Investments and initiatives

We continue to strengthen our initiatives related to environmental, social, and governance (ESG) aspects, with the commitment to advance decarbonization and to always act ethically and transparently, with safety in our operations and respect for people and the environment.

Our strategic model remains anchored in the premise of producing oil and gas compatible with scenarios of accelerated decarbonization.

Over the past few years, as a result of systemic actions, we have reduced our operational GHG emissions and achieved efficiency gains in our operations. In oil and gas production, we highlight the performance in the pre-salt fields, our leadership in CCUS-EOR, improvements in energy efficiency, and control of losses in operations. In refining, our emissions performance is accompanied by process and refinery load optimization and process energy efficiency.

Seeking to reinforce the decarbonization initiative, the Strategic Plan 2023-2027 brings important elements that reinforce our sustainability agenda and low-carbon positioning, allocating a US$ 4.4 billion CAPEX.

Investments to strengthen our low carbon position

US$ 3.7 billion

US$ 0.6 billion US$ 0.1 billion

DECARBONIZATION OF OPERATIONS

RefTop Portfolio

US$ 0.8 billion

Low Carbon Solutions in New E&P projects US$ 2.1 billion

Decabonization Fund

US$ 0.6 billion*

R&D** in decarbonization scopes 1 and 2 US$ 0.2 billion

BIOREFINING SKILLS FOR THE FUTURE

Renewable Diesel Sustainable aviation kerosene

R&D ** for activities not related to the operation Profitable diversitication

US$ 4.4 BILLION (5.6% OF TOTAL CAPEX)

* Expenditures classified as CAPEX can be allocated as OPEX for amounts related to the decarbonization fund and R&D expenditures.

** The forecast expenditures for the low carbon portfolio correspond to 10% of the total R&D budget, which depend on the legal obligation.

Our forecast for low-carbon investments increased considerably between SP 2022-2026 (forecast of US$ 2.8 billion) and SP 2023-2027. The main motivators were:

> E&P: increase in the budget to US$ 2.1 billion due to the incorporation of low-carbon solutions in 7 new projects of production units. The solutions adopted in the new projects include CO2 separation, high-capacity flare gas recovery system, cargo tank gas recovery system, and valves with fugitive emission requirements.

> Reftop: budget increase to US$ 813 million, considering 148 projects, 100 related to energy efficiency, ensuring greater operational availability, lower energy intensity, and lower emissions. The initiatives were mapped and matured throughout 2022, increasing the demand for resources focusing on the GHG emissions intensity by 2030 target.

> Decarbonization Fund: increase in the maturity of candidate projects for the Fund, review of the carbon price curve, with a potential increase in the number of projects that will use Fund resources, and inclusion of the possibility of buying carbon credits in the budget.

We spent about US$ 284 million1 in low-carbon initiatives in 2022, including amounts classified as CAPEX and OPEX, as per the table below:

Decarbonization initiatives prioritized through the marginal abatement cost curve

Considering our six sustainability commitments focused on carbon and our ambition to neutralize emissions, we systematically map opportunities for mitigating greenhouse gases. Since 2021, we have organized a set of options to mitigate operational GHG emissions in all segments we operate, using the Marginal Abatement Cost Curve (MACC) methodology.

The MACC methodology allows evaluating and comparing different emission mitigation opportunities through their Marginal Abatement Costs (MAC). The MAC is represented by the ratio between the financial cost (referring to the implementation of the opportunity) and its GHG abatement potential, in the unit of US$/tCO2e:

¹The estimates consider systems and equipment for investments in new production development projects, with calculations estimated by each project’s total physical progress. Low-carbon investments on chartered platforms are not considered.

² Includes investment in Oil and Gas Climate Initiative – Climate Investments (OGCI CI) of US$ 12.3 million, in Decarbonization of Operations.

Investments And Initiatives

Based on this ratio, it is possible to rank the opportunities, assisting in identifying solutions with better cost-effectiveness. Our Integrated MACC has more than 500 mitigation opportunities with different technological maturities. Opportunities are divided into five categories:

> Efficiency: mitigation opportunities focusing on energy efficiency and optimizing systems and equipment. E.g.: combined cycle, AII Electric, use of cold deep water, Eco Type vessel chartering, energy efficiency.

> Energy: mitigation opportunities focusing on adopting less carbon-intensive energy sources. E.g.: external energy from the coast, energy production plants with CCUS, supply of biomethane for operations, hybrid vessel, and fuel replacement.

> Losses: mitigation opportunities focused on reducing energy and product losses. E.g.: reduction of venting, optical gas imaging (OGI), flare gas recovery unit (FGRU).

> Process: mitigation opportunities focusing on intrinsic emissions from refining processes. E.g.: co-processing of bio-oil, reduction of emissions in the production of hydrogen.

> CO2 Removal: CO2 removal opportunities. E.g., CCUS, oxyfuel.

In the integrated MACC, the estimated MAC of each opportunity can be viewed, as well as its potential for abatement of operational emissions in case of implementation.

Integrated MACC, 2022

Note: Estimates of costs and emission reductions are based on internal work, literature data, and benchmarking, including uncertainties inherent to the studies. The initiatives are not ordered in terms of deadline or readiness level.

The results of the analysis of the opportunities of the integrated MACC supported our 2021 decision to aim for neutrality in the long term. Throughout 2022, the integrated MACC subsidized the development of the first portfolio of decarbonization opportunities under the Decarbonization Fund.