Rio de Janeiro, November 11, 2015 – Petróleo Brasileiro S.A. – Petrobrás hereby responds to Official Letter 457/2015/CVM/SEP/GEA-1, which requests the following clarifications:

Official Letter no. 457/2015/CVM/SEP/GEA-1

“We refer to the news published today in the Empresas (Companies) section of Valor Econômico newspaper, entitled Refinarias ‘premium’ tinham 98% de chance de dar prejuízo, diz TCU (Premium refineries had a 98% chance of recording losses, said the Federal Accounting Court), which states that:

Petrobras was aware of the high risk that led to the loss of almost R$3 billion in premium refinery projects that it intended to build in the Northeast. The audit carried out by the Federal Accounting Court (TCU) of the two projects shows that, only two years ago, the state owned company’s Board of Executive Officers decided to proceed with the refineries despite a gruesome reality: the risk of loss was 98%.

The diagnosis was made in July 2013 by the consultancy firm Wood Group Mustang Engineering Inc. (WGMI). The company was hired to “improve” the two projects, which already cost over US$44 billion after several revisions. After the suggested optimizations, the cost fell to US$33.7 billion. Nevertheless, the risk of loss was 98.4% for Premium I, promised for Maranhão, and 97.9% for Premium II, in Ceará.

The decision to move forward with the projects revealed a trap into which Petrobras had fallen three years previously. In February 2010, the Board of Executive Officers contracted land-leveling services for the Premium I refinery. The R$711 million contract was entered into with a consortium led by Galvão Engenharia, a company investigated in the Car Wash Operation for participating in the corruption scheme involving Petrobras executive officers.

That same year, the Company committed another US$425 million to the contracting of basic project and technology licensing and technical assistance and pre-detailing engineering services, known in the sector as Feed (Front End Engineering Design).

These two contracts are the main reason for the R$2.8 billion loss that Petrobras recorded in its balance sheet after giving up on the two refineries – which only happened this January. In addition to the loss, the TCU claims that the contracts were entered into before they were necessary, which may constitute “reckless management” by the Board of Executive Officers. According to the audit, the land-leveling works would normally be contracted in Phase 4 of the project, but were contracted in Phase 1.

The document stresses that it does not refer to reckless management of a criminal nature, practiced by financial institution and defined as a crime by Law 7,492/1986. “It means that the decisions were not potentially made based on the identification, measurement and management of the project’s risks”, said the report.

Although it attributes the responsibility for the decisions to the Board of Executive Officers, the TCU has decided to investigate if Petrobras’ Board of Directors was negligent in light of so much evident of a loss-making project. At the time when the contracting of land-leveling works was authorized, in 2009, Dilma Rousseff, then the President’s Chief of Staff, was the Chair of the Board of Directors.

Any punishment of those responsible for the loss will be covered by an insurance contracted by Petrobras. Although this mechanism is established at the Company’s Bylaws, the TCU’s auditors criticize the fact that there is no distinction between the executives that only made bad decisions and those that may have committed unlawful acts.  The court created specific proceedings to assess the insurance.

Given all the above, we would like you to confirm if the content of this news item is in fact true and, if so, why such information was not deemed to constitute a material fact, as well as any developments and the respective measures taken by the Company to solve the problems identified in the diagnosis by the consultancy firm Wood Group Mustang Engineering Inc.”

Clarification

Petrobras announces that contracted in 2013 a consulting service in order to review the project of the Premium I and II refineries, seeking ways to optimize and reduce investments.

After the project’s reviews, and other initiatives adopted by the Company, such as the pursuit of partnerships, and the revaluation of market forecasts, economic satisfactory results were not obtained, which made Petrobras opt to discontinue the projects, as per the Material Fact published on January 27, 2015.

Finally, the Company announces that it has not been notified of the Decision of the Federal Audit Court (TCU) until now and that it will opportunely present the necessary clarifications to this Court.

Petrobras reiterates its commitment to transparency and clarifies that it has presented all the clarifications requested by the control bodies.