Rio de Janeiro, April 20, 2017 – Petróleo Brasileiro S.A. – Petrobras responds to Official Letter no. 166/2017/CVM/SEP/GEA-1 which requests clarifications, as follows:

Official Letter no. 166/2017/CVM/SEP/GEA-1

“Dear Sir,

We refer to the news article published on 04.14.2017 in the newspaper Folha de S. Paulo, under the headline “Petrobras pode desistir de áreas do pré-sal após leilões” [“Petrobras may give up pre-salt areas after auctions”] in which, in summary, the following statements are included:

“Government is considering allowing the state-owned company not to participate in winning consortia if it considers the bid amount to be high.

The Government is considering allowing Petrobras to give up participating in pre-salt consortia after the auction, if it considers that the bid offered for an area is beyond its financial capacity. The information was antecipated by Reuters and confirmed by the report.

Under the current model, prior to the auction, the state-owned company can choose the areas which it wishes to operate. In these areas, it will have a minimum of 30% stake in the winning consortium, irrespective of who the other companies are. But it will have to bear an equivalent percentage of the signature bonus paid after the auction and of investments to place deposits  into operation.

The group of companies that undertakes to offer the Government the highest percentage of oil production wins the competition. According to the proposal under discussion, Petrobras will only be able to give up the area if it is not part of the winning consortium. The implementation of the right to withdraw is intended to allow Petrobras to decide whether it wishes to follow the winning proposal. If it considers that the terms do not suit its financial strategy, it may withdraw from the area.

Currently in crisis, the state-owned company has reduced investments and focused its resources to reduce its indebtedness.

The proposal is under discussion as part of the rules of application for the law that eliminated the company’s obligation to participate in all the bids, which was approved in 2016, and afforded the company the right to choose which bids to enter. In the first pre-salt auction, in 2013, Petrobras paid 40% of the signature bonus for the Libra area, which amounted to R$ 15 billion.

The company won in a consortium formed by Shell, the French company Total, and Chinese companies CNOOC and CNPC, that was the only one to submit a proposal, and committed to delivering 41.65% of production to the Government, excluding volumes equivalent to the cost of the project.

[…]”.

From the foregoing, we request your comments on the news and possible impacts on the Company, as well as comments on other information deemed relevant on the subject.”

Clarification:

Law 12.351/2010 established Petrobras as the sole operator of areas under the production sharing regime. This law was amended by Law 13.365/2016, which removed the Company’s obligation to act as sole operator in such areas, whereas the legislator has granted preferential rights to acquire a minimum 30% stake in consortia and the possibility to operate them.

However, the manner through which such first refusal right will be exercised has not yet been regulated. Therefore, it is not possible to know either the conditions or the moment at bidding rounds in which first refusal rights may be exercised.

Petrobras awaits the conclusions by government agencies on bidding rules for the next production sharing regime rounds in order to assess the possible impacts to the Company, and information deemed to be relevant to the subject will be timely published.