence in the everyday life of
petrochemical industries in Latin America. Our CEO
awards were received last year as a recognition of our
the society.
intellectual capital:
• Corporate Liability Management of the Year Award,
• 2017 Transparency Award, granted by the National
from LatinFinance magazine on the best debt
Association of Finance, Management and Accounting
management operation in the international capital
Executives (Anefac) on the quality of our 2016
market in 2016, where we were awarded for the two
financial statements.
operations of issuance and repurchase of securities
was chosen the best Chief Executive Officer, and our
Executive Director of Finances and Investor Relations,
the best Chief Financial Officer (CFO) of the industry.
The publication also recognized our Investor Relations
(IR) area in five categories: team, program, website, IR
professional and analyst days.
• Estadão Empresas Mais 2017 Award, granted by
newspaper Estadão in the “Board of Directors”
category on the performance of our Board of
Directors in corporate governance.
carried out in May and July that year. In addition, at
• SPE Brasil 2017 Excellence Award, from the Society
the beginning of 2018, we were once again awarded
of Petroleum Engineers, in the Corporate Support
for the offering of sale, exchange and repurchase of
Distinction category, for encouraging the development
securities held in September 2017.
of our technical staff.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 33
• Best practices in Corporate Education Award, granted
by the Brazilian Federation of Consulting and Training
Individual recognition of our Human
and Intellectual capital
• Company award with the best Legal Department in Latin
America, granted by International Legal Alliance Summit
& Awards (Ilasa).
• Valor Inovação Brasil 2017 award, organized by Valor
Econômico newspaper. We were awarded, for the
Companies (Febraec). The award reinforces our role
in the development and training of our employees in
operational and technological areas.
second consecutive year, as one of the most innovative
companies in the country. In addition, we won in the
Primary Industry and Metallurgy category, which includes
• We feature in the second position in the 2017 Dream
Career survey developed by Cia de Talentos as the
dream company for students and newly graduated
oil & gas, ore and cement companies.
• 2017 Technological Innovation award, sponsored by
ANP. We were also awarded in the three categories,
together with companies in the industry and universities,
for the projects: “Doris – Sistema Robótico Móvel para
Inspeção Remota de Instalações Offshore (Plataformas)”
[Mobile Robotic System for Remote Inspection of
professionals, being the best Brazilian company in the
eyes of the youngsters. We also feature as the fourth
dream company for middle management professionals
(coordinators and managers).
• Our subsidiary Transpetro, was awarded for the 12th time
the Maiores e Melhores do Transporte Award, granted by
OTM Editora, being considered the best company in the
Offshore Facilities (Platforms)], “Pilotos de Sistemas
Maritime and River Transportation segment.
de Manutenção Preditiva do Sul-Sudeste” [Predictive
Maintenance Systems Pilots in South-Southeast], and
“Otimização do processo de perfuração no pré-sal”
[Optimization of pre-salt drilling processes].
• “Os Melhores” Award, granted by Estadão newspaper to the
best products and companies linked to the automotive
sector. Our subsidiary Petrobras Distribuidora was
awarded in the “Best Fuel” category. In addition, Revista
Exame awarded it with the “Melhores e Maiores” award.
• 2017 Regional Management and Information Award –
South America and Caribbean Region, Society of
Petroleum Engineers (SPE), one of the most important
entities in the global oil and gas industry. The prize was
awarded in the Management and Information category,
with a program that generated savings of approximately
USD 2 billion to the total cost of well constructions.
• Distinguished Service Award for 2017, from the American
Association of Petroleum Geologists (AAPG), one of the
world's most important awards in the oil geosciences area.
This was the first time a Brazilian professional received
the award.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
34
Social and
Relationship
Capital
Our social and relationship capital is formed by the interactions with our
stakeholders. These interactions are strengthened through our dialog
channels, our social investments and our brand and reputation management
initiatives, seeking to strengthen the bonds of trust with society.
Our relationship network is organized in 13 stakeholders:
INTERNAL PUBLIC
PUBLIC AUTHORITIES
PARTNERS
CIVIL SOCIETY
ORGANIZATIONS
INVESTORS
PRESS
CLIENTS
RESELLERS
SCIENTIFIC AND
ACADEMIC COMMUNITY
COMMUNITIES
COMPETITORS
CONSUMERS
SUPPLIERS
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES MAIN COMMUNICATION CHANNELS
We connect to our stakeholders in a digital or face-to-face format, seeking constant
improvement of our communication to enable a constructive and transparent dialogue.
35
www.petrobras.com.br
facebook.com/petrobras
twitter.com/petrobras
instagram.com/petrobras
S
L
E
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N
A
H
C
linkedin.com/company/petrobras
petrobras.com.br/fatos-e-dados
I
L
A
N
O
T
U
T
T
S
N
I
I
CLIENT CHANNEL
INDEPENDENT COMPLAINT CHANNEL
CITIZEN INFORMATION SERVICE
OMBUDSMAN
SERVICE COUNTERS
Distributed in our units
0800
ADDRESS
For sending letters
S
T
N
E
L
C
I
N
A
M
S
D
U
B
M
O
S
L
E
N
N
A
H
C
WEBSITE
ANNUAL REPORTS
Management/Annual Report,
Form 20F, Reference Form and
Sustainability Report
WEBCASTS
ROADSHOWS AND CONFERENCES
RELEASES AND
MATERIAL FACTS
INVESTOR SUPPORT
Telephone, email, letters
MAILING
PETROBRAS AGENCY WEBSITE
PRESS SUPPORT CENTER
PRESS CONFERENCES
VIRTUAL PRESS ROOMS
PRESS RELEASES
S
L
E
N
N
A
H
C
R
O
T
S
E
V
N
I
S
L
E
N
N
A
H
C
S
S
E
R
P
E-PROCUREMENT PORTAL FOR THE
COMPANIES IN THE PETROBRAS
SYSTEM
Petronect
REGISTRATION CONTACT
REGISTRATION SUPPORT
STATIONS
PETROBRAS WEBSITE
Our intranet
CONECTE
Workforce digital collaborative network
PETROBRAS CHANNEL
Screens or fixed monitors,
on-line or off-line
TEXT MESSAGES
text message sent to mobile phones
via SMS.
UNIT NEWSPAPERS
Printed publication with local issues
for the workforce with limited access
to digital channels
S
L
E
N
N
A
H
C
I
R
E
L
P
P
U
S
I
C
L
B
U
P
L
A
N
R
E
T
N
I
S
L
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ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
36
INVESTORS
In addition, we also have relations with fixed-income
Channel” to the companies in the domestic market, with
investors both in Brazil and abroad, our debt holders, who,
24/7 operation. In that online environment, clients can
Our shares are traded at the São Paulo, New York, Madrid
on December 31, 2017, represented 51% of our gross debt.
order products, schedule withdrawals and monitor the
and Buenos Aires stock exchanges where we have a
relationship with more than 600 thousand investors. From
those, approximately 300 thousand are shareholders in
Brazil and 120 thousand abroad. The remaining investors
participate through investment funds.
In 2017, we interact with investors and market analysts
mainly through our website, with a monthly average of
75 thousand hits; annual reports (Management Report,
Form 20-F, Reference Form and Sustainability Report);
44 roadshows and participations in conferences, more
than 500 one-on-one or group meetings, in addition to
the presentations from the Executive Board to investors
(Petrobras Day) in São Paulo, London and New York; and
over 200 releases, material facts and news clarifications.
We also held five webcasts and five Shareholders’ Meetings
during the year. Also, we relate to rating agencies through
periodic meetings.
We also maintain relationships with national and
international commercial banks, multilateral agencies,
export credit agencies and national development banks,
such as the BNDES, which, on December 31, 2017,
accounted for 49% of our gross debt.
Despite our efforts to relate in an ethical and transparent
manner, there are lawsuits filed by our investors, based on
facts related to previous periods.
For further information on lawsuits filed by our
investors, please refer to Governance and Compliance.
For further information on our shareholder profile,
please refer to Financial Capital.
CLIENTS
RESELLERS
CONSUMERS
In Brazil, we have relationship with approximately 500
clients for oil products and fertilizers, with three groups
(Ultra Group, Raizen Combustíveis S.A. and Petrobras
Distribuidora) responsible for 43% of the total net revenue
of the Holding. The sale of oil products and biofuels to
the distribution companies takes place through contracts
signeds in accordance with the ANP regulations.
We provide a virtual trading platform referred to as “Client
entire trading process until payment.
Abroad, we have a portfolio of approximately
65 clients. These are refiners that regularly process or
have processed Brazilian oil, distributed in the Americas,
Europe and Asia.
In the oil products market, through our subsidiary
Petrobras Distribuidora, we have relationship with 14,443
consumer clients, from whom 6,507 are large consumers
and 37 airline companies, in addition to retail resellers,
through 8,277 service stations and 331 TRR (Transporter-
Resellers-Retailer, a company authorized to acquire bulk
diesel, lubricating oils and greases; store and transport
the product; retail resell it with delivery to the consumer),
which provide coverage to the distribution of fuels, and, in
turn, cater to the end consumers.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 37
SUPPLIERS
PUBLIC AUTHORITIES
In 2017, we celebrated agreements with approximately
The relationship with public authority entities must be
11 thousand suppliers through Petrobras Holding.
conducted in an ethical, transparent and impersonal
such instruments, as well as the disclosure of its detailed
costs and revenues, including at the accounting level. In
this case, the Federal Government shall reimburse us,
each fiscal year, on the difference between the market
Our suppliers must comply with our Social Responsibility
during face-to-face interactions.
the undertaken obligation.
Policy, health, safety and environment standards, and
guidelines on corruption prevention policies and procedures
The Federal Government is our controlling shareholder,
through our Code of Ethics and Conduct Guide.
which means that we have a specific relationship with
For further information on changes to our Bylaws for
governance enhancements, please refer to
Governance and Compliance.
manner, involving more than one member of the workforce
conditions and the operating result or economic return of
In line with the best compliance practices and national and
such as the Federal Court of Accounts (TCU) and the
international anticorruption legislation, we have improved
Office of the Comptroller-General (CGU), and interaction
our supplier management process in order to mitigate
with government agencies such as the Secretariat of
any potential risks of corruption in contracting goods and
Coordination and Governance of State-Owned Companies
services. Companies interested in trading with us must be
(Sest), Ministry of Mines and Energy, National Treasury,
the government, including monitoring by control bodies,
part of our registration and, since 2015, they were subjected
among others.
to the Integrity Due Diligence (DDI) process. In 2017, a total
of 5,306 companies were evaluated in the scope of the DDI
As a state-controlled company, we can have our activities
(approximately 15 thousand since the beginning of the
guided by the Federal Government, with the purpose
process) and received their Integrity Ranking, ranging among
of contributing to the public interest that justified our
high, medium and low.
For further information on Integrity Due Diligence and
Integrity Ratings, please refer to Compliance and Internal Controls.
For further information on our suppliers,
please refer to Sustainability 2017.
creation, aiming to ensure the supply of oil products
throughout the country. However, the contribution to this
public interest must be compatible with our corporate
purpose and market conditions, and may not jeopardize
our profitability and financial sustainability. Therefore, if
the provision of public interests takes place in conditions
differing from those applied to any other company in
the private sector operating in the same market, as
explained in our Bylaws, the obligations or liabilities
undertaken must be defined in rules or regulations and be
provided in a specific document, such as an agreement or
partnership, observing the broad and public disclosure of
For further information on public interest, please refer to
the Reference Form available at our website:
www.investidorpetrobras.com.br/en
The initiatives for meeting the public interest are
listed below:
• National Program for the Rationalization of the Use
of Oil Products and Natural Gas (Conpet): in 2017, the
costs associated to Conpet were imaterials.
• Thermal Electricity Priority Program: in 2017, the
gas supplied to the program generated revenue of
approximately BRL 1.1 billion and costs of BRL 2.3 billion.
In addition, we also work with regulatory agencies and
entities related to our activities, such as the National
Oil, Natural Gas and Biofuel Agency (ANP), the National
Electric Energy Agency (Aneel), the Brazilian Institute
for the Environment and Natural Resources (Ibama),
the National Environmental Council (Conama), and the
Brazilian Securities and Exchange Commission (CVM), with
the commitment to provide information in a transparent
and reliable manner, allowing the correct evaluation of
matters inherent to our business.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
38
TAX OBLIGATIONS
We settle our tax obligations in accordance to the national and international tax laws and standards,
evaluating the tax risk management and contributing to increase the business profitability, within
the context of a company modifying the social-economic environment in which we operate.
We also seek to have an ethical and transparent relationship with the society, promoting the
development of the regions in which we operate, considering we are one of the largest taxpayers in
the country, and our operation has a significant impact on tax collection managed by federal, state
and municipal tax authorities, as well as in the collection of government participation regarding the
oil industry, managed by ANP.
TAX LITIGATION
Despite our best efforts and diligence in calculating and paying
taxes, there are legal disputes regarding our tax obligations, partially
provisioned, when it is possible to estimate the likely losses, or not
provisioned, but disclosed in the explanatory notes, when the loss
expectation is considered possible.
PROVISIONED TAX CONTINGENCIES (BRL MILLION)
3,087
4,981
4,065
2015
2016
2017
2015
2016
2017
PAYMENT OF TAXES1 (BRL BILLION)
OWN TAXES AND WITHHELD BY THIRD PARTIES
ICMS
PIS/Cofins
Royalties
Special participation
Cide
Social security contributions
Other taxes and contributions
TOTAL
TAXES WITHHELD FROM THIRD PARTIES
ICMS tax substitution
Withholdings Law No.10.833
Other taxes and contributions
TOTAL
TOTAL TAXES PAID IN THE COUNTRY
40.0
23.6
11.3
9.0
3.3
4.3
7.0
98.5
23.3
6.5
6.1
35.9
134.4
37.3
20.9
9.7
4.5
5.1
4.6
3.8
85.9
28.2
5.9
5.6
39.7
125.6
35.0
27.4
12.4
11.0
4.6
4.2
6.8
101.4
28.4
5.4
4.9
38.7
140.0
1 Taxes paid by Petrobras Holding, in cash accounting regime. The added value of BRL 117.3 billion distributed to the State
and society, as presented in our Business Model, considers the annual tax obligations of the Petrobras System in the
accrual basis.
Federal Government (including Governmental Participations): BRL 75.7 billion
States: BRL 63.4 billion
Cities: BRL 0.9 billion
TAX CONTINGENCIES NOT PROVISIONED (BRL MILLION)
114,318
155,882
129,466
2015
2016
2017
In 2017, we joined federal debt settlement programs aimed at the
liquidation of administrative and legal proceedings in the amount of BRL
38,136 million. The programs allowed the use of benefits of reducing
interests, fines and legal costs, as well as using tax credits, reducing both
tax and non-tax debts to the amount of BRL 8.075 billion. In addition,
there were adhesions to state amnesty programs (Amazonas, Ceará,
Minas Gerais and Pernambuco) for the upfront payment of ICMS debts,
with 100% reduction of fines and interests. Consequently, we recognized
the amount of BRL 376 million as tax expenses.
For further information on debt regulation programs and tax contingencies,
please refer to Financial Statements (notes 21.2, 21.3 and 30).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 39
PARTNERS
• Statoil: we signed a strategic technical cooperation
agreement aiming at increasing the recoverable oil
refining, gas transport and trading, liquefied natural
gas (LNG), oil trading, lubricants, jet fuel, power
Our notorious knowledge in deep and ultra-deep water
volume from the Roncador Field, including the extension
and distribution, renewable energy and low carbon
exploration and production, as well as our pioneering in the
of its life, and sharing the gas export infrastructure,
emission technologies and initiatives.
introduction of new technologies, have allowed us to enter
forming a strategic partnership that included the
in several partnerships.
assignment of 25% of our participation at Roncador
Field, for the total amount of USD 2.9 billion;
We believe that working in a partnership brings benefits
by sharing the risks, increasing the investment capacity,
exchanging technical and technological expertise and
• China’s National Petroleum Corporation (CNPC) and
CNODC (CNPC subsidiary): through participation in
ANP’s 3rd Bidding Round, we formed the consortium for
We currently control 100% of our refineries in Brazil and a
model allowing the entrance of partners in this segment
is being studied.
In natural gas, petrochemicals and power, we operate
strengthening corporate governance.
the exploration of the Peroba area together with CNODC,
with stakes in companies and assets, such as natural
We are expanding this operation model with our
Partnership and Divestment Program, part of our
Business and Management Plan.
In 2017, our program featured the following partnerships1:
and in the scope of a potential strategic partnership, we
gas carriers and distributors, Braskem and some of
signed a Memorandum of Understanding with CNPC for
our thermal power plants. Also we hold interests in
cooperation in opportunities in Brazil in the downstream
companies in the biofuel sector through our wholly-
and upstream segments, including potential funding;
owned subsidiary Petrobras Biocombustível.
• Exxon Mobil: through participation in ANP’s 14th Bidding
Round, we formed a consortium to operate six offshore
blocks at the Campos Basin. We have also signed a
Memorandum of Understanding for cooperation in the
We also have partnerships with academic institutions
in Brazil and abroad, as well as with the key suppliers in
the oil and gas chain, who help us in the development
and provision of technology solutions, and in technical
scientific support.
For further information on partnerships with academic
institutions, please refer to Sustainability 2017.
• Total: we signed the final strategic partnership
exploration, production, gas and chemicals, in Brazil
agreements for the Lapa and Iara fields, and for the
and abroad;
Termobahia thermo-electric plant, totaling USD 2.2
• British Petroleum (BP):through participation in ANP’s
billion, as well as the collaboration agreement for
3rd Bidding Round, we formed a consortium for
partnerships in the upstream and downstream segments,
the exploration of the Peroba and Alto de Cabo Frio
and technology cooperation agreement encompassing
Central areas, and signed a letter of intent for strategic
the operation, research and technology areas;
cooperation in the areas of exploration and production,
1 The completion of these operations is subject to approval by the competent
regulatory entities.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 40
COMPETITORS
In 2017, this competition was intensified in the diesel and
gasoline markets, the latter also suffering competition from
We have a relationship with our competitors in several
an alternative product – ethanol.
business entities in which we participate, such as the
National Oil Industry Organization (Onip), the Brazilian Oil,
All our activities are developed in accordance with
Gas and Biofuel Institute (IBP) and Sindicom (National Fuel
our Competition Code of Conduct, which guides our
and Lubricant Distributor Company Union).
commitment towards the strict compliance with the
The trading of oil products in the internal market face
in the foreign jurisdictions in which we operate.
legislation regarding competition and antitrust in Brazil and
competition from importing companies, other national
producers and petrochemical centrals.
For further information on relationship with other
stakeholders, please refer to Sustainability 2017.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
41
OMBUDSMAN
CULTURAL, SPORTS AND SOCIO-ENVIRONMENTAL INVESTMENT
Our General Ombudsman Office receives and handles opinions, suggestions, requests,
We redesigned our sponsorships management, reducing and aligning the project portfolio
denouncements and information. Our Denouncement Channel is available to both
to our strategic objectives. Through Petrobras Cultural Program, Petrobras Sports Program
internal and external public. It is operated by an independent external company, ensuring
and the new Business, Science and Technology line, we generate positive association to our
confidentiality and our commitment of no retaliation to complainants.
brand and get closer to our audiences. Sponsorship focus on areas where we identify the
best opportunities for brand return and strengthening of our image and reputation.
In 2017, we received a total of 22,636 demands, 2,423 of which were denunciations. Forty-one
percent (41%) of those denunciations were for fraud and corruption.
We strengthen our work with communities, third sector organisations, public authorities and
DENUNCIATIONS RECEIVED IN 2017
995
41%
110
5%
6
0%
181
7%
1,428
59%
312
13%
576
24%
universities through the Petrobras Socio-Environmental Program. This initiative contributes
to environmental preservation and to improve the living conditions in the locations where
we operate, and in a broader extent, to the society. The program is aligned to our Social
Responsibility Policy, which advocates our commitment in providing energy respecting
human rights and the environment, having responsible relationships with the community,
and overcoming sustainability challenges.
Throughout 2017, we have reinforced the governance and process compliance in hiring
1,238
51%
sponsorships and in establishing partnerships, and we have worked in the renewal of socio-
environmental projects, with the expectation of accomplishing BRL 250 million until 2020,
covering 20 brazilian states, with direct benefit to more than 100 thousand people.
Denunciation – fraud and corruption
Denunciation – other topics
Being treated
Partially upheld
Inconclusive
Unfounded
Dismissed
Valid
We also provide a Citizen Information Service in compliance with the Information Access
Law, which ensures that any citizen has access to our non-sensitive information.
CULTURAL, SPORTS AND SOCIO-ENVIRONMENTAL INVESTMENT (BRL MILLION)
271
225
121
120
82
60
2015
2016
2017
Cultural and sports sponsorships Socio-environmental sponsorships and partnerships
For further information on the Ombudsman and Citizen Information
Service, please refer to Sustainability 2017.
For further information on the projects,
please refer to Sustainability 2017.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
42
ADVERTISING
ADVERTISING EXPENDITURE1 (BRL MILLION)
Two major advertising campaigns were aired in 2017. The first one,
focusing on the opinion-maker audience, addressed management,
governance and compliance topics. The second, directed to the public
opinion, was aiming at repositioning Petrobras brand from our new
corporate positioning.
2015
2016
2017
259.38
147.34
173.30
1 Data related to expenses from advertising broadcasted in each of the years,
contemplating the purchase of media space and the production of advertising materials.
BRAND REPOSITIONING
In 2017, we repositioned our brand and reformulate the relationship bases with the
stakeholders, considering our Strategic Planning and the image and reputation
crisis we face since 2014.
The new brand positioning is based on our differentiating attribute, known
to be resilient in image and reputation surveys: our unique technical capacity.
It is represented by the competence and the expertise of our staff and the
technologies developed by the company.
The brand repositioning has been accomplished through advertising campaigns,
presence in digital media and disclosures to our workforce.
In addition, in order to improve transparency and assist in the recovery of our
image and reputation with the stakeholders, two specific digital environments
were created:
• https://seguindoemfrente.hotsitespetrobras.com.br, to inform the society on
the management and governance measures adopted by the company.
• http://transparencia.petrobras.com.br, to disclose relevant institutional data.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 43
Natural
Capital
The natural capital is comprised by the renewable and
non-renewable environmental resources used in or affected
by our production process, especially our oil and gas reserves,
in addition to water resources, ecosystems and biodiversity.
Since we are an integrated energy company focusing on oil and gas, we use natural
resources and we impact the ecosystem during our activities.
OIL, CONDENSATE
AND NATURAL
GAS RESERVES*
9.672 billion boe in 2016
9.752 billion boe in 2017
WATER
191.6 million m3 in 2016
177.7 million m3 in 2017
ENERGY
899,487 TJ in 2016
947,645 TJ in 2017
MAIN
NATURAL
RESOURCES
USED/TO
BE USED
* According to SEC criteria.
MAIN
IMPACTS
EMISSIONS
66.5 million ton CO2 eq in 2016
67.0 million ton CO2 eq in 2017
BIODIVERSITY AND
ECOSYSTEMS
events with confirmed or likely
impact to fauna, flora or habitat
43 events in 2016
20 events in 2017
WASTE
hazardous solid waste
generated in industrial processes
132 thousand tons in 2016
113 thousand tons in 2017
WASTEWATER
281.8 million m3 in 2016
293.2 million m3 in 2017
LEAKS
51.9 m3 in 2016
35.8 m3 in 2017
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES RESOURCES USED/TO BE USED
Oil and Natural Gas
Brazil is the focus of our oil exploration and production operation. Our portfolio is concentrated in the Southeast region, with
most of the oil reserves located in deep and ultra-deep water fields, in the Basins of Campos, Santos and Espírito Santo. We also
operate in onshore and shallow water fields.
Considering Petrobras’ exclusively rights, we can explore and
produce oil and gas in Brazil in an area of 63,290 km².
Major Oil Basins in Brazil
ESPÍRITO
SANTO
ONSHORE
31.5%
total area
OFFSHORE
68.5%
total area
29.1%
DEVELOPED AREAS
70.9%
AREAS TO BE DEVELOPED
[in exploratory phase]
63,290 km²
Pre-salt Polygon
The pre-salt polygon, region in which new exploratory areas can
only be granted in the production sharing regime, occupies an area
of approximately 149 thousand km² (36.8 million acres), of which
we have production rights on approximately 14% of the total area
(approximately 21 thousand km² or 5.3 million acres).
RIO DE
JANEIRO
SÃO PAULO
BM-S-51
Sagitário
Buzios
Mero
Itapu
Sururu
Berbigão
Libra
Atapu
Sépia
PRE-SALT
POLYGON
Lapa
Lula
Sapinhoá
Peroba
Júpiter
REGULATORY FRAMEWORK
IN EXPLORATION AND PRODUCTION
CONCESSION
TRANSFER OF RIGHTS
PRODUCTION SHARING
EXPLORATORY AREAS ACQUIRED IN 2018
44
Baleia Anã
Cachalote
Baleia Franca
Jubarte
Mangangá
Baleia Azul
Caxareu
Pirambu
Albacora
Voador
Marlim
Barracuda
Caratinga
Roncador
Albacora
Leste
Marlim
Leste
Marlim
Sul
C-M-346
C-M-411
Pão de Açucar
Xerelete
Alto de Cabo
Frio Central
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES In Brazil, the Government is the owner of the oil, but it
The concession model fully governed the oil and natural
Currently, our main production fields follow the concession
can be extracted by companies or consortiums upon
gas exploration and production until 2010, when laws
regime. On the other hand, those under the transfer of
several payment forms, such as royalties, that vary due
instituting the transfer of rights and production sharing in
rights and production sharing will represent a large part of
to the applied regulatory model. Biddings held by ANP
the pre-salt polygon were enacted.
our production in the medium and long term.
are the main process for the acquisition of rights to the
exploratory blocks.
45
NEGOTIATING THE TRANSFER OF RIGHTS AGREEMENT
In November 2017 we established an internal
The Transfer of Rights Agreement signed between
Petrobras and the Federal Government is governed
by Law No. 12.276, of June 30, 2010. It regulates the
transfer of the oil and natural gas exploration and
production rights in specific pre-salt areas to Petrobras
and establishes provisions such as:
• volume that can be extracted in these areas, up to five
billion barrels of oil equivalent;
commission, which is responsible for negotiating
the review of the Transfer of Rights Agreement with
Federal Government representatives. In January 2018,
through the Interministerial Ordinance No. 15/2018, the
government instituted an Interministerial Committee
with representatives from the Ministries of Mines and
Energy, Treasury and Planning and Development and
Management, with the purpose of concluding the terms
of the agreement revision, within 60 days, renewable for
an equal period. The review process is accompanied by
• price paid for the Transfer of Rights Agreement;
our Minority Committee.
• term of the agreement and percentage of local content;
• provisions that define a later revision on the following
items: value, maximum volume, term and percentage
of local content.
Petrobras has already declared the commerciality in
the fields of all six blocks provided in the agreement:
Franco (Búzios), Florim (Itapu), Nordeste de Tupi (Sépia),
Entorno de Iara (Norte de Berbigão, Sul de Berbigão,
Norte de Sururu, Sul de Sururu, Atapu), Sul de Guará (Sul
de Sapinhoá) and Sul de Tupi (Sul de Lula).
If the revision concludes that the acquired rights have a
lower value than the value originally paid by Petrobras,
the Federal Government shall reimburse the difference,
in national currency, securities or other forms of
payment. If the revision concludes that the acquired
rights have in a larger value than what was originally
paid, the company may pay the difference to the Federal
Government or proportionally reduce the total volume of
barrels purchased.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
46
(BILLION BOE)
9.672
1.000
-0.920
0.080
9.752
Reserves
VARIATION IN PROVEN RESERVES
Oil reserves are booked according to criteria defined by
the Securities and Exchange Commission (SEC), taking
into consideration technical and economic aspects for
measuring the existing volumes and the possibility of
producing them in the future.
Through the exploratory activity, we discovered new
reservoirs that, after being declared commercially viable,
can be incorporated to our proven reserves.
PROVEN RESERVES (BILLION BOE)
COMPOSITION OF PROVEN RESERVES
a) Proven Reserves in December 2016
b) Appropriations in 2017
c) Production in 20171
d) Annual variation (b+c)
e) Proven Reserves in December 2017 (a+d)
1 Includes the volume produced by shale and does not consider the production of Extended Well Test (EWT) in exploratory blocks in Brazil, since they are
related to exploratory areas with no commerciality declaration, and therefore, with no associated reserves. Does not include the production in Bolivia,
since, pursuant to Article 357 in the Bolivian Constitution (enacted on February 7, 2009), the reserves cannot be registered by the concessionaire.
Even with the record production in 2017, we were able to replace 109% of the volume produced,
mainly due to the drilling of new wells and better behavior of the reservoirs in the pre-salt region
at the Santos and Campos basins. In onshore fields, the highlight was the reduction of operating
10.516
0.365
1.600
8.551
9.672
9.752
costs in the Solimões basin, in the State of Amazonas.
0.202
1.400
8.070
0.216
1.281
8.255
The relationship between the volume of reserves and the produced volume is 10.6 years overall
and 10.7 years in Brazil. The Development Ratio, which is the relationship between developed
proven reserves and the proven reserves, was 53% in 2017.
2015
2016
2017
Oil and condensate (Brazil) Natural gas (Brazil)
Oil, condensate and natural gas (abroad)
When we start to produce, the volume of oil, condensate
and natural gas produced is no longer a reserve. In
addition, other factors, such as the purchase and sale
of assets, oil prices and reservoir characteristics, also
influence the variation of the volume of our reserves.
RESERVE RATIOSI
RESERVE
REPLACEMENT RATIOS
(IRR)
109%
RESERVE/
PRODUCTION
RATIO (R/P)
10.6 years
DEVELOPMENT
RATIO
(ID)
53%
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
Water
We collected a volume of 177.7 million m³ of fresh water for our administrative and operational activities in 2017.
We used 175 collection sources, of which 158 are located in Brazil (accounting for approximately 97% of the total
volume of fresh water we collected) and 17 in other countries where we operate. We continuously invest in the
assessment of the impacts of our activities, respecting the protected areas and identifying sensitive areas located in
the influence regions of our units. We have not identified any significant impact on the watersheds where we collect
water directly.
We reused 25.4 million m³ of water in 2017, 2.4% more than the volume of 2016 and enough to supply water to a city
of 615 thousand inhabitants during a year. The savings resulting from the rationalization and reuse contributed to
ensure the reliability of the supply to our operations.
These reuse actions result in an estimated annual saving of BRL 24.2 million in the water collection and wastewater
disposal costs.
177.7
million m³
FRESH WATER
175
Collection
sources
97%
Total volume
158
Brazil
17
Other countries
25.4
million m³
REUSED
Enough to
supply a city
of 615 thousand
inhabitants
during a year.
BRL 24.2
million
Estimated annual savings in
water collection and
wastewater disposal costs.
47
Energy
In 2017 we recorded the total consumption of 948 thousand
terajoules (TJ), or 441 thousand boed, an amount 5.4%
higher than the previous year. One of the reasons for this is
the increase in the thermoelectric dispatch by the request of
the National System Operator (ONS).
Energy consumption improvements provided us savings of
2,910 terajoules in the year (TJ/y), or 1,355 boed, the equivalent
of electricity consumption of a city with 113 thousand people
for a year.
948
thousand terajoules
ENERGY
CONSUMPTION
5.4%
More than 2016
2,910
terajoules
Savings made
possible by
energy consumption
improvements.
Equivalent to
the electricity
consumption of
a city with
113 thousand
inhabitants
for a year.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 48
recycled 78% of it through energy or material reuse, an
amount 19% higher than 20162.
We expanded the reuse and recycling of oily currents
aiming at the recovery of hydrocarbons in the production
processes of green petroleum coke and other fuels,
at SIX and Refap. In 2017, those two units processed
over 86 thousand tons of oily currents, an increase of
approximately 17% when compared to 2016, when it
reprocessed a load of approximately 74 thousand tons.
We also seek to reduce the disposal of waste generated from
our activities to landfills, recycling: 94% of paper, 85% of
wood, 100% of scrap, 83% of glass, and 87% of plastics.
MAIN IMPACTS
Emissions
We are always seeking ways to reduce the impacts of
We monitor the international negotiations of agreements in
our activities on the environment. In 2017, Petrobras
which Brazil is a signatory and which require the transition
Holding invested BRL 5.2 billion in initiatives to improve
to a low-carbon energy model. In this sense, we monitor
our health, safety and environment performance, comply
the alternatives developed globally to supply the energy
with the specific legislation and contribute for our units
required to the social and economic development with
to have safe, profitable and eco-friendly operational
lower intensity of greenhouse gas emissions (GHG).
practices. These investments continued being directed
mainly to reducing emissions and residues from
industrial processes, managing the use of water and
wastewater, recovering impacted areas, implementing new
environmental technologies, modernizing our pipelines
and improving our capacity of responding to emergencies.
In addition, we support several environmental projects.
The relationship with our suppliers also includes matters
related to the environmental area. Environmental criteria
were used in 74% of new commitments formalized by
Petrobras Holding in 2017. The contractors must also
present evidence and certifications related to their
compliance with health, safety and the environment, as
well as declare that they comply with all requirements,
laws and decrees on that matter.
For further information on socio-environmental projects, please
refer to Sustainability 2017 and for information on our relationship
with suppliers, please refer to Social and Relationship Capital, and
Sustainability 2017.
GHG EMISSIONS (MILLION TONS CO2 EQ)
78.2
66.5
67.0
2015
2016
2017
Wastewater
Biodiversity and Ecosystems
In 2017, we recorded 20 events with confirmed or probable
impact on fauna, flora or habitat, such as the removal
of vegetation, erosion and accidental death of animals
in units. Measures for mitigating, treating or recovering
the environmental impact were adopted for all those
events, such as the replacement of protected species and
vegetation recovery, treatment and recovery of degraded
areas, facility adaptation, among other measures.
Waste
From the 114 thousand tons of hazardous solid waste
from the industrial processes sent to treatment, we
As a result of our operations, we discarded 293.2 million
m³ of wastewater in 2017, including industrial wastewater
and water produced from the oil extraction process. Our
wastewater disposal processes comply with the legislation
regarding such disposal. We use 52 surface water bodies,
13 underground disposal points, and 21 supply/treatment
concessionaires or outsourced companies for the
assimilation of our wastewater.
No significant quantitative or qualitative impacts were
identified in springs due to the disposal of our wastewater.
2 The amount of hazardous solid waste from industrial processes sent to
treatment in 2017 (114 thousand tons) was higher than the amount generated
in the same year (113 thousand tons).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Leaks
Oil and oil products leaks totaled 35.8 m³ in 2017, 30.94% less than the volume recorded in 2016, and 83.4%
below the alert threshold established by the company. We are constantly improving our spill response standards,
procedures and plans, which are structured at local, regional, and corporate levels.
LEAKED OIL OR OIL PRODUCTS (m3)
915.2
556.2
71.6
25
51.9
24
20
35.8
2015
2016
2017
Total number of leaks Petrobras Average Peer Group
Notes:
a) This calculation includes leaked volumes greater than one barrel (0.159 m3) that reached the environment.
b) The total 35.8 m³ equals approximately 225.4 barrels.
c) Peer group average: leaked volume data extracted from reports published by the sustainability or similar reports by the companies that comprise Petrobras
peer group. Not all companies in the peer group had disclosed leaked volumes until the closing of this report.
As part of our environmental procedures and efforts, we maintain detailed response and contingency remediation plans
to be implemented in the event of an oil spill or leak in our offshore operations.
In order to act effectively in such emergencies, we have resources such as vessels specialized in the containing and collection
of oil and firefighting and containment barriers distributed along our Environmental Defense Centers, in advanced bases and
in the Emergency Response Centers at our subsidiary, Transpetro, located in several points throughout the country.
We are associated to the Oil Spill Response Limited, a global organization specialized in providing and complementing resources for
effective response to oil spills. In 2017 we held 15 exercises in a regional level, including leak response training.
For further information, please refer to Sustainability 2017.
49
ENVIRONMENTAL LITIGATION
The processes of our value chain are governed
by a wide range of laws, regulations and licensing
requirements related to the protection of human
health and the environment. In this sense, we
are subject to several administrative and legal
proceedings related to environmental issues that
may expose us to civil, criminal and administrative
sanctions, including activity suspension orders.
No new relevant environmental disputes were
recorded in 2017.
PROVISIONED ENVIRONMENTAL CONTINGENCIES
(BRL MILLION)
282
300
194
2015
2016
2017
ENVIRONMENTAL CONTINGENCIES NOT PROVISIONED
(BRL MILLION)
5,748
7,079
7,787
2015
2016
2017
For further information on environmental contingencies,
please refer to Financial Statements (note 30).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
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Productive
Capital
Our productive capital is comprised of the industrial units and the
entire infrastructure we use in our productive activity, with emphasis
to the platforms, refineries and logistical assets.
The main tangible assets, most in Brazil, are presented in the following table:
EXPLORATION AND PRODUCTION
Producing wells (oil and natural gas) 1
10,160
10,045
7,888
2015
2016
2017
Floating rigs
Operated platforms in production
TRANSPORT AND STORAGE
Oil and oil products pipelines (km)
Transport gas pipelines (km)
Vessel fleet (owned and chartered) 2
Terminals 2
REFINING
Refineries
45
123
7,517
9,190
55
49
13
34
124
7,719
9,190
56
47
13
30
120
7,719
9,190
55
47
13
Nominal installed capacity (thousand barrels per day – bpd)
2,176
2,176
2,176
DISTRIBUTION IN BRAZIL
Number of service stations
Number of distribution bases
NATURAL GAS
Processing units
Brazil
Bolivia
Processing capacity (million m3/day)
Brazil
Bolivia
Regasification terminals
Regasification capacity (million m3/day) 3
8,176
86
8,176
85
8,277
83
23
20
3
144.80
100.75
44.05
3
41
22
20
2
147.97
106.75
41.22
3
41
23
20
3
150.80
106.75
44.05
3
41
POWER
Number of thermal power plants
Installed capacity (thousand MW)
PETROCHEMICALS
Interest in companies
Wholly-owned subsidiaries
FERTILIZERS
Fertilizer plants
2015
2016
2017
20
6.1
5
2
3
20
6.1
5
2
3
20
6.1
5
2
3
Urea production capacity (thousand ton/year)
Ammonia production capacity (thousand ton/year)
1,852
1,406
1,852
1,406
1,852
1,406
BIOFUELS
Biodiesel production units
6
5
5
Biodiesel production capacity (thousand m3/year)
886.4 4
902.8 5
1.054 5
1 Includes information from abroad, corresponding to Petrobras interest in affiliated companies.
2 Includes only Transpetro vessels and terminals.
3 From July 2017, due to the return of the Golar Spirit vessel, the regasification started to be
made using two vessels.
4 Includes the Guamaré unit.
5 Includes the capacity of Quixadá, which is currently in hibernation.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
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We have 90 owned platforms, 30 chartered platforms
The transportation system of the processed natural gas to
and eight operated by third parties, which provided us an
the distributors in Brazil, with shareholding participation of
offshore production of 2.06 million barrels of oil per day
Petrobras, consists of a total of 9,190 km of pipelines.
and 65.2 million m³ of natural gas per day, excluding the
liquefied volume.
We also own and operate a power generation park with
20 thermoelectric power plants, with installed capacity
Part of the oil is exported and the remaining
of 6,100 MW.
is transferred through terminals and pipelines to our
13 refineries, which have the capacity to process 2,176
thousand bpd.
In addition, we operate in Petrochemicals through interest in
five operating companies and two wholly-owned subsidiaries.
These oil products are sold to fuel distributors, including our
subsidiary Petrobras Distribuidora, which has a network of
630 owned service stations and 7,647 third-party service
stations, in addition to bases and terminals. The distributors
are responsible for selling to final consumers.
Our three fertilizer units have the annual production capacity
of 1,852,000 tons of urea and 1,406,000 tons of ammonia; in
addition, our biofuel plants have capacity to produce 945,000
m3 of biodiesel, without taking into consideration the Quixadá
unit, which is in hibernation, and 211,000 m3 of ethanol.
Those operations have Transpetro’s logistical support,
with 55 vessels, owned and chartered.
Our total fixed assets had book value of BRL 584.4 billion
as of the end of 2017.
The volume of natural gas produced is transferred to the
natural gas processing units, which have nominal capacity
of processing 150.8 million m3 per day.
In order to complement the total offer of natural gas,
we have three liquefied natural gas (LNG) regasification
terminals. Currently, the total delivery capacity amounts
to 41 million m3 per day.
For further information, please refer to Business Performance.
For further information, please refer to Financial Statements
(note 12) and Reference Form (item 9.1), available at
www.investidorpetrobras.com.br/en.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 52
INVESTMENTS
TOTAL INVESTMENT COMPARISON (BRL BILLION)
Our investments totaled BRL 48.22 billion in 2017,
13% less than the previous year.
85%
2016
82%
2017
12%
3%
16%
2%
55.35
48.22
-13%
Exploration and production
Refining and natural gas
Other areas
Exploration and
production investments
BRL 39.65
billion
Production
development of
new oil fields,
primarily in the
pre-salt area of the
Santos Basin
Production
maintenance
in legacy fields
Exploratory
activities
Improvement of
the operational
efficiency
Refining and natural
gas investments
BRL 7.81
billion
Construction and capacity
expansion of gas pipeline and
natural gas processing units to
meet the demand of the pre-salt
production area at the Santos Basin
Maintenance of the
refining park
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
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Transpetro, our subsidiary, invested BRL 1.4 billion in
IMPAIRMENT
2017. Most of the investment was directed to the
construction of vessels in the Fleet Expansion and
Our impairment assessment takes place once a year
Modernization Program (Promef), with the delivery of
on December 31, or when there is an indication of
three new vessels in the year (two Suezmax vessels
devaluation throughout the year. In 2017, losses
and one gas tanker), and projects related to the
and loss reversals in the impairment of assets were
maintenance of the company’s logistic infrastructure.
recognized in the net amount of BRL 3,862 million,
mostly in the fourth quarter, as a result of portfolio
Our subsidiary Petrobras Distribuidora invested BRL
management and the update of our medium and
301 million in 2017, intended for the maintenance and
long term economic assumptions within the context of
expansion of the logistic infrastructure, the
the new Business and Management Plan 2018-2022.
development and modernization of the gas station
network, the aviation segment, the distribution of
We had losses in the recoverability of exploration and
natural gas and the trading of power.
production assets, with emphasis on the area sold in the
Roncador field (Campos Basin); equipment and facilities
Our investment budget, as well as of our subsidiaries,
related to the oil and gas production, as well as well
is approved annually by the Brazilian National
drilling activities, and oil and gas production fields in
Congress, according to the budget legislation in force
Brazil, with reversal of losses recognized in prior periods,
in Brazil for companies directly or indirectly controlled
primarily related to Cash Generating Unit (UGC) Polo
by the Federal Government. The budget for 2017 was
Norte, located in the Campos Basin, offset by losses
approved by Law No.13.414/2017 (2017 Annual
mainly related to the UGC fields of Piranema, Salgo, Polo
Appropriation Act) and its supplementations.
Ceará Mar, Polo Civil, Polo Miranga, Polo Fazenda Belém,
In compliance with the constitutional standard that
prohibits investments exceeding the approved
In the Refining segment, impairment losses were
budget and additional credits, we invest within the
basically related to the second RNEST train and
limits approved by the competent authorities.
Transpetro vessels. Losses were also recorded in the Gas
Frade, Dom João and Candeias.
and Power segment.
In addition to investments in the expansion of
our production capacity, we have a portfolio adequacy
program that addresses the sale of several
non-strategic assets.
For further information on partnerships and divestments,
please refer to Financial Capital.
For further information on impairment in the business areas,
please refer to Financial Statements (note 14).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Financial
Capital
Our financial capital is composed of the available financial
resources, whether our own or from third parties, allocated to
our productive activity.
54
SHARES
In Brazil, our shares are traded at the São Paulo Stock
Exchange – B3, under the trading codes PETR3 (voting)
and PETR4 (non voting). In the United States, the
ADRs (American Depositary Receipts), certificates
issued by American banks, which represent shares
of a foreign company in the country, are listed at the
New York Stock Exchange (Nyse), under the codes PBR
(receipts representing voting shares) and PBRA (receipts
representing non voting shares). In Spain, representative
receipts of our shares are listed at Latibex under XPBR
Our shareholders
VOTING CAPITAL (%)
9.87
10.27
10.62
18.98
NON-VOTING CAPITAL (%)
50.26
21,96
34,39
13,91
29,74
Federal Government NYSE Foreigners in B3
Brazilians in B3 Foreigners in B3
(representing voting shares) and XPBRA (representing
Brazilians in B3
BNDES
BNDESPar NYSE
non voting shares). Representative receipts of our
shares are also traded in Argentina at the Buenos Aires
Stock Exchange under codes APBR (representing voting
shares) and APBRA (representing non voting).
SHARE CAPITAL (%)
6.87
9.52
16.81
28.67
18.83
19.30
Federal Government NYSE Foreigners in B3
Brazilians in B3 BNDES BNDESPar
The controlling block, consisting of
the Federal Government, BNDES,
BNDESPar, Caixa Econômica
Federal and Social Participation
Fund hold 63.60% of our shares
with voting rights.
Information about our shareholders as of February 28, 2018
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Stock performance
After a strong recovery in the value of our shares in 2016, 2017 presented a smaller increase, followed by a strong
resumption in early 2018.
STOCK PERFORMANCE SINCE 2015
5
1
0
2
/
2
0
/
1
0
n
o
0
0
1
–
.
o
N
x
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d
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I
250
200
150
100
50
0
+87.89%
+72.01%
+57.49%
5
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5
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7
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7
1
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7
1
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7
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7
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7
1
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v
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7
1
.
c
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d
PETR3
PETR4
IBOV
Source: Bloomberg
ADR PERFORMANCE SINCE 2015
180
160
140
120
100
80
60
40
20
0
5
1
0
2
/
2
0
/
1
0
n
o
0
0
1
–
.
o
N
x
e
d
n
I
+52.22%
+41.44%
-1.06%
5
1
0
2
.
n
a
j
5
1
.
b
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f
5
1
.
r
a
m
5
1
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p
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5
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y
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5
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n
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5
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5
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6
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6
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6
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6
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7
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7
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7
1
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p
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7
1
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7
1
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7
1
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l
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7
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PBR
PBR/A
AMEXOIL
Source: Bloomberg
Appreciation in 2017 /
Value on 12/31/2017
ON Shares (PETR3)
-0.18%/BRL 16.91
PN Shares (PETR4)
+8.27%/BRL 16.10
Market value
+3.18% /
BRL 216 BILLION
Ibovespa
+26.86%
Appreciation in 2017/
Value on 12/31/2017
ON ADRs (PBR)
+1.78%/USD 10.29
PN ADRs (PBRA)
+11.58%/USD 9.83
Market value
+1.43% /
USD 66 billion
AmexOil
+5.70%
Brent Oil
+13.88%
55
In January 2018, the value of
our shares exceeded our book
value, a milestone not reached
since January 2012.
For further information on the relationship with our investors,
please refer to Social and Relationship Capital.
For further information on lawsuits filed by our shareholders,
please refer to Governance and Compliance, and Financial
Statements (note 30.4).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
56
DEBT
INDEBTEDNESS
The indebtedness level is part of our key financial metric.
Since 2015, we have been working to reduce our debt
and improve our profile, redistributing amortizations
over time and reducing its costs. One of the main goals
of our Strategic Plan is to reach the Net Debt/Adjusted
EBITDA index of 2.5x by the end of 2018. The calculation
methodology for the Adjusted Ebitda was changed at
the beginning of 2017, excluding the capital gain with
divestments, which has changed the Net Debt/Adjusted
EBITDA index in 2015, from 5.3 to 5.1.
493.0
392.1
126.3
100.4
2015
385.8
314.1
118.4
96.4
2016
361.5
280.8
109.3
84.9
2017
REDUCTION OF
LEVERAGE
NET DEBT/ADJUSTED EBITDA
FROM
5.1
IN 2015
TO
2.5
UNTIL 2018
NET DEBT/ADJUSTED EBITDA INDEX (X)
5.11
Total debt (BRL billion)
Net debt (BRL billion)
Total debt (USD billion)
Net Debt (USD billion)
We reached USD 84.9 billion net debt at the end of 2017 and, according to our 2018-2022 BMP,
we will have USD 77 billion net debt at the end of 2018.
DEBT PROFILE – PER CURRENCY (%)
DEBT PROFILE – PER CATEGORY (%)
5
2
3
20
46
51
73
3.54
3.67
USD BRL Euro Other currencies
Export Credit Agency
Banking Market Capital market
2015
2016
2017
For further information about our debt profile, please refer to
Financial Statements (note 17).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
57
Debt Management
(ii) prepayment of BRL 52,000 million of loans in the
in the amount of BRL 23,815 million (USD 7,597 million)
national and international banking market.
with maturities in 2025 and 2028; and
According to the Business and Management Plan 2018-
(iii) the prepayment of BRL 2,963 million related to
(ii) exchange of debts in the national and international
2022, there is no need for new net funding on the
financing with export credit agencies; and
banking sector maturing between 2018 and 2020,
horizon of the plan. However, we will continue assessing
(iv) the prepayment of BRL 9,531 million related to
amounting to BRL 13,577 million (USD 4,257 million),
funding opportunities, targeting at liability management
funding with BNDES.
for new debt, on the same amounts, with maturities
operations, aiming at the improvement of the amortization
between 2020 and 2024.
profile and reducing the cost of the debt, maintaining an
We rolled-over debts through non-cash transactions. The
indebtedness profile that is compatible with the maturity
main highlights are:
deadlines of our investments.
In 2017, we raised BRL 86,467 million. The main
highlights are:
I) several offers of securities in the international capital
markets (Global Notes) with maturity in 2022, 2025,
(i) exchange of BRL 21,217 million (USD 6,768 million)
in securities in the international capital market with
maturities between 2019 and 2021 for new securities
2027, 2028 and 2044, amounting to BRL 32,574 million
Average interest rate (% p.a.)
(USD 10,218 million);
ii) issuance of debentures in the domestic capital market
Weighted average maturity (in years)
with maturities at 2022 and 2024, amounting to BRL
Leverage (%)
After those operations, our amortization profile was
extended and the average interest rate reduced,
rebalancing the volume of payments, especially in the
short term, for 2018 and 2019.
2015
6.3
7.14
60
2016
6.2
7.46
55
2017
6.1
8.62
51
4,989 million; and
III) funds raised from national and international banking
market, with approximately fiveyears average terms in
the total amount of BRL 41,645 million.
We have paid several loans and financing amounting to
BRL 137,386 million. The main ones are:
(i) the repurchase and/or redemption of BRL 24,356 million
(USD 7,569 million) securities on the international
capital market, with maturities between 2018 and 2021,
with premium paid to holders of securities who handed
in their papers in the operation in the amount of BRL
1,067 million;
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
58
Credit Rating
Our credit rating is defined by our operational and financial perspectives, and is influenced by Brazil's sovereign credit
rating. In 2017, the credit rating agencies Moody’s and Standard & Poor's (S&P) recognized the efforts to improve
governance, debt management and divestments, raising our ratings. In 2018, due to downgrading of Brazil’s credit
rating, Fitch downgraded our rating.
Reduction in the sovereign rating
Improved performance, improved relationship
with domestic and international banks, and better
access to capital markets. Price policy consistency.
BBB
Baa2
Ba1
BBB-
Ba2
BB+
BB
BB
Ba3
B+
B3
BB-
B1
Ba3
B2
Reduction in the sovereign rating
BB-
BB-
Ba3
Improved liquidity, reduced
leverage, improved
governance, better debt
profile, solid cash generation.
Lower liquidity risk, expectation of better
operational performance and success in
cash generation and sale of assets.
5
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5
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1
/
N
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Investment Grade
Fitch
S&P
Moodys
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 59
OPERATING CASH FLOW
Currently, the capital generated in our operating activities
is sufficient to finance our investments. Since 2015,
we have recorded positive free cash flow, reflecting the
adoption of a policy of competitive prices, combined to
efforts for the optimization of investments and reduction
of costs.
FREE CASH FLOW (BILLION OF BRL)
90
42
86
44
OPERATING
CASH FLOW
FREE CASH
FLOW
-48
-42
INVESTMENTS
87
16
-71
2015
2016
2017
For further information on our financial results, please refer to
Financial Performance and Financial Statements.
For further information on our price policy, Capex and Opex efficiency,
please refer to Strategies and Perspectives.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 60
OPPORTUNITY
DISCLOSURE
(TEASER)
BEGINNING OF
THE NONBINDING PHASE
(WHEN APPLICABLE)
BEGINNING OF
THE BINDING PHASE
GRANTING EXCLUSIVITY
IN THE NEGOTIATION
(WHEN APPLICABLE)
This is when the intention of divestment is made public,
and potential interested parties are invited to take part in
the bidding process.
Optional step, held to identify and select the participants who
are really interested in the acquisition and that see greater value
in the assets/companies.
Step where the selection of the best offer made by the
potential interested parties takes place, in order to maximize
the value of sales.
Optional step, which occurs when exclusivity is formally granted
to a potential buyer, after the binding phase.
TRANSACTION APPROVAL BY
SENIOR MANAGEMENT (EXECUTIVE BOARD AND BOARD
OF DIRECTORS) AND SIGNING OF AGREEMENTS
Step containing the signing of purchase and sale (or assignment of
rights) agreements containing the conditions of the transaction,
including the conditions precedent for the closing.
CLOSING OF
THE OPERATION
Step where the transaction is concluded with the fulfillment of
the conditions precedent set forth in the agreement.
PARTNERSHIPS AND DIVESTMENTS
Our active portfolio management, aligned to the
strategy of partnership operation, results in another
important source of funds for the company through the
Partnership and Divestment Program.
The program is aligned to the Business and
Management Plan, and seeks to optimize the business
portfolio, moving away entirely from the activities of
biofuel production, liquefied petroleum gas (LPG)
distribution, fertilizer production and interests in
petrochemicals, preserving the technological skills in
areas presenting development potential. In addition,
the program is considered one of the key pillars for
reducing our leverage.
In March 2017, the Federal Court of Accounts (TCU)
endorsed our new divestment procedure and defined
that such new procedure should be used in all the
ongoing divestment projects that had not yet been
signed. Thus, all projects with no signed agreements
were reinitiated.
The new procedures resulted in delays in the
ongoing divestment projects, but also brought more
transparency to the Program governance. All steps
presented below are now disclosed to the public:
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 61
Transactions signed within the 2015-2016 divestment plan, but completed in 2017 and early 2018, or not completed yet,
pending the fulfillment of legal and contractual conditions:
DATE OF
SIGNATURE
CLOSING
DATE
COMPLETED TRANSACTIONS
TRANSACTION
NOMINAL AMOUNT1
(USD BILLION)
07/22/2016
12/28/2016
01/04/2017
Disposal of 100% of Petrobras Chile Distribuición Ltda.
02/03/2017
Disposal of the entire interest of 45.97% at Guarani S.A.
09/23/2016
04/04/2017
Disposal of 90% of Nova Transportadora do Sudeste (NTS),
a carrier of natural gas in southeastern Brazil
12/28/2016
01/15/2018
Strategic alliance with the French company Total, including the transfer of 22.5%
of the rights in the Iara concession area and the assignment of rights of 35%, as
well as the operation in the concession area of the Lapa field in BM-S-9 block
PENDING TRANSACTIONS
12/28/2016
-
TOTAL
Disposal of Companhia Petroquímica de Pernambuco (PetroquímicaSuape)
and Companhia Integrada Têxtil de Pernambuco (Citepe)
0.5
0.2
5.2
2.2
0.4
8.5
Transactions signed within the scope of the 2017-2017-2018 divestment plan:
DATE OF
SIGNATURE
CLOSING
DATE
COMPLETED TRANSACTIONS
TRANSACTION
12/14/2017
02/16/2018
12/22/2017
Petrobras Distribuidora IPO
02/21/2018
Sale of all shares of São Martinho S.A. (6.593%)
PENDING TRANSACTIONS
02/28/2017
11/22/2017
12/18/2017
TOTAL
-
-
-
Sale of 50% of Termobahia S.A. as part of the Strategic Partnership with Total
Sale of Petrobras’ interest in the Azulão field
Strategic Partnership with Statoil: technical agreement aiming to increase
the recoverable volume of oil in the Roncador field; agreement to share gas
export infrastructure, and; sale of 25% interest in the Roncador field
1 Amounts received or to be received upon the closing of the transactions and subsequent payments;
2 Amount not disclosed yet.
NOMINAL AMOUNT1
(USD BILLION)
1.5
0.1
-2
0.05
2.9
4.5
PROGRAM RESULTS
2015-2016 biennium (target of USD 15.1 billion):
• total value of the signed transactions: USD 12,9 billion*
• total amount received in 2017 and early 2018: USD
6.9 billion**
2017-2018 biennium (target of USD 21 billion):
• total value of the signed transactions: USD 4.5 billion
• cash inflow in 2017 and early 2018: USD 1.7 billion
* Amount revised after the disposal of Liquigas was not approved
by Cade.
** Includes the amount received by the disposal of NTS, comprised
of: USD 2.59 billion regarding the sale of shares and USD 1.64 billion
regarding debentures convertible into shares issued by NTS, with
maturity in 10 years, for replacement of debt with Petrobras Global
Trading BV, a wholly-owned subsidiary of Petrobras.
The following operations were awaiting decision by Cade
Court and the results were disclosed in February 2018:
1. Liquigás Distribuidora S.A: On February 28, 2018, Cade
did not approve the sale of Liquigas, our wholly owned
subsidiary operating in the distribution of LPG, to Ultragaz.
This decision implies the cancelation of the purchase and
sale agreement of Liquigas, signed on November 17, 2016,
with fines to Ultragaz amounting to BRL 286.2 million.
Alternatives are being considered for Liquigas divestment,
which remains in the Partnership and Divestment Program.
2. Suape and Citepe: On February 7, 2018, Cade approved
the disposal of Companhia Petroquímica de Pernambuco
(PetroquímicaSuape) and Companhia Integrada Têxtil
de Pernambuco (Citepe), our wholly-owned subsidiaries,
to Alpek. Despite this approval, the completion of the
transaction is still subject to compliance with other
conditions precedent.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 62
Continuing our Partnership and Divestment Program, in 2017 and early 2018, we made the
following announcements to the market related to ongoing divestments:
ANNOUNCEMENTS TO THE MARKET IN 2017 AND EARLY 2018 1
TRANSACTION
SCOPE SUMMARY
Disposal of Petrobras companies in Paraguay
(distribution, gas, operation and logistic)
OPPORTUNITY
DISCLOSURE
(TEASER)
BEGINNING OF THE
NONBINDING
PHASE
BEGINNING
OF THE
BINDING PHASE
07/07/2017
08/14/2017
10/26/2017
Sale of the Maromba field, in the Campos Basin
07/06/2017
-
10/03/2017
Sale of five sets of offshore fields in shallow water, in
Ceará, Rio Grande do Norte, Sergipe, Rio de Janeiro
and São Paulo
Sale of the Pampo and Enchova poles, in shallow
water, in Rio de Janeiro
Sale of three sets of onshore fields (50 concessions)
in Rio Grande do Norte and Bahia
Disposal of 90% of Transportadora Associada de Gás
S.A. (TAG), a wholly-owned subsidiary of Petrobras
Total disposal of Araucária Nitrogenados S.A.(ANSA)
and Unidade de Fertilizantes Nitrogenados III (UFN-III)
Sale of five sets of onshore fields (totaling 19
concessions) in Ceará, Rio Grande do Norte and Sergipe
Disposal of 100% interest in Petrobras Oil & Gas B.V.
(POGBV), holder of exploration and production assets
in Africa
Disposal of 100% of the shares held by Petrobras
Biocombustíveis at BS BIOS
Total disposal of the Pasadena Refinery,
located in Texas, USA
1 Information updated until February 28, 2018.
07/28/2017
10/04/2017
-
07/28/2017
10/04/2017
02/27/2018
08/28/2017
11/17/2017
-
09/05/2017
10/23/2017
12/28/2017
09/11/2017
10/27/2017
12/19/2017
09/22/2017
-
11/07/2017
11/17/2017
12/14/2017
02/05/2018
02/06/2018
-
-
-
-
-
PETROBRAS DISTRIBUIDORA IPO
On December 15, 2017, Petrobras Distribuidora, one of
our subsidiaries, leader in the fuel distribution segment
in Brazil and listed at Novo Mercado, the main governance
segment among publicly traded companies in the
Brazilian stock exchange, held its initial public offering of
shares (IPO) at B3, with ticker BRDT3.
Petrobras Distribuidora shares were initially traded at a
price of BRL 15.00 per share. The main batch (base offer)
was of 291,250,000 voting shares and the supplementary
batch had 43,687,500 shares. The initial offer of shares
attracted investors from Latin America, Europe and
United States.
GEOGRAPHICAL DISTRIBUTION (%)
UNITED
STATES
LATIN
AMERICA
EUROPE
30
10
60
DISTRIBUTION BY INVESTOR TYPE (%)
INSTITUTIONAL
90
RETAIL
10
The offering amounted to BRL 5,024,062,500.00.
Petrobras Distribuidora IPO represented the biggest IPO
in the Brazilian stock exchange since 2013, and marked
Petrobras Distribuidora’s return to the capital market.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Liquidity and Capital Resources
The resources generated by our operations, added to the asset disposals, were more than sufficient to afford our
investments, amortization of principal and interests.
63
CASH FLOW
BRL BILLION
69
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86
86
-115
Principal
-42
-22
Interests
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* BRL 4.9 billion related to Petrobras Distribuidora IPO.
** Includes variation of federal public securities and time deposits above 90 days, investments in marketable securities, dividends
paid to non-controlling shareholders, participation of non-controlling shareholders and exchange rate variation on cash and cash
equivalents.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
64
EXTERNAL CONTEXT
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 65
INTERNATIONAL OIL MARKET (BRENT)
The high prices of oil until mid-2014 can be mainly explained by the supply constraints as a result of
geopolitical matters, such as the sanctions imposed on Iran and the consequences of the Arab Spring. The
sharp drop in oil prices in the second half of 2014 reflect the combination of the reduction of the demand
growth and the steep rise in non-conventional production in North America, which culminated with the
formation of high levels of oil stocks.
In 2015 and 2016, despite the increase in demand, stocks levels remained high, largely due to growth in
production from the Organization of Petroleum Exporting Countries (OPEC), which did not adopt a coordinated
action to limit their production. Only at the end of 2016, OPEC announced an agreement to limit its production,
being joined, in an unprecedented manner, by non-OPEC countries.
Throughout 2017, the high degree of compliance with the production quotas set forth in the agreement
contributed to reducing the stocks and, consequently, a rise in the price of Brent oil was observed, reaching an
annual average of USD 54.35/bbl, 23% increase over the average price of 2016, of USD 44.11/bbl.
ANNUAL AVERAGE BRENT PRICE (USD/BBL)
52.31
54.35
44.11
2015
2016
2017
Source: Bloomberg
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Regarding demand, in line with the global economic growth and
INCREASE IN GLOBAL DEMAND FOR OIL (MILLION BPD)
66
emphasizing the performance of the economies such as U.S. and
China, the year of 2017 was marked by a robust increase in the global
1.9
consumption of oil, of approximately 1.8 million bpd, representing
an expansion rate above the historical average and higher than the
market expectation.
Regarding supply, the agreement defined that OPEC producers
reduced their production in 1.2 million bpd in relation to October
2016 , establishing a ceiling for the group’s production at 32.5 million
bpd. In addition, a group of 11 non-OPEC producing countries
(including Russia), further contributed with a production reduction
of 558,000 bpd. At the November 2017 meeting, the agreement
was extended until December 2018, under the same conditions.
The group will meet again in June 2018 to assess the need for
adjustments in the agreement.
0.6
1.3
1.2
0.3
0.9
1.8
0.6
1.2
2015
2016
2017
OECD Non-OECD
Source: IHS
Despite the resumption of growth in the U.S. oil production in
EVOLUTION OF GLOBAL SUPPLY OF OIL (MILLION BPD)
2017, uncertainties arising from geopolitical events, such as those
associated with the Iraqi Kurdistan plebiscite, the political turmoil in
Saudi Arabia and the unexpected interruption of pipeline operations
in the North Sea and in Libya prevailed over the expectation
supply increases, contributing to rise the average price of crude oil
throughout 2017.
96.7
97.0
97.8
9.4
40.5
8.9
41.5
9.3
41.4
46.8
46.6
47.1
2015
2016
2017
Non-OPEC (Excluding USA)
OPEC USA
Source: IHS
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES BRAZILIAN ECONOMY
EXCHANGE RATE (BRL/USD)
In 2017, the Brazilian economy grew about 1% and started a recovery process after two years of strong
recession. The accumulated inflation for the year, as measured by the National Consumer Price Index (The
Índice Nacional de Preços ao Consumidor Amplo - IPCA). On the other hand, the domestic economy seems
to have been able to respond positively to external stimulus, especially regarding the maintenance of
China’s growth rate and the improvement of the United States’ economy.
In relation to the BRL/USD exchange rate, 2017 presented a lower instability of the Brazilian Real when
compared to the high volatility recorded for 2015 and 2016. In the two years of the crisis, the difference
between the highest and lowest monthly rate was of 127 and 89 points, respectively. In 2017, this
oscillated in only 19 points.
3.48
3.19
3.34
4.00
3.50
3.00
2.50
2.00
1.50
2015
2016
2017
Annual average Variation between the highest and the lowest monthly average
Source: Central Bank of Brazil
67
Lower
currency
instability
in 2017
REGULATION
In 2017, the oil and natural gas sector in Brazil experienced
major changes, with the following highlights:
Local Content: in March 2017, a new local content policy
was approved by the National Energy Policy Council (CNPE),
putting an end to the demand of local content percentage
as a scoring criteria for the bidding rounds for exploration
blocks, thus decreasing the risks associated to the time
elapsed between the bidding and the investment; reduction
of the minimum threshold of the fine for non-compliance
with the local content requirements from 60% to 40% of
what is not reached, rendering the new system less punitive
than the former one; and simplifying the percentage of local
content in macro-segments, replacing the former and more
complex item and sub item percentage tables.
Taxes: in August 2017, Provisional Measure No. 795 was
published, instituting a special tax regime for the exploration
and production activities; and Decree No. 9.128, which
extended the Special Customs Regime for the Export and
Import of Goods designated to Exploration and Production
of Oil and Natural Gas Reserves (Repetro) until 2040. That
brought greater predictability to the standards applicable to
the oil and gas industry in the country, although its regulation
is still subject to the Brazilian Federal Internal Revenue Service.
Right of first refusal to Petrobras: the change in the pre-
salt regulatory framework, which took place in November
2016 with Law No. 13.365, when Petrobras ceased to be the
mandatorily sole operator and participant in at least 30%
of any block hired under the production sharing regime, to
become the preferred operator, was regulated by Decree
No. 9.041, dated of May 2017. It established the rules for
Petrobras exercising the right of first refusal in the pre-
salt blocks, contributing to a greater transparency in the
regulatory framework.
Auctions: in 2017, the National Energy Policy Council
(CNPE) also approved a new policy on the exploration
and production of oil, which instituted the multiannual
planning of auctions. The auction calendar for the
2018-2019 biennium reduces the uncertainties of the
companies and increases the predictability of planning
financial resources for the acquisition of exploratory areas.
These measures have given greater security to auctions
taking place in 2017, which implied in a more leading role of
Petrobras, since it did not take part in any bidding since 2013.
In the 14th Bidding Round of the Concession regime, held
in September, we acquired seven blocks. In the 2nd and 3rd
Bidding Rounds in the Production Sharing regime held in
October, we purchased the blocks of Entorno de Sapinhoá,
Alto de Cabo Frio Central and Peroba, to which we had already
exercised our right of first refusal.
For further information on our participation in the 2017 auctions,
please refer to Business Performance.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
CALENDAR OF BIDDING ROUNDS APPROVED BY CNPE
2018
15TH ROUND
Concession
4TH ROUND
Partilha de Produção I Pré-sal
March 29
June 7
1
4
2
3
7
5
6
4TH ROUND (PRODUCTION SHARING)
15TH ROUND (CONCESSION)
UIRAPURU
TRÊS
MARIAS
ITAMBEZINHO
DOIS
IRMÃOS
ONSHORE
BASINS
4
7
PARNAÍBA
PARANÁ
OFFSHORE
BASINS
1
2
3
5
6
CEARÁ
POTIGUAR
SERGIPE & ALAGOAS
CAMPOS
SANTOS
SATURNO
TRANSFER
OF RIGHTS
LIBRA
Sector SC -
AP5
LULA
Sector SS -
AUP1
68
2019
16TH ROUND
Concession
5TH ROUND
Production
Sharing
6TH ROUND
Concession
Mature Areas
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 69
Natural Gas: in 2017, extensive debate was held
on the improvement of the sector’s regulatory
(vii) use of the natural gas from the government; and
(viii) integration between the natural gas and electricity
Biofuels: Law No.13.576/2017 established a new
regulatory framework for biofuels. Referred to as
framework. Discussions were started under the eight
industries. In the second half of the year, the guidelines for
RenovaBio, this new program has the purpose of
subcommittees of the “Gas para Crecer” initiative,
opening the gas market were forwarded to the Ministry of
recognizing the strategic role of biofuels for the reduction
comprised of representatives from several federal
Government Affairs and the parties started contributing
of greenhouse gas emissions. In order to do so, within 180
government agencies, natural gas industry associations
to the text of the new regulatory framework for the
days (from the presidential sanction), decarbonization
and agents, and the civil society, whose topics were: (i)
industry, which will replace the Gas Law adopted in 2009.
targets shall be defined for a period of 10 years, which
distribution, processing and regasification of liquefied
The processing is taking place at the Mines and Energy
should be fulfilled by fuel distributors through the proof
natural gas (LNG); (ii) transport and storage; (iii)
Committee, through alternate bill to Bill No 6.407/2013,
of purchase of decarbonization credits (CBIOs). Those
distribution; (iv) trading; (v) tax structure improvement
and is expected to be forwarded to the Chamber of
CBIOs will be generated by the biofuels producers and
for the natural gas sector; (vi) natural gas as raw material;
Deputies and Senate for approval in 2018.
importers and negotiated in organized markets.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 70
Exploration and
Production of
Oil and Gas
71
Refining and
Natural Gas
78
Consolidated
Financial
Performance
97
BUSINESS
PERFORMANCE
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Exploration and Production
of Oil and Gas
SEGMENT’S KEY STRATEGIES – 2017 HIGHLIGHTS
Integrated management of the
Exploration and Production project portfolio
Prioritize the development of deep-water production,
working primarily in strategic partnerships, joining
technical and technological skills
Manage the exploratory portfolio aiming to maximize
the economics and ensure the sustainability of the oil
and gas production
Continuously maximize the productivity and reduction
of costs in accordance with the best international practices
Strengthen the management of reservoirs to maximize
the value of exploration and production agreements
under all regulatory regimes, seeking opportunities for
continuous incorporation of reserves
S
IE
G
E
T
A
R
T
S
71
Total production of 2,767 thousand boed
Investments of BRL 39.6 billion
Acquisition of seven new exploration blocks in Brazil and three
new blocks in the pre-salt areas of the Campos and Santos
Basins under the production sharing regime
Reduction of 14% in manageable operating expenses in the
segment, when compared to 2016
Strategic partnerships were signed with Total and Statoil, in line
with the active management process of the exploration and
production portfolio established since 2016
In 2017 we maintained the same lifting cost level of 2016,
excluding the foreign exchange effect
Creation of a Reservoir Executive Management
M
A
I
N
I
A
C
H
E
V
E
M
ENTS
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
72
11.7
10.3
11.0
PERFORMANCE INDICATORS
RESERVES (BILLION BOE)
INVESTMENT – E&P (BRL MILLION)
LIFTING COST (USD/BOE)
10.516
9.672
9.752
63,321
47,250
39,650
2015
2016
2017
2015
2016
2017
PRODUCTION (THOUSAND BOED)
ADJUSTED EBITDA – E&P (BRL MILLION)
2,786
2,790
2,767
2015
2016
2017
2015
2016
2017
48,843
53,648
2015
2016
2017
GHG EMISSIONS – E&P
(MILLION TON CO2 EQ)
23.15
22.27
21.56
65,302
2015
2016
2017
Note:
Information per operating segment consider the scope of
each segment, as defined in our financial statements.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 73
BUSINESS PERFORMANCE
Exploration
EXPLORATION
PRODUCTION
DEVELOPMENT
PRODUCTION
EXPLORATION
PRODUCTION
DEVELOPMENT
PRODUCTION
Our oil and gas exploration and production activities
are the largest components of our investment portfolio
and are focused on research, discovery, identification,
The oil and gas industry chain starts at the exploratory phase, with the hiring of exploration blocks, either
through auctions held by governments, or by purchasing from other companies. From the acquisition, processing,
interpretation of geological and geophysical data, and drilling of wells, an oil or gas deposit, or both, is discovered.
After the discovery, the deposit goes through an assessment process, where the volume of technically recoverable
production and acquisition of oil and gas reserves, both
hydrocarbon is estimated for that area.
offshore and onshore, producing hydrocarbons in a safe
and profitable manner.
On December 31, 2017, we had 135 exploratory blocks, in which 28 oil and/or gas discoveries were under
assessment process. In addition to these, three other discoveries were under assessment in the production areas.
We are world leaders in production in deepwater and
Our exploratory assets are presented in the following table:
ultra-deepwater. In 2017, we produced 28.7% of the global
production in that class of assets3. Our activities focus
on oil reservoirs in deep and ultra-deep waters in Brazil,
which, in 2017, accounted for 87% of our entire production
and were responsible for 91% of our proven reserves on
December 31,2017. We also operate in mature fields in
shallow waters and onshore fields. Outside of Brazil, we
BRAZIL
ABROAD
operate in South America, Gulf of Mexico and West Africa.
South America
North America
Africa
TOTAL
EXPLORATORY
AREA (km2)
EXPLORATION
BLOCKS
ASSESSMENT
PLANS
DRILLED
WELLS
SUCCESS
RATE (%)
63,753
13,684
13,451
233
-
77,437
123
12
2
10
-
135
28
3
1
0
2
31
8
1
1
0
0
9
88
0
0
-
-
78
3 According to data from IHS Markit (E&P Portfolio Tool)
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 74
NATIONAL AGENCY OF PETROLEUM, NATURAL GAS AND
BIOFUELS (ANP) AUCTIONS
The following map and table synthesize the areas acquired by Petrobras.
In 2017, ANP held four bidding rounds for new exploratory blocks in Brazil.
We were very selective in these auctions, reflecting our strategic vision and
marking the beginning of the recovery of our exploratory portfolio, while we
also seek to recover the relationship between reserves and production, and
ensure the sustainability of our future oil and gas production. In line with the
purpose of strengthening partnerships, sharing risks, joining technical and
technological skills and capturing synergies, we continue with our strategy of
operating in competitive joint ventures.
EXPLORATORY
BLOCKS
PARTNERSHIPS
BONUS
(BRL MILLION)
PROFIT
OIL (%)
ACQUIRED AREA
(THOUSAND KM2)
14th ROUND (CONCESSION)
6 offshore
50% Petrobras
50% ExxonMobil
1 onshore
100% Petrobras
1800
2
-
-
3.6
2.9
2nd ROUND (PRODUCTION SHARING)
Entorno de
Sapinhoá
45% Petrobras
30% Shell
25% Repsol
90
80
0.2
PAR-T-175
MS
SP
PR
SÃO PAULO
ESPÍRITO
SANTO
3rd ROUND (PRODUCTION SHARING)
Peroba
Alto de Cabo
Frio Central
10 blocks
(9 offshore
and 1 onshore)
40% Petrobras
40% BP
20% CNODC
50% Petrobras
50% BP
800
76.96
1.1
250
75.86
3.7
-
2.942
-
11.4
TOTAL
SETOR SC-AP3
Regarding the 4th Bidding Round of Exploratory Blocks under the production sharing regime, scheduled to
be held in June 2018, we expressed interest in exercising our preferential rights at Dois Irmãos, Três Marias
and Uirapuru areas, with the minimum percentage of 30% participation in each of them.
RIO DE
JANEIRO
Alto de Cabo
Frio Central
PRE-SALT
POLYGON
Sapinhoá
Peroba
CONCESSION
PRODUCTION SHARING
For further information on our oil and natural gas reserves,
please refer to Natural Capital.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
75
Our exploration investments amounted to BRL 4.67 billion in 2017, 97% of it in Brazil. Those investments mainly
LIBRA AREA AND MERO FIELD
cover the cost of drilling, seismic surveys and the acquisition of blocks, which contributed to the following
discoveries and declarations of commerciality:
MAJOR DISCOVERY IN 2017
COUNTRY
AREA
WATER
Brazil
Campos
Marlim Sul
AREA
(km2)
24.3
WATER
DEPTH (m)
PARTICIPATION
PETROBRAS (%)
1,107
100
Marlim Sul Field (Campos Basin pre-salt): first and main commercial discovery of oil at pre-salt in the area in 2017.
The discovery took place during the drilling of well 6-BRSA-1349, informally referred to as Poraquê Alto.
DECLARATIONS OF COMMERCIALITY IN 2017
COUNTRY
FIELD
BASIN
VOLUME
RECOVERABLE
(MILLION BOE)
OIL
QUALITY
(° API)
PETROBRAS
PARTICIPATION (%)
Brazil
Canário da Terra,
Canário da Terra Sul e
Guriatã Sul
Recôncavo
0.892
38
Brazil
Mero
Santos
3,300
29
100
40
Libra, the first block in the production sharing regime
in Brazil, is one of the largest offshore exploration and
production projects in the world, operated by a consortium
(Libra Consortium), led by Petrobras (40%), in partnership
with Shell (20%), Total (20%), CNPC (10%) and CNOOC
Limited (10%). The Consortium also has the participation
of the state-owned company Pré-Sal Petróleo SA (PPSA) as
the manager of the agreement.
Since the signing of the production sharing agreement
in 2013, a total of 12 wells have already been drilled
in the Libra area, with one of them (3-BRSA-1339A-
RJS) reaching, during testing, a historical national
productivity record.
In November 2017, on behalf of the Consortium,
we announced the declaration of commerciality in
the Northwest region of the Libra block, which was
renamed to Mero Field. This was the first declaration of
commerciality in the Libra area, marking the beginning
of the production development phase.
The first definitive production systems are expected to
start operating in 2021 (Mero 1) and 2022 (Mero 2). A
total of four production systems are currently envisaged
for that field.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
76
Production development
Production
EXPLORATION
PRODUCTION
DEVELOPMENT
PRODUCTION
EXPLORATION
PRODUCTION
DEVELOPMENT
PRODUCTION
After a field receives its declaration of commerciality,
the development phase starts. Investments made in
PRODUCTION (THOUSAND BOED)
that phase are primarily focused on the design of projects
2,786
2,790
2,767
and the contracting of production systems, including
platforms, subsea systems, and the drilling and completion
of wells.
190
468
2,128
161
485
2,144
112
500
2,154
In 2017, the greatest production development highlights
are in the Santos Basin pre-salt, with the initial operation
of FPSOs Pioneiro de Libra, in the Mero Field, and P-66,
at the Lula Sul FIeld, the first one in the replicating model
(several platforms built following the same basic design).
2015
2016
2017
Oil and NGL – Brazil Natural gas – Brazil Oil and Natural Gas – Abroad
We invested BRL 29.8 billion in production development in
PRODUCTION RECORDS IN 2017
2017, a 20% decrease when compared to the previous year,
mainly due to the postponement of some activities in the
construction of FPSOs for 2018, the reduction of rates and
the greater efficiency of rigs and support vessels.
Total oil and gas
production
in Brazil:
2.65
million boed
Oil
production
in Brazil:
2.15
million bpd
Own natural gas
production
in Brazil:
79.6
million m³/d
Associated
gas usage
index:
95.55
%
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 77
In Brazil, our average production
of oil reached, for the fourth
consecutive year, a historical
record: 2.15 million barrels per day
(bpd), 0.4% above the results from
the previous year. For the third
consecutive year we reached our
Regarding our own production of natural gas, in 2017 we
of new wells to FPSO Cidade de Saquarema, Cidade de
reached the unprecedented amount of 79.6 million cubic
Maricá and Cidade de Itaguaí, as well as the beginning of
meters per day (m3/d), excluding the liquefied volume.
the operation of platform P-66. The second one was due
With that, the country’s total production reached 2.65
to the interconnection of new wells to FPSO Cidade de
million barrels of oil equivalent per day (boed), volume
Caraguatatuba. Another important factor was the beginning
0.9% higher than 2016. This mark was also a
of the production of the FPSO Pioneiro de Libra.
new record for Petrobras.
The annual average for operated production (covering
below the volume produced in the previous year. The average
Petrobras’ and partners’ portion) in the pre-salt layer, in
natural gas production accounted for 8.3 million m³/(d), 39%
2017, was also the highest in our history, reaching 1,29
below the 2016 production. The decrease is mainly due to the
million bpd. This volume exceeded the 2016 production in
divestments made, such as the sale of Petrobras Argentina.
Abroad, the average oil production was of 64,000 bpd, 20%
production target, confirming the
26%. In addition, together with our partners, we reached
predictability of our forecast.
a monthly (1.36 million bpd in December) and daily record
When considering Brazil and abroad together, the average
(1.48 million bpd, on December 04) in the pre-salt layer.
production of oil was of 2.22 million bpd and the annual
This result was also due to the increase in the production
average production of oil and gas was 2.77 million boed.
in the Lula and Lapa fields, both in the Santos Basin pre-
salt region. The first one was due to the interconnection
In 2017, our lifting cost (Brazil and abroad), excluding
government taxes, was USD 11.0 per boe, representing a 7%
increase when compared to the average cost of USD 10.3 per
boe recorded for 2016. Disregarding the exchange rate effect
(+9.4% compared to 2016), the lifting cost for 2017 is in line
with the previous year, even when taking into consideration
the beginning of operation in the new units (P-66 and
Pioneiro de Libra).
URUCU OIL PROVINCE
Discovered in 1986, the Urucu Oil Province holds the largest proven onshore reserves of oil and
natural gas of Brazil. Despite the logistics and operation challenges in the Amazon region, the
cost for extracting oil and natural gas from Urucu is among the lowest in Brazil. In 2017, Urucu
presented average daily production of 36.18 thousand barrels of oil of excellent quality, including
1,083 tons of cooking gas (LPG). With that, our activities in the operating unit in the Exploration
and Production area in Amazonas reached a production efficiency index of 94.3%, the best in the
country. It also obtained the best associated gas usage index of the company, at 97.40%. And it
had zero oil and oil products leaks for the fifth consecutive year.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Refining and Natural Gas
SEGMENT’S KEY STRATEGIES – 2017 HIGHLIGHTS
Reducing our risk in exploration and production, refining,
transportation, logistics, distribution and marketing activities
through partnerships and divestment
Promoting market price policy and margin maximization
in the value chain
Optimizing the business portfolio, completely exiting
from biofuel production, liquefied petroleum
gas (LPG) distribution, and fertilizer production
activities, and the interest in petrochemicals,
preserving our technological skills in areas with
development potential
Maximizing the creation of value in the gas chain, aligned
with regulatory developments, ensuring the monetization
of our own production and adapting our interest in the
natural gas chain as the long-term transitional fuel
Restructuring the energy business, consolidating
the thermoelectric assets and other businesses in the
sector, seeking the alternative that maximizes the
value for the company
Review the lubricant business positioning,
aiming at maximizing the creation of value to Petrobras
78
Reviewing the price policy for diesel and gasoline, aiming at
increasing the frequency of price adjustments
New price policy for the marketing of liquefied petroleum
gas (LPG-P13)
Petrobras Distribuidora IPO
Active participation in debates that have impact in the country’s
regulatory framework for the oil and gas industry; RenovaBio,
Gás para Crescer and Combustível Brasil programs
Investments of BRL 7.81 billion
S
IE
G
E
T
A
R
T
S
M
A
I
N
I
A
C
H
V
I
M
E
N
TS
For further information on partnerships and divestments, and on the
regulatory framework for the oil and gas industry, please refer to
Financial Capital and External Context, respectively.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
79
PERFORMANCE INDICATORS
DOMESTIC SALES AND OIL PRODUCTS
PRODUCTION (THOUSAND BBL/DAY)
2,234
2,064
1,940
2015
2016
2017
Sales
Production
REFINING COSTS (BRL/BBL)
2015
2016
2017
8.16
8.89
9.26
GHG EMISSIONS – SUPPLY
(MILLION TON CO2 EQ)
28.73
27.77
26.78
2015
2016
2017
INVESTMENT – SUPPLY (BRL MILLION)
ADJUSTED EBITDA – SUPPLY (BRL MILLION)
8,390
4,032
4,093
2015
2016
2017
2015
2016
2017
39,581
47,475
28,592
2015
2015
2016
Nota:
As informações por segmento operacional consideram a abrangência de cada segmento, conforme definido em nossas Demonstrações Financeiras.
Note:
Information per operating segment consider the scope of each
segment, as defined in our financial statements.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES NATURAL GAS DEMAND (MILLION M3/DAY)
POWER GENERATION (AVERAGE MW)
95
76
83
4,646
2,252
3,165
80
GHG EMISSIONS – GAS AND POWER
(MILLION TON CO2 EQ)
25.64
18.02
15.75
2015
2016
2017
2015
2016
2017
2015
2016
2017
INVESTMENT – GAS AND POWER (BRL MILLION)
ADJUSTED EBITDA – GAS AND POWER (BRL MILLION)
2015
2016
2017
2,581
2,426
3,602
2015
2016
2017
6,940
7,934
6,485
Nota:
As informações por segmento operacional consideram a abrangência de cada segmento, conforme definido em nossas Demonstrações Financeiras.
Note:
Information per operating segment consider the scope of each
segment, as defined in our financial statements.
2016
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 81
Business Performance
OIL PRODUCTS
A total of 24% of our oil production was exported, with
LIQUID OIL PRODUCTS CHAIN
the remaining being processed at our refineries.
The national production of oil products equivalent to
1.8 million barrels per day was obtained from the
REFINING
LOGISTICS
MARKETING
DISTRIBUTION
processing of 93% of the domestic oil, supplemented
We serve our oil products clients in Brazil through a planned combination of oil processing, import and export that seeks
by imported oil. Those oil products were traded both in
to optimize our margins, taking into consideration the different opportunity costs of domestic and imported oil, the oil
Brazil and abroad.
products costs in the several markets, as well as the transportation, storage and processing costs involved.
Regarding natural gas, in Brazil, our processing units
(UPGN) have the capacity to treat 106.75 million m3/
day. That natural gas, along with the natural gas
imported from Bolivia and the liquefied natural gas (LNG)
purchased in the international market, is marketed to
several consumers, in addition to the thermoelectric
power plants where we have interest and our fertilizer
production units.
In addition, we operate in the petrochemical sector
with interest in companies and subsidiaries and
in the production of biofuels through Petrobras
Biocombustível, our wholly-owned subsidiary.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
82
PROJECTS IN PROGRESS
Abreu e Lima Refinery
The Abreu e Lima refinery located in Ipojuca,
in the state of Pernambuco, is expected to
operate two sets of processing units, commonly
referred to as refining trains. Since 2016, the
first refining train can process up to 100,000
bbl/day of oil. In 2017, we resumed work on the
sulphur emissions reduction unit (SNOX), with
forecast to start in 2018, when we will operate
2,026
at full load. For the completion of the second
train, we will prioritize the establishment of
Refining
REFINING
LOGISTICS
MARKETING
DISTRIBUTION
We hold 98.2% of all refining capacity in Brazil4. Six of our thirteen refineries are located in the southeast of the
country, close to the most populous and industrialized markets, and to the source of most of our crude oil in the
Campos and Santos basins.
PROCESSED FEEDSTOCK (THOUSAND BBL/DAY)
OIL PRODUCTS PRODUCTION (THOUSAND BBL/DAY)
2015
2016
2017
1,702
274
848
435
250
78
127 98 190
1,976
2015
1,669
150
775
444
196
54
125 100 193
partnerships, as set forth in our Business and
1,819
2016
1,887
Management Plan.
1,621
127
692
439
200
53
126 106 185
1,748
2017
1,800
Rio de Janeiro Petrochemical Complex
(Comperj)
National oil, NGL and C5+ Imported oil
Diesel Gasoline Fuel oil Naphta
LPG Jet Other oil products
In the United States, our Pasadena Refining System (PRSI), with processing capacity of 100 thousand bbl/day of oil
is currently under divestment process. In 2017, it processed 94 thousand bbl/day of oil and natural gas liquid (NGL),
and produced 94 thousand bbl/day of oil products.
In 2016, we approved the reassessment of the
Comperj project, located in the city of Itaboraí,
in Rio de Janeiro, to continue implementing the
utilities and infrastructure units associated
with the Natural Gas Processing Unit, which
will process the natural gas from the pre-salt
pole of the Santos Basin. The completion of the
refining train depends on the establishment of
partnership, as set forth in our Business and
Management Plan.
For further information on divestments,
please refer to Financial Capital.
4 According to the 2017 Statistical Yearbook from ANP
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
83
Logistics
REFINING
LOGISTICS
MARKETING
DISTRIBUTION
The oil and oil products logistics connects the oil production systems to the refineries and the markets, seeking
to minimize the costs of transportation and storage, and optimizing the result of the refining and marketing
operations of oil and oil products in Brazil and abroad.
A few assets in that system are directly managed by Petrobras Holding, while others are hired at our wholly-owned
subsidiary Petrobras Transporte (Transpetro).
2017 Operational Highlights
The increase in the efficiency of the programming and
usage of vessels allowed a 5% reduction in the fleet size,
as well as a 16% reduction in cost per ton-mile.
VOLUME MOVED AT
TERMINALS AND PIPELINES
(MILLION M3)
The deployment of ship-to-ship oil transfer operations
in Angra dos Reis and São Sebastião provided greater
efficiency in the oil export operations.
The 5% decrease in the movement of products in
terminals and pipelines operated by Transpetro in
2017 reflected the increase of oil product imports by
third parties, reducing our participation in the supply
of the domestic market, which resulted in lower loads
processed in our refineries.
2015
2016
2017
638
603
572
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Marketing
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
84
S From the total supply
E
C
of oil products,
R
U
O
S
N
A
M
1.8
million bbl/day
come from
the production
of our refineries
I
181
thousand bbl/day
were imported
I
N
O
T
P
M
U
S
N
O
C
We sold
OIL PRODUCTS PRODUCTION
(THOUSAND BBL/DAY)
DOMESTIC MARKET SALES
(THOUSAND BBL/DAY)
an average of
1.94
million bbl/day
of oil products for the
domestic market
157
thousand bbl/day
to the foreign market
through agreements
with approximately
400 clients
2,026
1,887
1,800
2,234
2,064
1,940
2015
2016
2017
2015
2016
2017
IMPORT OF OIL PRODUCTS
(THOUSAND BBL/DAY)
256
239
EXPORT OF OIL PRODUCTS
(THOUSAND BBL/DAY)
181
149
155
157
2015
2016
2017
2015
2016
2017
2015
2015
2016
Nota:
As informações por segmento operacional consideram a abrangência de cada segmento, conforme definido em nossas Demonstrações Financeiras.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
85
Marketing
REFINING
LOGISTIC
MARKETING
DISTRIBUTION
The oil products we market come from our refineries and from imports, with approximately 90% are sold in Brazil.
SALE VOLUME OF OIL PRODUCTS IN THE DOMESTIC MARKET BY PRODUCT (THOUSAND BBL/DAY)
2,234
923
553
2,064
1,940
780
545
717
521
232
133 110 104
179
234
186
151
101
67
235
171
134 101
61
2015
2016
2017
Diesel Gasoline LPG Naphta Jet Fuel Fuel oil Other
DIESEL
LPG
JET FUEL
Sales of fuel diesel decreased in 8%, mainly due to the decline
in our market share as a result of the significant increase in
third-party imports. Another factor that explains the decrease
is the increase of biodiesel content from 7% to 8% that took
place in March 2017.
Sales of liquefied petroleum gas (LPG) presented a 0.4%
increase, influenced by the population growth and by
the increase in salaries, as well as the production of the
processing industry, which drove the consumption of this
derivate for residential and industrial use, respectively.
GASOLINE
NAPHTA
The marketing of gasoline presented a 4% decrease. The key
factor was the increase in the volume sold by importers and
petrochemical plants, which displaced part of our sales.
In 2017, Braskem reduced their order for naphta from
Petrobras and increased the imports, reducing the naphtha
sales in 11% in 2017.
The marketing of jet fuel remained at the same level as in
2016, continuing with the network optimization measures
adopted that year by the airlines, as a way to offset the strong
decrease in the demand for trips due to the economic crisis.
FUEL OIL
We observed a 9% decrease in the sales of fuel oil, mainly
due to the lower volume sold to the thermo power plants.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 86
PRICE POLICY
Diesel and Gasoline
In June 2017 we revised the price policy originally
announced in October 2016, to increase the
frequency of price adjustments of diesel and
gasoline sold at our refineries.
We started to make adjustments to the prices, at
any moment, including on a daily basis, as long as
the accumulated adjustments per product are, in the
Brazilian average, within a given range ( -7% to +7%),
respecting the margin established by the Market and
Price Executive Group (GEMP), a committee composed
by the CEO of the company, the Refining and Natural
Gas director and by the Chief Financial and Investor
Relations Officer. In addition, any change outside this
range must be authorized by the GEMP.
The review of the approved policy provides a higher
adherence of the prices in the domestic market to
those in the short-term international market, allowing
us to compete in a faster and more efficient way.
The principles of the price policy approved in October
2016 remain unchanged, considering the international
price parity, margin for compensation of the risks
inherent to the operation and the market share level.
In 2017, we announced the adjustment of sale prices
at the refineries, amounting to 7.7% increases for
gasoline and 11.2% for diesel in comparison to the
prices for December 31, 2016.
Liquefied Petroleum Gas (LPG)
In June 2017, we approved a price policy for
liquefied petroleum gas sold at the refineries and
intended for domestic use in cylinders of up to
13 kg (LPG P13). This policy provided monthly
adjustments calculated by the average price
quotes for butane and propane in the European
market in the previous month, plus 5% margin.
In January 2018, our Executive Board approved a
review to the LPG P13 price policy with the purpose
of smoothing the transfer of the price volatility
taking place in the international market to the
domestic price. Therefore, the adjustments now
take place in a quarterly basis, using the average
prices of butane and propane in the European
market calculated in increasing periods, that will
reach 12 months from the fourth quarter of 2018.
The addition of the 5% margin remained in force.
Additionally, a compensation mechanism has been
established, which will allow the comparison of
prices according to this new policy and the prices
that would be charged according to the previous
policy. The differences accumulated in a year,
adjusted by the Selic rate, will be offset through a
fixed installment to be added to or deducted from
the prices of the following year.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 87
Exports x Imports
NET TRADE BALANCE RESULTS (THOUSAND BBL/DAY)
Our oil exports reached 512 thousand bbl/day, a 32% increase, due mainly to two factors: growth of the
domestic oil production and retraction of the domestic market demand.
Our oil imports totaled 127 thousand bbl/day, a 7% reduction, and oil products imports totaled 181
thousand bpd, a 24% decline. The lower imported volume of oil products was also the consequence of the
domestic market retraction, linked to the larger sale of products in the Brazilian market by third parties.
0
83
-107
251
-84
385
-24
In 2017, we maintained our position of net exporters of oil and oil products. The financial results of our trade
balance, calculated based on the exports and imports of oil and oil products, without including natural gas,
liquefied natural gas (LNG) and nitrogen, presented a surplus of USD 7.3 billion.
Oil Oil products
2015
2016
2017
EXPORTS (THOUSAND BBL/DAY)
IMPORTS (THOUSAND BBL/DAY)
149
360
155
387
157
512
256
277
239
136
181
127
2015
2016
2017
2015
2016
2017
Oil Oil products
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 88
Distribution
REFINING
LOGISTIC
MARKETING
DISTRIBUTION
In the fuel and lubricant distribution, we operate through our subsidiary
MARKET SHARE BY SEGMENT (%)
Petrobras Distribuidora, the largest distributor in Brazil in sales volume*,
which operats in the marketing and distribution of oil products and biofuels
throughout the country, through a network of 8,277 service stations and
5,567 large consumers. We also operate in the chemical, aviation, asphalt and,
56.6
53.0
55.1
45.5
56.4
43.1
energy business segments, and locally, in the State of Espírito Santo, in the
27.6
25.4
24.4
distribution of piped natural gas.
Our interest in the oil products distribution market amounts to 29.9%*, and we
are the leader in the service stations, large consumers and aviation segments,
with 24.4%, 43.1% and 56.4% market share, respectively.
In 2017, Petrobras Distribuidora’s sales volume was 5.7% lower than 2016, with
the sales of diesel, coke, gasoline and ethanol presenting the greatest impact
on the company’s sales volume.
Such a reduction is explained by the greater participation of our competitors in
the market, made possible by importing products at more competitive prices.
In addition, we emphasize the dispatches to thermo power plants, 8.5% less
than the volume traded in the previous year.
In 2017, we held Petrobras Distribuidora’s IPO, which is no longer a wholly
owned subsidiary.
For further information on Petrobras Distribuidora IPO, please refer to Financial Capital.
* Source: Plural/ANP
2015
2016
until sep. 2017
Service Station Large Consumers Aviation
SALES VOLUME OF OIL PRODUCTS IN THE DOMESTIC
MARKET BY PRODUCT (THOUSAND BBL/DAY)
924
373
203
186
90
72
2015
789
744
316
192
165
64
53
2016
296
186
144
65
52
2017
Diesel Gasoline Jet Fuel Fuel oil Other
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
89
In the external market, we operate in the distribution
NATURAL GAS
segment in Colombia, Paraguay and Uruguay, with 113,
192 and 88 service stations, and 4%, 17.7%, and 22.2%
market share, respectively.
NATURAL GAS CHAIN
We also operate in the bottling, distribution and
commercialization of liquefied petroleum gas (LPG)
through the subsidiary Liquigás Distribuidora, which,
in 2017, sold 1.6 million tons of LPG. We are in the
process of selling that company, pursuant to the
strategy of optimizing the business portfolio, leaving
the LPG distribution activity.
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
One of our main strategic objectives in this segment is to maximize the generation of value of the gas chain from the
adequacy of our interest in each link of the production chain. Throught this strategy, we will remain as a relevant player in the
natural gas value chain, serving the market with our supplying portfolio.
For further information on the process of selling
Liquigás, please refer to Financial Capital.
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
Processing of Natural Gas
Natural gas originating from our exploration and production process needs to be treated at processing units in order to be
transformed into marketable products, which will be used as fuel and raw material for different uses, such as in vehicles,
industries, households, in the fertilizer industry and in the generation of thermoelectric power.
Our natural gas processing units are located in Amazonas, Ceará, Rio Grande do Norte, Alagoas, Sergipe, Bahia, Espírito Santo,
Rio de Janeiro, São Paulo and Bolivia, and have the capacity to process natural gas in its gaseous and condensed forms.
In 2017, the average total volume of natural gas processed in Brazil amounted to 71.7 million m³/day, 16% higher than in 2016. After
the processing of natural gas, the main products were 58.2 5 million m³/day of natural gas and 3.8 thousand ton/day of LPG.
Besides the natural gas produced in Brazil, we also receive natural gas from Bolivia through the pipeline, and liquefied natural
gas, imported from other countries in special vessels and re-gasified at terminals in Brazil.
In 2017, the average total volume of natural gas processed in Bolivia amounted to 20.5 million m³/day, 17% lower than in 2016.
5 In addition to the consumer market, part of the volume of processed gas is destined to reinjection in isolated areas and to consumption in the processing units.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 90
From the second quarter of 2017, with the
sale of 90% of the NTS shares to Brookfield
Infrastructure Partners and its affiliates,
we started considering the charges for the
transport services in those pipelines as
operating expenses.
Natural Gas Logistics
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
We use a pipeline network that carries natural gas from the processing plants, regasification terminals, and the
border with Bolivia, taking the product to local distributors and our own units. We hold the following equity interest
on the gas transport companies in Brazil:
OUR INTEREST IN THE NATURAL GAS TRANSPORT SYSTEM IN BRAZIL
Company
Transportadora Brasileira Gasoduto Bolívia Brasil S.A (TBG)
Transportadora Associada de Gás S.A (TAG)
Nova Transportadora do Sudeste S.A (NTS)
Transportadora Sulbrasileira de Gás S.A (TSB)
TOTAL
PIPELINE
EXTENSION
(km)
2,593
4,504
2,043
50
9,190
OUR
EQUITY
INTEREST (%)
51 (via Logigás)
100
10
25 (via Logigás)
-
We also hold indirect interest of 11% at Gas Transboliviano S.A. (GTB), responsible for the Bolivian side of the
Bolivia-Brazil gas pipeline, totaling 557 km..
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 91
GAS FROM PRE-SALT
In order to distribute the natural gas from our production
at the Santos Basin pre-salt area, in addition to using part of the
existing infrastructure, we have invested in the construction of
distribution routes integrated to the processing units, seeking to
optimize the use of the natural gas.
Route 1: 359-km pipeline consisting of two sections:
the Lula-Plataforma de Mexilhão segment and the one connecting the
Mexilhão platform to the Monteiro Lobato Gas Treatment Unit in the
city of Caraguatatuba (SP), with capacity to transport up to 10 million
m3/day of gas produced in the Santos Basin pre-salt.
Route 2: pipeline interconnecting the Santos Basin pre-salt to the
Cabiúnas Processing Asset in the city of Macaé (RJ), with 401 km and
initial capacity to distribute 13 million m³/ day, and later increased to
16.0 million m3/day, with the deployment of an additional treatment
unit at Cabiúnas Processing Asset. This additional unit, once
completed, will allow the distribution of the additional production for
processing at the Route 3 units at Comperj.
Route 3: gas pipeline connecting the pre-salt to the Natural Gas
Processing Unit located at the Rio de Janeiro Petrochemical Complex
(Comperj) in Itaboraí (RJ), for the distribution of up to 18 million m3/
day. This pipeline will be355 km long, of which 307 km will be at sea
and 48 km inland. The Natural Gas Processing Unit will have two units
with total capacity for processing 21 million m³/ day of natural gas,
which will increase the supply of natural gas, LPG and natural gasoline
(C5+) to the market. Route 3 is scheduled to start operating in 2020.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Marketing
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
92
S Total offer
E
C
natural gas
R
U
O
S
53.7
million m³/day
originated from
national production
5.0
million m³/day
liquefied natural gas
(LNG) were subject
to regasification at
the LNG terminals in
Pecém (CE), at Baía
de Guanabara (Rio
de Janeiro) and in
Bahia (BA)
24.0
million m³/day
were imported
from Bolivia
I
N
O
T
P
M
U
S
N
O
C
We supply,
We sell
The average of
82.7
million m³/day
natural gas
25.7
million m³/day
for the internal
consumption of
our units
57.0
million m³/day
to the market
through
45 agreements
with
19 distribution
companies,
both for the thermoelectric
segment, as for the non-
thermal segment, including
cogeneration units.
Additionally, we serve two
free consumers and one
other consumer forced
by judicial injuction, who
purchase directly from
Petrobras
Total volume
delivered
We delivered
29.2
million m³/day
to the thermoelectric market
OFFER OF NATURAL GAS (MILLION M3/DAY)
95
18
32
45
76
4
28
44
83
5
24
54
15.4
million m³/day
to the refining units and
fertilizer manufacturers
36.7
million m³/day
to the gas distributors
for supplying the non-
thermoelectric market
1.4
million m³/day
was consumed by
the natural gas carriers
hired by Petrobras for
the provision of
transport service
2015
2016
2017
National Bolivia NG
DEMANDA DE GÁS NATURADEMAND
FOR NATURAL GAS (MILLION M3/DAY)
95
37
41
15
2
2015
76
35
24
15
2
2016
83
37
29
15
2
2017
System gas Refineries Thermo-electric power-plant
Non-thermo-electric
2016
Nota:
As informações por segmento operacional consideram a abrangência de cada segmento, conforme definido em nossas Demonstrações Financeiras.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
93
Natural Gas Distribution
PROCESSING
LOGISTICS
MARKETING
DISTRIBUTION
NATURAL GAS DISTRIBUTORS
NATURAL GAS VOLUME SOLD AND NUMBER OF CLIENTS
2015
2016
2017
The distributors provide gas through their distribution networks to commercial establishments, households,
BRAZIL1
industries, vehicles and thermal power plants. This is how the end customer receives natural gas.
Number of clients (thousands)
298
351
402
We operate in Brazil and Uruguay in the natural gas distribution business.
In Brazil, we are controllers, with 51% stake of Petrobras Gás (Gaspetro), a holding that consolidates our equity
interests in 19 of the 27 state distributors of natural gas. Additionally, Petrobras Distribuidora operates the natural
gas distribution in the State of Espírito Santo.
In Uruguay, through Petrobras Uruguay S.A de Inversión, we have equity interest in two companies in the natural
gas distribution business, which are responsible for distribution throughout the Uruguayan territory.
Volume (million m3/d)
29
21
24
URUGUAY
Number of clients (thousands)
59
59
59
Volume (million m3/d)
0.16
0.18
0.16
1 Distributors with Gaspetro interest
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 94
ELECTRICITY
We operate in the generation and sale of electricity with a generating network consisting of 20 thermoelectric power plants,
among owned and rented plants, powered by natural gas, diesel oil or fuel oil, with a total installed capacity of 6,100 MW.
In 2017, upon the storage reduction of the reservoirs supplying the hydro-electric power plants in the National
Interconnected System (SIN), a result of the unfavorable hydrological scenario observed throughout the year, the
thermoelectric dispatch of our plants increased, mainly in the second half of the year, presenting an increase of
41% in 2017.
We also have generating plants using renewable sources and minority stakes in other projects, which add approximately
325 MW to our power generation capacity.
The electricity market segment in Brazil involves the Free Marketing Environment (ACL) and the Regulated Marketing
Environment (ACR).
SALE AND GENERATION OF ELECTRICITY
Electricity Sales (ACL) – average MW
Electricity Sales (ACR) – average MW
Electricity Generation – average MW
2015
858
3,160
4,646
2016
835
3,172
2,252
2017
788
3,058
3,165
The sales of electricity in ACR decreased in
average 114 MW due to the termination of the
agreements from the 15th Auction of Existing
Energy, an auction category aimed supplying
the distributors with energy originated
from ongoing projects.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES OTHER SEGMENTS
We are also present in the petrochemical industry, in the production of biofuels and fertilizers. However, since our
strategy focus on oil and gas, in order to optimize the business portfolio, we are leaving these activities until 2022.
However, we will continue investing in the research and development of these areas, so as to enable our future
operation in these segments, after our financial situation improves.
Petrochemicals
Our operation in the petrochemical sector takes place through interest in the following companies:
EQUITY INTERESTS IN THE PETROCHEMICAL INDUSTRY
95
Braskem S.A. Shareholders’ Agreement is under
negotiation of terms and conditions, aiming to
improve the corporate governance of that company,
and, together with the other business strategies,
create value for all its shareholders. The negotiation
with Odebrecht S.A has evolved to studies with the
purpose of carrying out a corporate reorganization
with the unification of Braskem’s shares. However,
PRODUCT
EQUITY (%)
those studies are still in the preliminary stage.
COMPANY
Braskem S.A
Deten Química S.A
Ethylene, polyethylene, polypropylene and PVC
Raw materials for detergents: linear alkyl benzene (LAB),
linear alkyl benzene sulfonic acid (LAS), heavy alkylated (ALP)
Metanor S.A/Copenor S.A
Methanol, formaldehyde and hexamine
Fábrica Carioca de Catalisadores
Catalysts and additives
Petrocoque S.A
Calcined petroleum coke
Companhia Petroquímica de Pernambuco
(PetroquímicaSuape)
Purified terephthalic acid (PTA)
Companhia Integrada Têxtil de Pernambuco
(Citepe)
PET resin (polyethylene terephthalate)
and polyester filaments
36.2
27.88
34.54
50
50
100
100
In February 2018, the Court of the Administrative
Council for Economic Defense (Cade) approved the
sale of Companhia Petroquimica de Pernambuco
(PetroquímicaSuape) and Companhia Integrada
Textil de Pernambuco (Citepe), both Petrobras
wholly-owned subsidiaries, to Alpek, through the
signing of a Merger Control Agreement (ACC).
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 96
Fertilizers
Biofuels
BIOFUEL PRODUCTION (THOUSAND M3)
We currently have three plants located in the States of
Bahia, Sergipe and Paraná, which jointly have the installed
capacity for the production of 1.852 million ton/year of
urea, 1.406 million ton/year of ammonia, 300,000 ton/year
of ammonium sulphate, and 800,000 ton/year of ARLA-
32. The plants produce mainly ammonia and urea.
We operate in the production of biodiesel and ethanol
through our wholly owned subsidiary Petrobras
Biocombustível, which manages our operation in the
production, logistics and marketing of these products.
BIOFUEL ASSETS
1,182
1,152
679
690
678
FERTILIZER PRODUCTION (THOUSAND TONS)
CANDEIAS
EQUITY
CAPACITY/YEAR
98
2015
2016
2017
AMMONIA
BA
UREA
322
435
354
372
418
308
399
AMMONIA
253
137
PA
UREA
AMMONIA
UREA
SE
609
370
185
372
388
291
508
524
374
Biodiesel Production
100%
217,000 m3
MONTES CLAROS
Biodiesel Etanol
Biodiesel Production
100%
152,000 m3
QUIXADÁ1
Biodiesel Production
100%
109,000 m3
BSBIOS MARIALVA
Considers 100% of the volume of affiliated companies;
Ethanol considers the sum of anhydrous and hydrated ethanol.
Biodiesel Production
50%
288,000 m3
In 2017, we completed the sale of our entire equity at
BSBIOS PASSOFUNDO
Biodiesel Production
50%
288,000 m3
PROJETO BELÉM
Cultivation and Crushing
of Palm
BIOÓLEO
Processing and Refining
of vegetable oils
50%
2015
2016
2017
Extraction
130,000
ton/year grains
Refining
54,000 ton/year
50%
42,000 ha
Petrobras Biocombustível sold the São Martinho S.A.
Petrobras Biocombustível in Guarani to Tereos and the
exchange of shares of Nova Fronteira Bioenergia for
shares at São Martinho S.A. as part of the divestment
process. In February 2018, through auction at B3,
(SMTO3) shares held by the company. With that sale, our
equity of 6.593% in the share capital of São Martinho S.A.
was terminated.
We started the process of selling Araucária Nitrogenados
BAMBUÍ
S.A (Ansa), which operates in Araucária (PR), and the
Ethanol production
8,4%
211,000 m3
Fertilizer Unit – III (UFN-III), whose plant in Três Lagoas
(MS) is 81% complete.
1 The Quixadá plant had its operations closed in November 2016 and is
currently in hibernation.
For further information on partnerships and divestments,
please refer to Financial Capital.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
97
Consolidated
Financial Performance
We presented improvement in our operating profit in the year,
caused by the rise in the Brent, as well as in the volume and margin
of oil exports and the increased sales of natural gas, reduction of
personnel expenses, lower expenses with the write-off of dry and/or
sub-commercial wells and equipment idleness, as well as gains with
the sale of Nova Transportadora do Sudeste S.A. (NTS) and expressive
decrease of impairment and depreciation. On the other hand, there
was a decrease in the volume of oil products in the domestic market
and higher production taxes. Those factors resulted in an operating
profit of BRL 35,624 million, 108% greater than 2016.
During 2017, aiming at eliminating litigation risks and uncertainties,
we signed a settlement agreement related to the class action, in the
amount of BRL 11,198 million (including taxes), and we joined four
Brazilian federal settlement programs which affected our results,
generating a loss of BRL 446 million.
The Brazilian federal settlement programs have also affected the
net financial expenses; however, they were offset by the reduction
in the interest expenses, allowed by the active liability management,
which provided the reduction of both the amount and its cost of
debt. However, the greater depreciation of the US dollar against
the Pound and Euro during the period led to a worsening of the net
finance expense, totaling an expense of BRL 31,599 millions.
Free Cash Flow increased by 6%, reflecting the reduction in investments.
GROSS PROFIT (BRL MILLION)
OPERATING PROFIT (LOSS) (BRL MILLION)
98,576
89,978
91,595
35,624
17,111
2015
2016
2017
-12,391
2015
2016
2017
NET RESULT – PETROBRAS
SHAREHOLDERS (BRL MILLION)
FREE CASH FLOW (BRL MILLION)
2015
2016
2017
15,889
41,572
44,064
-446
-14,824
-34,836
2015
2016
2017
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES ADJUSTED EBITDA
The Adjusted Ebitda decreased 14%, to BRL 76,557
million, mainly due to the provision of BRL 11,198
million for the payment of the agreement to terminate
the class action and the Brazilian federal settlement
programs entered throughout 2017. The Adjusted
Ebitda margin was 27% in 2017.
ADJUSTED EBITDA (BRL MILLION)
76,752
76,557
88,693
2015
2016
2017
For further information on indebtedness and impairment,
please refer to Financial and Productive Capital, respectively.
98
ADJUSTED EBITDA RECONCILIATION (BRL MILLION)
Net Income (Losses)
Net Financial Income
Income Tax and social contribution
Depreciation, depletion and amortization
EBITDA
Results of investment participations
Reversal/Loss in the value of asset recovery – Impairment
Execution of accumulated conversion adjustments – CTA
Result with disposals/write-off of assets1
ADJUSTED EBITDA
Adjusted Ebitda Margin (%)
2017
377
31,599
5,797
42,478
80,251
(2,149)
3,862
116
(5,523)
76,557
27
2016
2017 x 2016 (%)
(13,045)
27,185
2,342
48,543
65,025
629
20,297
3,693
(951)
88,693
31
103
16
148
(12)
23
(442)
(81)
(97)
(481)
(14)
(4)
1 Includes the results with the disposal and write-off of assets and gains/losses of remeasurement – equity interests.
The Ebitda (Earnings Before Interest, Taxes, Depreciation and Amortization) is an indicator calculated as the
net profit for the period plus plus income taxe, net financial income (expense), depreciation, depletion and
amortization. We disclose the Ebitda, as provides in CVM Instruction No. 527 dated of October 4, 2012.
In order to reflect the vision of the managers regarding the formation of the result from the company’s
current activities, the Ebitda is also presented in its adjusted form (Adjusted Ebitda) through the results in
equity-accounted investments, impairment, cumulative foreign exchange adjustments reclassified to the
income statement and results from divestments and write-off of assets.
Ebitda and Adjusted Ebitda are not provided in the International Financial Reporting Standards (IFRS), and
should not be used as a comparison with the data disclosed by other companies, nor should it be considered
a substitute to any other measurement calculated according to IFRS. Those measures should be considered
together with other measures and indicators for a better understanding of the company’s performance and
financial condition.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 99
Strategic
Planning
100
2018-2022 Business
and Management Plan
103
Management System:
Evolution Project
108
STRATEGIES
AND PERSPECTIVES
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 100
Strategic
Planning
UNCERTAINTIES AND LONG-TERM SCENARIOS
Simultaneously, the growing social perception on
the risks of climate change favoured the Paris
The energy industries are facing a confluence of forces
Agreement, negotiated during COP-21 and intensified
that seem to point towards important transformations.
the demand for services with reduced emissions impact,
The development and dissemination of new
whether by replacement by renewable sources or permanent
Technological innovations, regulation advancement and
technologies have been favoring supply expansion
improvement in energy efficiency.
the adoption of new strategies by the companies point
and energy price reductions. With the 2014 decline in
to an energy transition period towards a low-carbon-
based economy. The scope and pace of such changes are
still uncertain. Likewise, it is not evident which business
models will predominate in that new environment. These
issues not only make long-term strategic planning even
more complex, but also reinforce their importance for the
resilience of companies in this context of great challenges.
oil prices, the industry’s reaction was to cut costs and
To better handle this high degree of uncertainty, we are
postpone investments, considerably changing the
improving our scenarios methodology. Based on the scenarios
competitiveness conditions of this market.
that are elaborated our assumptions used for an analysis of
investment projects and quantification of our strategic and
On another front, advances in wind and solar generation
business plans. The marine universe was our inspiration to
technologies and energy storage, as well as the
name our scenarios, an environment where we have developed
dissemination of distributed generation and smart grids are
our history and where we concentrate our activities.
reconfiguring the electricity production and consumption.
STREAM
SHOAL
CORAL
A world of great economic growth, but still houses
Local issues dominate the political agenda. Changes
The energy transition gains strength with a broader
many social and resource conflicts. It presents
in society’s values drive important transformation in
perception of the risks of climate change. Binding
distinct trends for the energy matrices of developed
the mobility of major urban areas. Each region seeks
global agreements, innovations directed to the
and emerging countries.
its own solutions to decarbonize its energy matrix.
environment and society’s changes in behavior
interact to foster the transition
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
STRATEGIC MONITORING
We approved our Strategic Plan in 2016, highlighting our vision and its five fundamental principles that define what we
want to be, and also the 21 strategies linked to these principles.
As a result of the continuous process of strategic monitoring, in December 2017 our Board of Directors approved the
changes proposed in the set of strategies established in the Strategic Plan approved in 2016, resulting in a total of 20
strategies and 78 corresponding initiatives. Each initiative, in turn, has systematic monitoring features, to ensure discipline
in its execution.
INTEGRATED VISION AND STRATEGIES MAP
OUR
VISION
THE 5
FUNDAMENTAL
PRINCIPLES OF
THE VISION
20
STRATEGIES
“An integrated energy company focused on oil and gas that evolves with society,
creating high value with unique technical capability"
EFFICIENT
INTEGRATION
ENERGY, FOCUSED
ON OIL AND GAS
EVOLVING WITH
SOCIETY
COMPANY
DETERMINED TO
GENERATE VALUE
TECHNICAL
CAPABILITY
Active portfolio
management
Restructuring of
the electric energy
business
Exploratory portfolio
E&P Portfolio projects
Exit non-core business
Maximization of
gas value
Strengthening of
governance
Recovery of
credibility
Low carbon
economy
Digital
transformation
Technological
skills
Deepwater
production
development
Low breakeven
price projects
Disciplined use
of capital
Optimize
productivity
and costs
Procurement
focused on value
Meritocracy
Reserves
incorporation
Pricing policy
Financial and
risk management
78
INITIATIVES
9
12
18
32
7
101
As shown in the Integrated
Map, our set of strategies
supports the five fundamental
principles of our Vision:
efficient integration; energy,
focused on oil and gas;
evolving with society; company
determined to generate value;
and technical capability.
For more information on the 20 strategies,
see the Reference Form (item 10.8), available
on our website: www.investidorpetrobras.com.br/en
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
102
In addition to the changes made to the set of existing
strategies, we introduced three new strategies:
(1) Low Carbon Economy: prepare the company for a
future based on low carbon economy, developing actions
to reduce greenhouse gas emissions from our production
processes; invest and promote new technologies to
mitigate the impact of climate change; develop high value
business in renewable energy from our technological skills
and new business models.
(2) Digital Transformation: capture the opportunities
created by digital transformation, applying new
technologies to our processes and/or generating new
processes or new business.
(3) Financial and Risk Management: optimize our
financial and risk management, to improve financial
planning and assessment of cash flow uncertainties,
increasing safety while fulfilling our objectives and targets
defined in the Business and Management Plan.
For more information on the new strategies (1 and 2),
see Sustainability 2017.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Business and
Management
Plan 2018-2022
Our 2018-2022 Business and Management Plan
(2018-2022 BMP) remains focused on safety
and reducing financial leverage, the two major
metrics already defined in the 2017-2021 BMP6.
These metrics guide our strategic actions and are
unfolded at all organizational levels.
103
SAFETY
FINANCIAL
ADVANCED 2 YEARS
1.0 IN 2018
MAINTAINED
2.5 IN 2018
TOTAL RECORDABLE INJURY (TRI)
NET DEBT/ADJUSTED EBITDA
TOTAL RECORDABLE INJURY FREQUENCY RATE (TRI)
NET DEBT/ADJUSTED EBITDA
PERFORMED
PERFORMED
PERFORMED
PERFORMED
2.2
2015
1.1
2017
1.0
in 2018
5.1
2015
3.7
2017
2.5
in 2018
50% REDUCTION
28% REDUCTION
The safety metric considers the Total Recordable Injury
frequency rate recorded per million men-hours (TRI), a metric
widely used in the oil and gas industry. This metric’s limit
in 2018 was changed from 1.4 to 1.0 due to deployment of
the Commitment to Life Program in 2017, which had 100%
of its actions completed, contributing to a TRI reduction of
approximately 50%, which dropped from 2.15 in 2015 to 1.08 in
2017. The new 2017-2018 cycle of the program includes actions
based on process safety that follow principles and guidelines
that also cover the Environment and Health dimensions.
The financial indicator continues to be the Net Debt/
adjusted EBITDA, with a target of 2.5 in December 2018. The
objective is for the indicator to decline and converge by 2022
with the global average of the main oil and gas companies
rated as investment grade.
6 2017-2021 BMP defined two major metrics, one in safety and another
in finance, which guide the company’s strategy: (i) reduce the Recordable
Injury Frequency Rate by 36%, from 2.2 in 2015 to 1.0 in 2018; and (ii) reduce
leverage (Net Debt/Adjusted EBITDA) from 5.11 in 2015 to 2.5 by 2018.
See Safety for further information.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Our 2018-2022 BMP includes four value generation
pillars: competitive prices, investment efficiency
(capex), operational expenditure efficiency (opex),
and partnerships and divestments program. Safety,
cultural transformation and the management
system are imperatives that support the actions on
these four fronts.
For further information an safety and cultural transformation,
see Safety and Human Capital, respectively. And for more
information on the management system, see the Management
System item: Evolution Project
104
N
TNERS HIP A
DISIVEST M E
R
A
P
N
N
S AFETY
CO
P
M
P
E
D
S
T
R
I
C
T
I
T
I
E
V
E
EVOLUTION
TIO
A
M
R
O
F
S
N
M
A
N
A
G
E
M
E
N
T S
Y
STEM
F
E
CAPEX
FICIENCY
A
R
T
L
A
R
U
Y
C
N
E
X
E
P
I
FIC
F
E
O
T
L
U
C
Competitive prices: Competitive pricing: in June
2017, we approved the revision of the pricing policy
The new policy’s application will allow, throughout
the 2018-2022 BMP horizon, greater adherence os
for diesel and gasoline marketed in our refineries,
domestic prices to the international market, as well as
aiming to increase price adjustment frequency. The
provide better competitive conditions, in order to reach
principles of the pricing policy approved in October
the company’s optimal market share.
2016 remain unchanged in this revision, considering
the international price parity (IPP), margin for
compensation of the risks inherent to the operation
and the market share level.
For more information on our pricing policy,
see Business Performance.
ASSUMPTIONS OF THE 2018-2022 BMP
The Brent price of oil and the exchange rate are
among the main assumptions that impact our
business. We consider the following variables
in our 2018-2022 BMP:
BRENT PRICES (USD/BARREL)
70
73
66
58
53
53
46
2016 2017 2018 2019 2020 2021 2022
Forecast Range
NOMINAL EXCHANGE RATE (USD/BARREL)
3.69
3.62
3.80
3.48
3.55
3.44
3.17
2016 2017 2018 2019 2020 2021 2022
Focus Interval (11/03/17)
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
105
Investment efficiency (capex): the investment portfolio of the 2018-2022 BMP maintains the same level of
investments with respect to the 2017-2021 BMP and continues to prioritize oil exploration and production
projects in Brazil. In other business areas, investments are intended primarily to maintain operations and
projects related to the flow of oil and natural gas production and are distributed according to the following
charts:
2018-2022 INVESTMENTS (%)
1
18
74.5
(USD billion)
81
Exploration and production (E&P)
Refining and natural gas (RGN)
Other areas
2018-2022 INVESTMENTS E&P (%)
2018-2022 INVESTMENTS RGN (%)
11
12
60.3
(USD billion)
77
6
28
13.1
(USD billion)
66
Production development
Infrastructure + Research and development
Exploration
Refining, transportation and marketing
Natural gas and energy
Distribution and biofuels
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES OIL, NGL AND NATURAL GAS PRODUCTION CURVE
With 19 new production systems coming online between 2018 and 2022, we expect to reach a total oil and
gas production, in Brazil and abroad, of 3.5 million barrels of oil equivalent per day (boed) in 2022, with 2.9
million barrels per day (bpd) of oil and natural gas liquids (NGL) in Brazil, already considering the investments,
partnerships and divestments.
19 NEW PRODUCTION SYSTEMS COMING ONLINE BY 2022
PRODUCTION OF OIL, NGL AND GAS
(MILLIONS OF BOED)
TARTARUGAS VERDE
E MESTIÇA
EGINA
Egina FPSO
BÚZIOS 1
P-74
BÚZIOS 2
P-75
BÚZIOS 3
P-76
LULA NORTE
P-67
BERBIGÃO
P-68
LULA EXTREMO
SUL P-69
ATAPU 1
P-70
BÚZIOS 4
P-77
2.7
2.6
2.1
REVIT. DE
MARLIM MÓD. 1
REVIT. DE
MARLIM MÓD. 2
MERO 1
INTEGRADO PARQUE
DAS BALEIAS
SERGIPE-ÁGUAS
PROFUNDAS
BÚZIOS 5
MERO 2
SÉPIA
ITAPU
106
3.5
3.4
2.9
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Post-salt Pre-salt (Concession)
Assignment Agreement Product Sharing
Oil + Gas abroad Gas Brazil Oil Brazil
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 107
Operational expenditure efficiency (opex): we continue
our efforts to identify opportunities to optimize opex,
foreseeing a total expenditure of USD 394 billion by 2022,
including USD 57 billion in government equity, which
reflects the magnitude of the company’s impact on the
country’s economy.
Of that total, provision of USD 137 billion is made for
manageable operational expenditures, which include the
greatest potential for improvements in cost management. Our
actions are concentrated on reducing extraction costs, from
USD 11.0 per barrel in 2017 to USD 9.9 per barrel (average of
the 2018-2022 BMP), as well as refining cost improvements to
OPEX 2018-2022 (USD BILLION)
10
3%
57
14%
59
15%
394
(USD BILLION)
137
35%
131
33%
USD 2.6 per barrel (average of the 2018-2022 BMP) compared
Manageable operational expenses Purchase of feedstock
to USD 2.9 per barrel, level attained in 2017.
Depreciation Government take Other
Partnerships and divestments: for the 2017-2018
biennium, the target is to reach USD 21 billion, to obtain
additional resources to support our investment program.
For further information on partnerships and divestments, see
Social and Relationship Capital and Finance, respectively.
These initiatives, associated with operational cash flow
generation, after dividends, estimated at USD 141.5 billion,
from 2018 to 2022, will allow us to make our investments and
reduce our debt (interest and amortization payments), with the
need for new net borrowing during the Plan. The following chart
presents the sources and uses of the 2018-2022 BMP:
MANAGEABLE OPERATIONAL EXPENSES
2018-2022 (USD BILLION)
11.7
EXTRACTION COST (USD/BBL)
11.0
9.9
136.8
(USD BILLION)
62.2
62.9
Refining and natural gas Exploration and production Corporate
2017
2018-2022**
REFINING COSTS* (USD/BBL)
2.9
2.6
2017
2018-2022**
*Brazil ** Average of the 2018-2022 BMP
2018-2022 SOURCES AND USES (USD/BBL)
162.5
162.5
21.0
141.5
74.5
54.2
25.7
8.1
USES
SOURCES
Cash Buildup Financial expenses Amortizations
Investments Operational generation (after dividends)
Partnerships and divestments
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Management System:
Evolution Project
The Evolution Project was created to monitor the delivery of the main targets
and progress of the strategic initiatives foreseen in the Strategic Plan, for the
purpose of developing the Management System.
To that end, the Evolution Project distributed the goals throughout the
management body and, by applying PDCA (Plan, Do, Check, Act) processes
and standards, deployed a governance and monitoring system, which
considers the control and capture process of the results and holds meetings
in which deviations are handled, once the root causes are identified and
recovery plans are proposed.
The strategic initiatives and the main indicator targets are tracked monthly
in the different thematic subcommittees, comprised of executive managers.
The Evolution Project Leadership Committee (CLPE), led by the Director of
Strategy, Organization and Management System, assesses the top indicators
on a weekly basis and the deviations that arise throughout the cycle,
recommending specific studies and actions when required. The closing of
each tracking cycle occurs during the monthly Managing Committee meeting,
when the members of the CLPE present the results of their assessments to
senior management (CEO and directors).
The system deployed therefore ensures the appropriate disclosure of the
information and any course corrections, with the structured involvement of
the entire corporation.
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Corporate
Governance
110
Ethics
117
Compliance
and Internal
Controls
118
GOVERNANCE AND
COMPLIANCE
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Corporate
Governance
The year 2017 was a year of continuing improvement and
strengthening of our corporate governance mechanisms.
Since 2015, we have announced and implemented a
series of measures to improve our governance and revert
the problems and challenges faced by the Car Wash
Operation. As one of the main actions, we established
a new corporate governance model and created a set of
rules and procedures that seeks to ensure that future
decisions proceed in line with good governance.
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Our corporate governance structure is comprised of: Shareholders’ General Meeting, Fiscal Council, Board of
Directors and its committees, Auditing (Internal and External), Ombudsman’s Office, Executive Board and it's
committees, according to the following chart.
Setting
strategies and
monitoring its
execution.
Proposal and
execution of
strategies.
Management and
supervision of
operations.
SHAREHOLDERS’
GENERAL MEETING
FISCAL COUNCIL
BOARD OF
DIRECTORS
BOARD OF DIRECTORS COMMITTEES
A
D
B
E
C
F
AUDITING
OMBUDSMAN
CEO
EXECUTIVE
BOARD
EXECUTIVE OFFICERS
TECHNICAL
STATUTORY
COMMITTEES
1
5
2
6
3
7
4
8
ADVISORY
OR DELIBERATIVE
COMMITTEES*
BOARD OF DIRECTORS COMMITTEES:
A Strategic
B Finance
C Audit
D Health, Safety and Environment
E Nomination, Compensation and Succession
F Minority
TECHNICAL STATUTORY COMMITTEES:
1 Production and Technology Development
2 Exploration and Production
3 Refining and Natural Gas
4 Financial and Investor Relations
5 Corporate Affairs
6 Governance and Compliance
7 Strategy, Organization and Management System
8
Investments and Divestment
We also rely on a Special Investigation Committee, of an
independent nature and that reports directly to the Board
of Directors. Comprised of three members, two of which are
external, independent and with renowned technical knowledge,
and our Executive Director of Governance and Compliance,
this committee operates as spokesperson in the independent
investigations regarding the implication of the Car Wash
Operation. The recommendation of this Committee, since its
creation in December 2014, have allowed for the improvement
*THE EXECUTIVE BOARD MAY CREATE ADVISORY OR DELIBERATIVE
COMMITTEES ACCORDING TO THE RELEVANCE OF TOPICS AND SUBJECTS.
of our processes.
For more information on the Board of Directors and Executive Board
committees, see the following item on our website: Corporate Governance/
Governance Bodies/Committees
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We have been promoting strengthening actions for our governance, to establish better practices aligned with our
strategy and in compliance with the requirements of new governance regulations adopted by the company (Law
No. 13.303/2016, Decree No. 8.945/2016, Corporate Governance Program for State-Owned Companies of B3 and
request for joining the special listing segment Level 2 of Corporate Governance of B3.
112
Revision of the
governance
model and
organizational
management,
with the definition
of our new
organizational
structure
Structuring
of the new
Governance, Risk
and Compliance
(GRC) Area
Collegiate
decisions
replacing
individual ones
Revision of
the Bylaws
Creation of
five Statutory
Committees
linked to
the Board of
Directors
Increased
level of
accountability
for our
managers
Revision of the
competence
limits of the
Board of
Directors
and of the
Executive
Board
Approval
of the Training
and Qualification
Program in
Corporate
Governance
Creation of
Technical
Statutory
Committees
to assist the
Executive Board
Disclosure
of corporate
governance
instruments on
our website
Installation of
the Statutory
Audit
Committee
(CAE)
Revision of the
Code of Best
Practices
Creation of
Executive
Committees of a
deliberative
and/or advisory
nature
Creation
of the Minority
Committee
Revision of
the Bylaws
Publication
of the Annual
Letter of Public
Policies and
Corporate
Governance 2016
Revision of
the Corporate
Governance
Guidelines
Approval of
the position of
Deputy Officer
of Governance
and Compliance
Administrator
Training
Program
Revision of
the Code of
Best Practice
Revision
of the
Bylaws
Provision of
Distance Voting
Certification in
the Corporate
Governance
Program for
State-Owned
Companies of B3
Request for
joining the
special listing
segment Level
2 of Corporate
Governance of B3
Obtain the
Governance Seal
IG-SEST Level 1
for state-owned
companies
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The review of the Bylaws, publication of the Annual
Letter of Public Policies and Corporate Governance,
• Public interest: the Bylaws now foresee, in a clear and
transparent manner, that our activities may be guided
Distance Voting
implementation of Distance Voting and the Regulations on
by the Federal Government to contribute to the public
Contract Bidding stand out among the changes in 2017, as
interest that justified our creation. However, if said
well as revisions to some of our policies that make up the
Federal Government guidance leads us to assume
constant search to improve our Code of Best Practices.
obligations and responsibilities in conditions other
Bylaws
The revision of the Bylaws in 2017 included the following
changes, among other points:
• Minority Committee: expansion of this Committee’s
duties, which began to examine and issue opinions on
certain matters, in an advisory and non-binding nature,
and through registration in minutes published in the
Shareholders’ General Meeting Manual.
The holders of preferred shares do not have a right to vote,
but acquire the right to a voice through their representatives
on the Minority Committee.
• Tag along of 100% for preferred shares: inclusion of
clauses that ensure the concession of 100% tag along
for preferred shares, under the same conditions granted
to common shares, in addition to rules for public offering
of shares acquisition.
than those of any other corporation of the private
sector operating in the same market, they must be
defined in law or regulations and have their costs and
revenue broken down and published. In addition the
Federal Government must reimburse us, each fiscal
year, for the difference between the market conditions
and the operating result or economic return of the
undertaken obligation.
• Prohibition of reappointment: the administrators and
audit board members who do not participate in annual
training provided in the last two years may not be
reappointed to the position.
Annual Letter of Public Policies
and Corporate Governance
We published the Annual Letter of Public Policies and
Corporate Governance 2016, intended for the general
public and joining, in a synthetic manner, the main
• Arbitration Proceedings: the provision for arbitration
information regarding commitments to achieve public
proceedings was adapted to the B3 Level 2 regulations,
policy objectives, activities performed, control structure,
except for disputes or controversies regarding Petrobras
economic-financial data, risk factors, policies and
activities based on Article 1 of Law No. 9,478, dated
corporate governance practices and a description of our
August 06, 1997, and subject to the provisions of our
administration’s composition and compensation.
Bylaws, with respect to the public interest that justified
its creation, as well as to disputes or controversies
involving unavailable rights.
Our Bylaws and Annual Leter of Public Policies
and Corporate Governance are available on
our website: www.investidorpetrobras.com.br/en
We implemented the distance voting process in 2017
for our shareholders in the Ordinary and Extraordinary
Shareholders’ General Meetings (AGO and AGE,
respectively), which makes it easier for shareholders to
exercise their rights. Distance voting is a CVM requirement
for general shareholders’ meetings where members of the
board of directors and fiscal council are elected. However, to
stimulate our shareholders’ participation, we expanded this
option to all AGO and AGE votes.
Bidding and Contract Regulation
To govern the general bidding standards and attend to the
requirements of Law No. 13.303/2016, we published our
Bidding and Contracts Regulation in January 2018. The
document presents the new ways of hiring, the steps to be
taken in bidding processes, contract management and the
ancillary procedures, including supplier registration.
One of the main themes addressed by the new legislation
addresses hiring regulations, with changes and innovations
regarding the regulations in force to that point. The law
determines that all hiring must be performed, as a rule,
through public bidding, which means it will be open to any
interested party that has conditions to fulfill the bidding
notice. This new feature broadens the participation of
suppliers and makes our processes more transparent.
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• Petrobras' Dividend Distribution Policy;
RECOGNITION OF OUR PROGRESS
The regulation is being expanded in a progressive
manner, by organizational units, since February 2018.
To present the changes brought by Law No.13.303/2016,
we launched the New Hiring Rules website, accessed at:
http://contratacao.petrobras.com.br/en
Petrobras Code of Best Practices
• Communication Policy; and
• Petrobras’ Related Party Transactions Policy.
In compliance with the State-Owned Companies Law, the
Corporate Governance Program for State-Owned Companies
of B3 and the new CVM instructions, we made changes to the
following policies in 2017: Relevant Act or Fact Disclosure and
Our Code of Best Practices joins the main
Negotiation of Securities Policy; Business Risk Management
governance policies:
Policy; Appointment Policy; and Related Party Transactions
• Relevant Act or Fact Disclosure and Negotiation of
Policy. Changes were made to the latter on the provision for
Securities Policy;
• Appointment Policy for Members of the Audit
Committee, Board of Directors, Executive Office and
officers in the general structure of Petrobras and
Petrobras System Companies;
• Corporate Policy;
• Business Risk Management Policy;
performing prior analysis of a set of transactions on the part
of the Statutory Audit Committee, in situations where prior
analysis by the Minority Committee is also required, under the
criteria of materiality of the transactions and, in accordance
with the provisions of the State-Owned Companies Law,
the provision for at least an annual revision of this policy
was included.
Our advances in governance, reaffirming our
commitment to continuous governance improvement and
alignment to best market practices, are bringing results:
• we received certification in the "Corporate Governance
Program for State-Owned Companies of B3 and
created for the purpose of encouraging state-owned
companies to improve their corporate governance
practices and structures.
• we obtained full marks (10) in the Governance Indicator
(IG-SEST), prepared by the Secretariat of Coordination
and Governance of State-Owned Companies (Sest).
With this result, we attained Level 1 Sest governance.
• we approved changes to our Bylaws in the Shareholders’
General Meeting for membership in the special listing
segment Level 2 of Corporate Governance of B3. We
forwarded a formal request to B3 for membership in
the referred listing segment and, if approved, we will
• Policy and Guidelines of the Ombudsman Function
for the Petrobras System;
Our Policies are available on the website: www.investidorpetrobras.
com.br/en/corporate-governance/governance-instruments/code-best-
practices-and-associated-policies
sign, along with the Federal Government, as controlling
shareholder, the Level 2 participation agreement.
“SIMPLIFY PETROBRAS” PROGRAM
The purpose of the “Simplify Petrobras” Program is to reduce red tape and provide agility in decision-making,
without compromising compliance and security. Its expected result is an increase in productivity by simplifying
processes. It is made up of projects in different areas, wherein the scope of each one is defined after extensive
diagnostics with leaders and employees. Its governance consists of a Management Committee, which is the
guidance and decision-making instance. Through December 2017, the Program contributed to simplifying
more than 100 processes, whose benefits include reduction of procedural time limits and of costs with
redundant systems, scanning and automation of reports, with less document printing, and incresing decision
making agility.
These initiatives help perpetuate the advances made in
our corporate governance.
See Intellectual Capital for other references to
our governance improvements.
For further information on Corporate Governance, access our
website: Governança Corporativa/Instrumentos de Governança.
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115
OPERATION CAR WASH (LAVA JATO)
We do not tolerate any form of corruption and
participation in new bidding processes and
consider any illegal acts involving our employees
from signing new contracts with us. On a case
and suppliers inadmissible. We are officially
by case basis, Petrobras can consider again sign
recognized as victims of crimes disclosed in the
contracts with those suppliers who cooperate
Car Wash Operation. For that reason, we are acting
with the investigation of the authorities and
as assistants to the prosecution and an interested
is subjected to the Integrity Due Diligence
party in 49 criminal proceedings filed as a result of
process, which includes verification of the
the Car Wash Operation. We are awaiting approval
existence and application of an effective
of qualification in two more proceedings.
integrity program, based on the parameters set
The purpose of the lawsuits is to charge for
forth in Article 42 of Ordinance No. 8.420/15.
crimes of criminal organization, corruption,
money laundering, bidding fraud, illegal acts of
We have been taking necessary measures
administrative misconduct, among others.
to recover from damage suffered as a result
of these acts, including those related to our
We continue to monitor the investigations
corporate image. That’s why we filed 15 public
and effectively cooperate with the work of the
civil legal actions up to December 2017 for
competent authorities to clarify the facts.
acts of administrative misconduct, including
We presented to the competent authorities the
investigations result in leniency agreements
non-compliance items found in investigation made
with the companies investigated or cooperation
by internal committees instituted to verify possible
agreements with individuals who agree to
irregularities in contracts with service providers.
return funds, we may be entitled to receive
claims for moral damages. Furthermore, as the
For certain companies investigated by the Car
already received, as compensation for incurred
part of these funds. Therefore, we have
Wash Operation, we have relied on precautionary
measures since 2014 that prevent their
damages set forth in leniency and cooperation
agreements, BRL 1,475,586,737.78 up to
December 2017.
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COLLECTIVE ACTION (CLASS ACTION)
AND RELATED PROCEEDINGS
the same judge of the Federal Court of New York, and one
its subsidiaries and the company’s former managers.
was filed in the Federal Court of the Eastern District of
The Foundation claims to represent an unidentified
Between December 2014 and January 2015, five
collective actions (class actions) were filed by
investors against Petrobras before the Federal Court
for the Southern District of New York, in the United
States. These lawsuits were later consolidated into
one collective lawsuit, where the claimants alleged
that Petrobras supposedly reported materially false
information and committed omissions capable of
inducing investors to error.
In January 2018, we signed an agreement to finalize
the class action suit in which we agreed to pay USD
2.95 billion, in two installments of USD 983 million
and a final installment of USD 984 million. The first
installment was paid on March 1, 2018 and the
second installment will be paid within ten days of
final approval by the Federal Court of New York. The
last installment shall be paid (i) within six months of
final approval or (ii) on January 15, 2019, whichever
comes last. The total amount of this agreement was
recognized in our 4Q17 results.
In addition to the consolidated class action suit, 33
individual lawsuits were filed by investors before
Pennsylvania, with allegations similar to those presented
group of investors and demands a legal ruling as to the
in the class action lawsuit. Of this total, we have already
alleged illegality defendants' conduct regarding the
celebrated agreements in 21 individual lawsuits and 13 are
investors that acquired shares and securities issued
still pending. Since the claimants in this individual lawsuits
by Petrobras and its subsidiaries outside the U.S., due
are eligible to participate in the agreement signed in the
to the alleged financial loss suffered as the result of
class action lawsuit, the individual cases may be terminated,
false financial information disclosed by the company,
if they agree with the terms set forth. However, these
supposedly revealed by facts discovered in the Car
individual claimants will also have the option of not joining
Wash Operation.
the class action lawsuit agreement and in this case, such
lawsuits will be maintained.
Given the uncertainties present at this time, it is not
possible to make any safe assessment regarding any
In addition to the amount regarding the class action suit, to
risks related to this dispute. We deny the allegations
reflect the agreements signed with the individual claimants,
made by the Foundation and are strongly defending
as well as negotiations in advanced stage with other
ourselves in this suit.
individual suit claimants, we recognized BRL 1,476 million
in the result throughout the process (BRL 1,215 million of
which was recognized in 2016).
Other related proceedings
Class action lawsuit filed by the investors
Foundation in the Netherlands
In January 2017, Stichting Petrobras Compensation
Foundation filed a class action lawsuit in the Netherlands, in
the District Court of Rotterdam, against Petrobras, some of
We are also part of arbitrations and legal proceedings
in Brazil, which are currently in their initial stages.
These lawsuits were filed by investors that purchased
shares in the B3 and claim losses resulting from the
acts revealed by the Car Wash Operation.
For further information on class action lawsuits and
related proceedings, please refer to
Financial Statements (note 30.4).
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We believe that ethics is a commitment of each
one for the good of all. We are constantly seeking
ethical behavior throughout relations with different
stakeholders through the dissemination of ethical
principles and conduct commitments, among other
references, which regulate the conduct of the workforce.
In December 2017, we reached approximately 96% of
the workforce with training on our Code of Ethics and
Code of Conduct of the Petrobras Group.
Addtionally, in 2017 we providade training on ethics
management for the members of the Board of
Directors, with the participation of members of the
Executive Board.
For further information on ethics, see Sustainability 2017
117
In the Code of Ethics, we present the main ethics principles
(respecting life and all human beings, integrity, truth, honesty,
justice, equality, institutional loyalty, responsibility, diligence,
merit, transparency, legality, impersonality and consistency
between speech and practice) and the conduct commitments
that must be followed by the members of the Board of Directors,
Fiscal Council and Executive Board, as well as our employees,
interns and service providers.
The Code of Conduct is intended for the same target
audience, and introduces the consequences of the Code of
Ethics principles, with behavioral guidelines for situations in
professional life or situations that arise from it.
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PETROBRAS CORRUPTION PREVENTION PROGRAM (PPPC)
• The PPPC is driven by continuous actions on prevention, detection and correction of acts of fraud, corruption
and money laundering.
• Intended for our different stakeholders, such as clients, suppliers, investors, partners, public authorities, own
employees and service provider companies.
• The program has been continuously improved and it adheres to the best market practices and anticorruption
laws, especially Law No. 12.846/2013; to the Foreign Corrupt Practices Act (FCPA), U.S. federal law of 1977; and
to the UK Bribery Act, a British law to fight and prevent corruption of 2010.
Compliance and
Internal Controls
We work to disseminate a compliance culture, in the
prevention, detection and correction of cases of fraud,
corruption and money laundering, in the management
of our internal controls, analysis of the integrity of our
managers and counterparts, seeking to ensure a healthy
environment for our business.
We have a Corporate Compliance Policy, which intends to
describe and disclose the commitments we assume with
respect to the promotion of the highest ethical values
and transparency when conducting business, with zero
tolerance for fraud, corruption and money laundering.
For integration and strengthening of the compliance
initiatives, we use, in addition to the Code of Ethics and
Code of Conduct, the Petrobras Corruption Prevention
Program (PPPC).
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In line with our goal of being a reference in ethics and integrity, we improved initiatives in 2017 to
mitigate the possibility of acts that set aside or violate the existing controls or acts not in compliance with our
internal policies and standards, and with the laws applicable to our operations. All controls are part of a set of new
procedures and actions to improve governance and compliance. The main actions implemented include:
INICIATIVE
DEFINITION
IMPROVEMENTS 2017
Integrity Background
Check (BCI)
Summary of information on the integrity of candidates to
management and senior management positions to support the
manager prior to making a decision.
Additional integrity requirements become mandatory after the
inclusions of the Nomination Policy for members of the boards and
executives in the Bylaws, assessed by the BCI process.
Integrity Due
Diligence (DDI)
Analysis of integrity of the counterpart that allows us to become
aware of and assess integrity risks to which we may be exposed in our
relationships.
It was extended to other stakeholders, such as clients, sponsored
entities and companies interested in divestment processes for
assets and/or corporate equity interests, in strategic and operational
partnerships, in addition to suppliers of goods and services, which have
been analyzed since 2015.
Disciplinary Committee
Created to reinforce our system of consequences, guide,
standardize and monitor the application of disciplinary sanctions in
cases related to fraud or corruption.
Improvement of the committee’s assessment process through a matrix
that captures the accumulated experience of case analysis.
Complaint Channel
Independent channel that provides confidentiality to the
complainant, secrecy and integrity of information, traceability
of the processes and full handling of the complaints.
Revision of the handling and monitoring processes for reports of fraud
and corruption filed and sent by the complaint channel outsourced for
further internal investigation.
Commitment to
Compliance Attitude
Constant requirement for assessment of the results of all employees,
for the purpose of assessing the capacity to perform the activities
focused on the prevention of noncompliance, respecting the
standards, procedures, regulations and laws, in order to strengthen
the internal control environment, our image and reputation and fight
deviations related to fraud and corruption.
Only employees who have concluded mandatory training within the
established deadlines in compliance and ethics may be assessed as
complying with the attitude.
For further information on our Complaint Channel,
see Social and Relationship Capital and Sustainability 2017.
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LINES OF DEFENSE
With the “three lines of defense” model, we strengthened our internal control system and contributed to allowing
the organization to reach its objectives through risk management in a standardized manner and to the resulting
implementation of effective controls. In this model, each group of managers that comprises the lines of defense
performs a distinct role in the internal control system, according to our governance structure.
BOARD OF DIRECTORS/AUDIT COMMITTEE
F
I
R
S
T
L
I
N
E
O
F
D
E
F
E
E
S
N
E
F
E
E SECOND LINE OF D E F E N S E TIR D LINE OF D
N
S
INTERNAL AUDIT
MANAGERS AND TEAMS
OPERATIONAL UNITS
BUSINESS AREAS
FIRST LINE OF DEFENSE
The business area managers have
the duty to manage risks and are
responsible for implementing corrective
actions to resolve deficiencies in
processes and controls.
INTERNAL CONTROLS
COMPLIANCE RISK
MANAGEMENT
INFORMATION
SECURITY
OMBUDSMAN
OTHER
CORPORATE DUTIES
SECOND LINE OF DEFENSE
The different corporate duties of risk
control and compliance supervision
support the development and/
or monitor the control activities
performed by the managers.
CHECK LIST
EXTERNAL
REGULATORS
CHECK LIST
EXTERNAL
AUDIT
THIRD LINE OF DEFENSE
The Internal Audit assesses, in and
independent manner, the efficiency
of the risk management and the
effectiveness of the internal control
system, reporting any deficiencies and
proposing improvement actions.
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121
The administration found
that our actions were capable
of correcting, in all relevant
aspects, all significant
deficiencies identified in
previous exercises.
INTERNAL CONTROLS
(iii) management, revision and monitoring of access to
the corporate management system, including critical
As part of our compliance process, we have an internal
functions and segregation of duties; and
control system that seeks to ensure the mitigation of
corporate risks of strategic, business, financial compliance
or operational nature, providing reasonable security to
obtain our objectives.
(iv) generation of data to calculate actuarial liabilities related
to our healthcare plan (AMS) and pension plan (Petros),
as well as monitoring of certain assets of the benefits
plans generated by the Petros Foundation.
Using a risk analysis, we identify the more sensitive
processes and develop appropriate controls. The
effectiveness of these controls is tested internally and also
by independent auditors.
Our managers, supported and supervised by senior
management, implemented several actions to correct
these deficiencies in 2017, seeking to strengthen our
control environment.
Once we identify any control deficiency, we correct it and
propose improvement actions, as well as in the diagnosis
of potential occurrences in other areas.
A deficiency, individually or together with other
deficiencies, may be classified as significant if it has
sufficient importance to deserve management’s attention.
In 2016, we identified significant deficiencies related to the
following controls which, however, did not cause impacts
on our financial statements:
(i) identification of the need to perform accounting
adjustments to certain down payments to suppliers that
did not result in future economic benefits, as well as
identification of the need to report expenses with the
dissolution of the respective agreements;
(ii) classification of the possibility of loss with contingencies;
At the end of 2017, our administration assessed the
effectiveness of our internal controls on financial
statements based on criteria set forth in the Integrated
Internal Controls Structure, issued by the Committee of
Sponsoring Organizations of Treadway Commission (Coso).
Based on this assessment, using the internal control
deficiencies classification of Brazilian Accounting Standard
265 (NBC TA 265), the administration found that our
actions were capable of correcting, in all relevant aspects,
all significant deficiencies identified in previous exercises.
In this manner, it concluded that our internal controls on
financial statements were effective
on December 31, 2017.
For further information of our improvement of our Internal Control,
please see Reference Form (item 5.3) avaliable in our website: www.
investidorpetrobras.com.br/en.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 122
Risk Management
123
Crisis Management
125
Opportunities
125
RISKS AND
OPPORTUNITIES
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Risk Management
• respect life in all of its diversity;
• full alignment and coherence with our Strategic Plan;
• ethical operation in compliance with legal and regulatory
RISK
GROUPS
The integrated and proactive management of risks
requirements;
is fundamental for delivering results in a secure and
• integrated risk management;
sustainable manner.
Since 2014, our risk management process has been
centered on a corporate area, allowing for standardization
• guidance of risk response actions focused on
the aggregation or preservation of value for the
shareholders and business continuity.
STRATEGIC
Risks that can compromise the strategic objectives
and/or the fulfillment of the Business and
Management Plan.
and uniformity of the risk analyses of the Petrobras
In 2017, we revised our Corporate Risk Management Policy
BUSINESS
Group and management of risk responsibilities, which are
to incorporate the recent governance improvements as
structured according to the three lines of defense model.
well as facilitate their adoption by the other companies
of the Petrobras Group. In addition, the duties of the
Executive Risk Committee were inserted and some of
the managers’ duties were altered, to make their risk
management roles more evident.
The risks to which we are exposed are classified in five
groups, according to our risk management system:
Strategy, Business, Finance, Compliance and Operations.
We have an Executive Risk Committee for the purpose of
advising the Executive Board on the analysis of matters
specific to risk management. As such, each organizational
unit must identify, prioritize, monitor and, along with the
Executive Management of Corporate Risks, periodically
notify the Executive Risk Committee of the main risks and
the mitigating actions planned.
To assist in this process, our Corporate Risk Management
Policy establishes guidelines and responsibilities and is
based on the following fundamental principles:
For further information on the three lines of defense model and
governance improvements, see Governance and Compliance.
For information on the risks of each group, see the Risk Factor session
of the Reference Form and Form 20F, available on our website:
www.investidorpetrobras.com.br/en. On Form 20F, we describe two
more groups, in addition to the five cited above: one related to Brazil
and to our relationship with the Brazilian Federal Government and
another with risks related to our investors.
Risks related to the company’s business, according
to its value chain, specific to an integrated oil
company (exploration and production, refining,
distribution, natural gas, transportation, etc.)
FINANCIAL
Market, credit and liquidity risks, which
may negatively affect cash flow and the
financial statements.
COMPLIANCE
Risks related to compliance with laws and
regulations of our Code of Ethics, Code of
Conduct and other related documents.
OPERATIONAL
Gathers risks resulting from failures, deficiencies
or inadequacy of internal and industrial processes,
supply of goods and services, systems, as well as
natural disasters and/or third party actions.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES RISK MANAGEMENT IN THE BUSINESS AND MANAGEMENT PLAN
In the process of elaborating the Business and Management Plan 2018-2022, senior management and other executives
identified the risks that may impact its implementation. Among the main risks identified, we highlight:
MAIN
RISKS
MITIGATION
CHANGES RELATED TO
MARKET CONDITIONS
Such as oil and natural gas
price volatility, product
sales and margins
DELAYS IN
CONSTRUCTION
OF PLATFORMS
• Continuous monitoring of the evolution of the external scenario and of the operation of
our different stakeholders;
• Robust planning process and portfolio management;
• Improvement of the efficiency of operations.
• Qualification of suppliers according to the new system, established by the Supplier Base
Management Program, which ensures greater hiring security;
• Development of the supplier base, seeking to enhance competitiveness in the hiring processes;
• Promotion, through institutions of which it is a part, of the construction of a business environment
that favors the viability of projects that stimulate oil industry activity in Brazil and consequent
activity throughout the productive chain.
PERFORMANCE OF
DIVESTMENTS AND
PARTNERSHIPS
• Continuous analysis of the partnership and divestment portfolio, seeking to adapt it to our
necessities and to market opportunities;
• Comprehensive identification of risks and elaboration of action plans to increase chances of success
for partnership and divestment projects.
LEGAL PROCEEEDINGS
AND CONTINGENCIES
• Management of the contingency portfolio with a risk matrix and internal controls of the processes and routines;
• Governance practices for analysis and collegiate review for relevant causes;
• Internal regulations and standards for the work process throughout all steps of the process;
• Creation of work groups for relevant processes focused on improvement of the theses, differentiated
support for the processes and treatment of the root cause;
• Legal analysis prior to decision-making, which generates inputs for the definition of more robust
procedures with less risk of judicial questioning.
MAJOR ACCIDENTS/
ASSET INTEGRITY
• Continuous inspection and maintenance programs for our facilities and training for our workforce for
the correct compliance with safety requirements, according to best international practices.
124
HEDGE POLICY
We preferably maintain exposure
to the price cycle, avoiding
the use of derivatives to
systematically protect purchase
or sale operations of goods
whose objective is to attend to
our operational needs. However,
subject to analysis of the business
environment and of perspectives
of fulfilling the business plan, the
execution of occasional protection
strategy may apply. Derivatives
transactions performed in 2017
had the exclusive purpose of
protecting results expected from
short-term trade transactions.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 125
Crisis Management
Opportunities
In 2017, we launched the Crisis Management Guide.
Our Corporate Risk Management Policy not only
The document attends to the recommendations of
considers anticipating the threats that may negatively
Strategic Partnerships: our partnerships are formed
along with companies that excel in all areas where we
the Corporate Risk Management Guide of the Brazilian
affect our strategic, economic-financial, operational
operate. We believe that the establishment of these
Institute on Corporate Governance (IBGC) and B3’s
or compliance objectives, but also takes advantage
relationships allows us to reduce our debt, helps us
Corporate Sustainability Index.
of the positive aspects of the risks, identifying and
support future investments, allows us to share business
strengthening new business opportunities, processes
risks, in addition to contribute to technical and/or
The Crisis Management Guide formalizes and addresses,
and products, or even improving existing ones, resulting
technological exchange and to improve governance in
in a structured and integrated manner, the procedures
in actions and projects that are continuously covered by
long-term decision making.
and response teams for unplanned events (leaks, fires,
our strategic planning. In the context of the challenges
operational outage, intentional acts, fraud, legal issues,
associated with energy industry transformations, we
Our notorious knowledge in deep and ultra-deep waters,
etc.) with potential to generate a crisis.
identify the following opportunities:
Recomposition of the exploration portfolio: we are
recomposition our exploration portfolio with the
acquisition of new areas in the 14th concession round
and in the 2nd and 3rd production sharing rounds, with
an expectation to increase the average of exploration
as well as our pioneerism in the introduction of new
technologies, have allowed the conclusion of several
partnerships in exploration and production projects in
the last two decades. More recently, we expanded our
partnerships to explore opportunities in natural gas,
transportation and marketing of our products, as well
as low carbon initiatives. We are studying a model that
wells per year. Also, new pre-salt discoveries occurred in
allows us to extend the benefits of the partnerships to
the Campos Basin, such as Forno, Brava and Tracajá. We
the refining segment.
continue to be active and selective in coming auctions in
the production sharing and concession regimes already
announced by the ANP in 2018 and 2019.
For further information on our partnerships,
see Social and Relationship Capital.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 126
Review of the Assignment Agreement: throughout
the execution of the operations under o assignment
Low Carbon Economy: a set of factors is accelerating the
march toward a low carbon economy. In particular, the
agreement contract, with the volume of information
commitments undertaken by the countries of the Paris
obtained by drilling more than 50 wells and long-term
Agreement (in 2015) represent a landmark that stimulates
production tests, associated with extensive knowledge
the energy industries to join their actions with global
acquired in the pre-salt layer of the Santos Basin, it was
efforts to mitigate climate change.
possible to conclude that there are volumes of more than
5 billion barrels of oil equivalent originally contracted.
The transformations promoted by the energy transition
Thus, we consider that the existence of surplus volumes
impose enormous challenges to our traditional business in
in the areas under Assignment Agreement constitute
the oil and gas industry. Preparing for this context requires
an opportunity for both parties, the government and
better identification, assessment and transparency of the
Petrobras, to establish a compensation agreement to
potential risks (physical, regulatory and market) to which
Petrobras in the assignment agreement review process.
our assets and business are exposed. It also requires us
Digital transformation: recent advances in the
acquisition and analyses of data, connectivity,
to broaden our participation in initiatives and forums on
climate change. In this sense, strengthen our planning and
expanding our institutional engagement for the purpose
artificial intelligence, robotics and other technologies,
of understanding the context, we define strategies and
are changing sources of advantage. The increase
identify improvement possibilities in our enterprises that
perception among investors that the general of value
are part of the emerging opportunities.
expected from the companies is increasingly dependent
on the adoption of digital technologies and of new
Since November 2017, we have been participating in the
forms of work, cooperation and innovation.
Oil and Gas Climate Initiative (OGCI), an initiative formed by
ten oil and gas companies (BP, CNPC, ENI, Pemex, Reliance,
Specific studies on the oil and gas industry indicate
Repsol, Saudi Aramco, Shell, Statoil and Total), committed
several opportunities of value aggregation with the
to investing USD 1 billion in ten years to stimulate low
adoption of digital solutions with low uncertainty and high
carbon technologies, as an oil and gas industry response
maturity. The order of magnitude of this potential and
to the challenges of climate change.
the need to prepare for a new competitive environment
is causing the major companies in the sector to structure
their digital transformation journeys.
For further information on Digital Transformation,
see Sustainability 2017.
For further information on Low Carbon Economy,
please refer to Sustainability 2017.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 127
Annexes
128
Acknowledgments
129
Glossary
130
Management and
Editorial Staff
132
OTHER
INFORMATION
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 128
Annexes
CONTRACTUAL OBLIGATIONS
The following table summarizes our obligations and commitments on December 31, 2017.
INFORMATION ON THE PROVISION OF SERVICES OTHER THAN THE
EXTERNAL AUDIT BY THE INDEPENDENT AUDITOR – CVM INSTRUCTION
381/2003
Our corporate management instruments are based on our Code of Ethics and
Code of Good Practices and on the Corporate Governance Guidelines.
Article 30 of our Bylaws determines that the independent auditors cannot
provide us consulting services during the term of the audit agreement.
On December 20, 2016, we hired KPMG Auditores Independentes (KPMG) to
provide independent auditing services for fiscal years 2017 to 2019, with a
BALANCE SHEET ITEMS1
Debt obligations 2
PAYMENTS DUE BY PERIOD
Total
2018
2019
-2022
2023
on
360,724
23,160
155,081
182,483
With transfer of benefits, risks and asset control
759
84
242
433
Provision for descomissioning 3
47,347
3,133
5,525
38,690
Total of the balance sheet items
408,830
26,377
160,848
221,606
OTHER CONTRACTUAL COMMITMENTS
Natural gas ship-or-pay 4
Service contracts
23,182
4,678
18,504
-
189,907
66,090
53,060
70,757
renewal possibility for another two years.
Natural gas supply agreements 4
26,066
4,616
21,450
-
KPMG provided the following services during the 2017 fiscal year, including for
Purchase commitment
29,782
21,944
7,777
61
Without transfer of benefits, risks and asset control
304,398
27,844
83,505
193,049
our subsidiaries and controlled companies:
SERVICES
Accounting Audit
SOX Audit
Additional services related to audits
Tax Audit
TOTAL SERVICES
BRL
19,214
3,627
1,178
833
24,852
Total of other commitments
573,335
125,172
184,296
263,867
TOTAL
982,165
151,549
345,143
485,473
1 Excludes the amount of R$ 121,916million related to our pension and medical benefits obligations, which are partially
funded by R$49,704 million in plan assets. Information on employees’ post-retirement benefit plans, including a
schedule of expected maturity of pension and medical benefits obligations, is presented in Note 22 to our audited
consolidated financial.
2 Includes accrued interest, short-term and long-term debt (current and non-current portions). Information about our
future interest and principal payments (undiscounted) for the coming years is presented in Note 33.6 to our audited
consolidated financial statements.
3 Includes R$563 million of liabilities related to assets classified as held for sale.
4 The current import contract is expected to terminate in December 2019, but it will be automatically extended until the
entire contracted volume be taken by Petrobras up to, at least, April 2022.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 129
Acknowledgments
We thank our employees for their dedication and performance, which
has enabled the recovery of the company, and our shareholders, the
market and society, for the confidence in the company’s recovery
process, pride of all Brazilians. We also thank professor Luis Nelson
Guedes de Carvalho, chairman of our Board of Directors, for the
initiative to produce the first Integrated Petrobras Report.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES 130
Glossary
Terms not listed in this glossary were defined throughout
the text.
Free commercialization environment (ACL): market
segment in which electricity purchase and sale operations are
performed, the object of bilateral agreements freely traded,
according to specific marketing rules and procedures.
Regulated trade environment (ACR): market segment in
which electricity purchase and sale operations are performed
between sales and distribution agents, preceded by bidding,
except the cases set forth in the law, according to specific
trading rules and procedures.
Boed: barrels of oil equivalent per day.
Brent: oil used as one of the main references in the
international oil market. Dated contracts for Brent or its
derivatives in the financial market reference several oil
purchase and sale agreements in the world.
Class action: a type of collective lawsuit set forth in foreign
law that allows a class composed of individuals who have
suffered the same damage, or harmed by the same fact and,
therefore, with a common interest, to claim compensation
together for damages suffered.
CO2: carbon monoxide.
Public Ethics Commission (CEP): the Public Ethics
Commission, bound to the President of the Republic, was
created by an Ordinance of May 26, 1999, authorizing it
to operate as an advisory instance to the President of the
Republic and the ministries of the State in matters of public
ethics; manage the application of the Code of Conduct of
the Superior Federal Administration, and it must submit
measures to the President of the Republic to improve the
document; resolve issues regarding the interpretation of
its standards, deliberating on omitted cases; investigate,
by means of a report or ex officio, conducts noncompliant
with the standards provided therein when practiced by the
authorities submitted thereto; to resolve doubts on the
interpretation of the standards of the Code of Professional
Ethics of the Public Civil Servant of the Federal Executive
Branch referred to in Decree No. 1.171./1994; coordinate,
assess and supervise the Public Ethics Management
System of the Federal Executive Branch; approve its
internal regulations and choose its chairman.
Completion: oil exploratory phase in which is installed in
the well the necessary equipment to controllably lift the
desired fluid to the surface, and allows the installation of
monitoring equipment in the well.
Condensate: hydrocarbon mixture in a gaseous state in
the reservoir which, on the surface, becomes liquid under
normal atmospheric conditions.
The Assignment Agreement: specific regime of
exploration and production of oil and natural gas for
certain deposits located in the polygon of the pre-salt
layer. Petrobras was directly contracted by the Federal
Government to discover and produce reserves with a
maximum limitation of up to five billion barrels of oil and
natural gas.
Statement of Commerciality: written notification from
the concessionaire to ANP declaring a deposit as a
commercial discovery in the concession or sharing area.
Decree No. 8.945/2016: regulates, in the scope of the
Federal Government, Law No. 13.303, dated June 30,
2016, which governs the legal statute of the public
company, joint stock company and its subsidiaries, in the
scope of the Federal Government, the States, the Distrito
Federal and the Municipalities.
Local Response Structure: set of resources (human,
material), defined in the emergency response plan, for
accident control and to mitigate potential damage in the initial
phase of the emergency.
Organizational Response Structure: previously established
structure for emergency management, mobilized for the purpose
of planning response actions for accident control and to mitigate
potential damage, defining the resources required.
Occupational exams: examinations performed periodically
for monitoring, prevention and promotion of workers’ health.
They include medical, dental and nutritional assessment, with a
custom approach to clinical and occupational history.
Foreign Corrupt Practices Act (FCPA) of 1977: U.S. federal law
to fight corruption, to which we are subject due to the fact that
we have ADRs (American Depositary Receipts) traded on the New
York Stock Exchange.
FPSO: Floating production, storage and offloading unit.
GLP-P13: Liquefied Petroleum Gas for residential use, sold in
canisters of up to 13 kg.
Hedge: transaction or combination of transactions, whether
financial or otherwise, that produce the effects to fully or
partially offset the variation of price or value of the good, right or
obligation.
Impairment: loss in the recovery value of assets.
The Development Index (ID): the relationship between the
proven reserves developed and the proven reserves.
Reserve Replacement Rate (IRR): measures the replacement of
the production by addition of reserves, whether via extensions,
revisions of estimates or supplemental recovery.
Reserve/Production Rate (R/P): measures the longevity of the
current proven reserves considering constant production levels.
Law No. 12.846/2013: Anticorruption Law: governs the
administrative and civil accountability of legal entities for the
practice of acts against public, national or foreign administration.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Law No. 13.303/2016: State-owned Companies Law: governs
the legal statute of the public company, the joint stock
company and its subsidiaries, under the scope of the Federal
Government, States, Distrito Federal and Municipalities.
Law No. 13.414/2017: Annual Budget Law: estimates the
income and sets the Federal Government’s expenses for a
certain fiscal year.
Existing Energy Auction: bidding process for contracting
energy generated by plants already built and that are in
operation, whose investments have already been recovered and,
therefore, have the lowest cost.
Alert Limit: maximum permissible parameter of a given
indicator in a defined period, used to apply corrective actions
and process improvements.
Concession model: regime of exploration and production
of oil and natural gas in which a company or a consortium of
companies performs these activities in an area granted by
the government. In Brazil, if oil or gas is found, the companies
securitize the volumes produced and, in return, pay the
government stake– royalties and the special stake (when
applicable to the field in production). In Brazil, concessions
are granted through bidding of areas for oil exploration and
production, promoted by the National Agency of Petroleum,
Natural Gas and Biofuels (ANP), which also performs the
technical regulation of exploration and production activities.
The concession model is applied in all Brazilian sedimentary
basins, except for the areas defined in the pre-salt polygon. It
should be noted that the concession model is adopted in cases
where the areas were tendered prior to the effectiveness of the
production sharing system that defined the pre-salt polygon.
Production sharing model: regime of exploration and
production of oil and natural gas in which a company performs
these activities through a production sharing contract between
a state-owned company, which represents government
interests, and a company or consortium of companies
(contractors) for the exploration and production of oil by
compensating the parties upon sharing the production of an
oil field. Companies or consortia responsible for production
must pay royalties to the government. In Brazil, Pre-Salt S.A.
(PPSA) inspects the costs and has specific powers in consortia
formed to carry out the activities under sharing. The current
production sharing model is adopted only for areas of the
pre-salt polygon, without the effect of amending concession
contracts for the areas already under contracts executed prior
to Law No. 12.351/2010. With the advent of the recent Law
No.13.365, dated of November 29, 2016, Petrobras no longer
has the obligation to be the operator and hold 30% stake in
the blocks to be granted under this regime, providing the
company, however, with the option to express preference to sign
a contract with the government.
Profit Oil: the surplus in oil that corresponds to the portion
of oil and/or natural gas production to be shared between the
Federal Government and the company, according to criteria
defined in the agreement, resulting from the difference
between the total production volume and the portions related
to the cost in oil and the royalties due.
Route 2 Gas Pipeline Project: project conducted by
partnerships (“Joint Operating Agreement” – JOA), consisting of
three sections: (i) Section 1 – offshore (Lula – NE to Cernambi):
18” Gas Pipeline/approx. 19 km. BM-S-11 Consortium:
Petrobras – 65%; BG – 25% and Petrogal – 10%; (ii) Section
2 – offshore (Cernambi to Praia do Lagomar – Macaé): 24”
Gas Pipeline/ approx. 377.5 km. Cabiúnas 1 Consortium; and
(iii) Section 3 – onshore (Praia do Lagomar to Tecab): 24” Gas
Pipeline/approx. 4.5 km. Cabiúnas 1 Consortium. “represents
gas pipeline sections 2 and 3.
HSE Conduct Treatment System: system to assist managers
in making decisions regarding expected HSE behaviors, with
valuation of positive practices and/ or attitudes, and HSE
behaviors that are not expected, differentiating error from
violation, enabling the application of employee recognition
program and the Petrobras disciplinary system.
131
SNOX: catalytic process for the reduction of emissions from gas
streams, removing solid, liquid and gaseous contaminants and
generating commercial sulfuric acid.
Suezmax: oil tanker class with dimensions that allow its passage
through the Suez Canal.
Tag Along: a protection mechanism for minority shareholders
of a company in the case of alienation of corporate control that
obligates the purchaser to make a public offering to purchase
minority interest shares with the right to vote for a price of no
less than 80% of the amount paid per share with the right to vote,
as part of the control block, as set forth in article 254-A of Law
No. 6.404/76.
TRI: Total Recordable Injury Frequency Rate or number of recordable
injuries with or without lost time, and with casualty, for every million
man hours of exposure to risk in the period considered.
Long-Term Test (TLD): activity performed during the
exploratory phase, for the exclusive purpose of obtaining data
and information for knowledge of deposits.
Refining line: set of processing units that mainly involves
the separation of oil into oil products, the conversion of oil’s
heavier parts of lower value into smaller molecules, originating
nobler oil products, and treatment to adjust oil products to
market-required quality.
UK Bribery Act of 2010: Anti-corruption law of the United
Kingdom that allows British courts to rule on crimes related to
fraud and corruption committed by companies incorporated in
the United Kingdom or which carry out operations on its territory.
UPGN: Natural Gas Processing Unit.
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES Management
EXECUTIVE OFFICERS
132
Executive Director of
Corporate Affairs
EBERALDO
DE ALMEIDA
NETO
Deputy Director of
Governance and
Compliance
PAULO
JOSÉ ALVES
Executive Director of
Production Development
and Technology
Executive Director of
Refining and
Natural Gas
CEO
PEDRO PARENTE
Executive Director of
Exploration and
Production
Executive Director
of Governance and
Compliance
Chief Financial
Officer and
Investor Relations
HUGO
REPSOLD JÚNIOR
JORGE
CELESTINO
RAMOS
SOLANGE DA SILVA
GUEDES
JOÃO ADALBERTO
ELEK JUNIOR
IVAN
DE SOUZA
MONTEIRO
Executive Director of
Strategy, Organization
and Management
System
NELSON LUIZ
COSTA SILVA
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FISCAL COUNCIL
ELECTED BY THE
ELECTED BY THE FEDERAL
FEDERAL GOVERNMENT
GOVERNMENT
Adriano Pereira
de Paula
Marisete Fátima
Dadald Pereira
Alternate: José Franco
Alternate: Agnes Maria
Medeiros de Morais
de Aragão da Costa
BOARD OF
DIRECTORS
Jerônimo Antunes
Member elected by the
Controlling Shareholder
Marcelo Mesquita de
Siqueira Filho
Segen
Farid Estefen
Guilherme
Affonso Ferreira
Member elected by the
Member elected by the
Member elected by the
Common Shareholders
Controlling Shareholder
Preferred Shareholders
Francisco Petros
Member elected by the
Controlling Shareholder
ELECTED BY THE COMMON
ELECTED BY THE
SHAREHOLDERS
FEDERAL GOVERNMENT
Reginaldo Ferreira
Alexandre
Alternate: Marcelo
Gasparino da Silva
Eduardo César Pasa
Alternate: Mauricyo José
Andrade Correia
ELECTED BY THE
PREFERRED
SHAREHOLDERS
Walter Luís
Bernardes Albertoni
Alternate: José Pais Rangel
Betania Rodrigues
Coutinho
Member elected by the
Employees
Pedro Parente
Member elected by the
Controlling Shareholder
Luiz Nelson Guedes
de Carvalho
Chairman of the Board
of Directors elected by the
Controlling Shareholder
Durval José
Soledade Santos
Member elected by the
Controlling Shareholder
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES
Editorial Staff
GENERAL COORDINATION,
PRODUCTION AND EDITION
Investor Relations
Social Responsibility
Strategy and Organization Communication
and Brands Accounting and Taxes
ADDRESS
Petróleo Brasileiro S.A – Petrobras
Avenida República do Chile, nº 65 Centro
20031-912 – Rio de Janeiro, RJ
Phone: (21) 3224-4477
INTERNET WEBSITE
www.petrobras.com.br is our internet website, which
provides general information on the Company,
including a specific investor relations room, with notes
on the results, financial statements (Brazilian and U.S.
standard), annual reports, audio and transcriptions
of investor presentations, Bylaws, stock quotes,
shareholder information, etc.
GENERAL SHAREHOLDERS’ MEETING
The General Shareholders’ Meetings (AGO) are held
in the first four months following the end of the fiscal
year, according to Article 39 of the Bylaws, at our
headquarters, located at Avenida República do Chile,
65, Centro, Rio de Janeiro.
134
DEPOSITORY BANKS
BANCO DO BRASIL S.A
Shareholder Support
Metropolitan Regions and Capitals
Phone: 4004.0001
Other locations
0800.729.9001
Diretoria de Mercado de Capitais
Núcleo de Escrituração de Ativos
Rua Lélio Gama, 105 / 38º andar
20031–201 Centro, Rio de Janeiro, RJ
aescriturais@bb.com.br
Note: Shareholder support is conducted throughout the bank’s
entire branch network.
ADR
The Bank of New York Mellon Corporation
101 Barclay Street, 22 West, New York, NY, 10286
Tel: (1-888-269-2377)
shrrelations@bnymellon.com
www.adrbnymellon.com/resources/contact-us
SHAREHOLDER SUPPORT
PETROBRAS
Shareholder Support
Av. República do Chile, 65 sala 1002
20031–912 Centro, Rio de Janeiro, RJ
Phone: (21) 3224.1540
0800.282.1540
Fax: (21) 2262.3678
acionistas@petrobras.com.br
INVESTOR SUPPORT
PETROBRAS
Investor Relations Management
Av. República do Chile, 65 / sala 1002
20031–912 Centro, Rio de Janeiro, RJ
Phone: (21) 3224.1510 / 9947
Fax: (21) 3224.6055
petroinvest@petrobras.com.br
Graphic project & Layout
Flávia da Matta Design
Photographs
Andre Luis de Souza Alves Pinto (p. 105)
Andre Motta (pp. 24, 63, 76, 83, 102, 108, 110 e 132)
Andre Ribeiro (pp. 28, 40, 52, 59, 99 e 133)
Andre Valentim (p. 70)
Drailton Gomes (p. 81)
Edher Souza (pp. 9, 51, 52 e 127)
Flavio Emanuel (pp. 3, 5, 86, 93, 109, 115, 118 e 122)
Francisco de Souza (p. 129)
Geraldo Falcão (p. 69)
Giovanni Sergio (p. 91)
Gledson Laurek (p. 32)
Guilherme Costa (p. 20)
Roberto Rosa (p. 65)
Rogerio Reis (p. 15)
Steferson Faria (pp. 12 e 64)
Taís Peyneau (pp. 45 e 53)
ANNUAL REPORT 2017PETROBRASSAFETYOVERVIEW AND BUSINESS MODELOUR CAPITALSEXTERNAL CONTEXTBUSINESS PERFORMANCESTRATEGIES AND PERSPECTIVESOTHER INFORMATIONGOVERNANCE AND COMPLIANCERISKS AND OPPORTUNITIES