RepRisk Company Report

Petroleo BrasileiroSectors: Oil and GasHeadquarters: Brazil

August 31, 2018

What is the RepRisk CompanyReport?

The RepRisk Company Report

RepRisk Company Reports provide an in-depth look at the environmental, social, andgovernance (ESG) risk exposure of an individual company through a combination ofquantitative data – our proprietary risk analytics and metrics – and qualitative research thatcovers ten years of history.

Company Reports are dynamically generated to include the latest information from theRepRisk ESG Risk Platform - the world’s most comprehensive database on ESG risks.

Each Company Report includes two main sections:

1. Quantitative data section: A summary of RepRisk analytics and metrics that capture andhighlight the areas of ESG risk exposure of the company (e.g. key ESG Issues, Country ESGRisk), for both a two-year and a ten-year timeframe.

2. Qualitative research section: Details of all the individual ESG risk incidents (news) relatedto the company, from August 31, 2015 to August 31, 2018.

RepRisk's assessment of the ESG risk exposure of a company is based on the company'sactivities as observed by media, stakeholder, and third-party sources, and excludesinformation provided by the company itself. For more information on RepRisk’s methodology,please visit the RepRisk website.

RepRisk’s Research Scope

RepRisk’s core research scope is comprised of 28 ESG Issues that are broad, comprehensive,and mutually-exclusive. The 28 Issues drive the entire research process, as every risk incidentin RepRisk’s ESG Risk Platform is linked to at least one of these Issues.

The Issues were selected and defined in accordance with the key international standardsrelated to ESG themes, such as the Ten Principles of the UN Global Compact, the World BankGroup Environmental, Health, and Safety Guidelines, the IFC Performance Standards, theEquator Principles, the OECD Guidelines for Multinational Enterprises, and the ILOConventions.

In addition, RepRisk has defined 57 Topic Tags, which represent specific and thematic ESG hottopics and provide a second and more granular level of analysis. All Topic Tags link to at leastone of the ESG Issues. They are a dynamic concept, with the list expanding over time inresponse to emerging trends.

Company Report: Petroleo Brasileiro - August 31, 2018 2

Section 1: ESG Risk Analytics and Metrics

The RepRisk IndexCompany: Petroleo Brasileiro

RepRisk Index Trend for the last two years (August 31, 2016 to August 31, 2018)

100 Extremely high

75 Very high

60 High

50 Medium

25 Low

0

Current RRIAs of August 31, 2018 56Peak RRIIn August 2016 66RRI ChangeLast 30 days -1

2016 2017 2018

A S O N D J F M A M J J A S O N D J F M A M J J August 31, 2018

Environment Social Governance

The RRI is a proprietary algorithm developed by RepRisk that dynamically captures andquantifies reputational risk exposure related to ESG issues. The RRI is not a measure ofreputation, but is rather an indicator of ESG-related reputational risk of a company or otherentity. It allows the comparison of a company’s exposure with that of its peers and helps trackthe risk trend over time. In essence, the RRI facilitates an initial assessment of the ESG andreputational risks associated with financing, investing, or conducting business with aparticular company.

The RRI ranges from zero (lowest) to 100 (highest): 0-24 means low risk exposure, 25-49means medium risk exposure, 50-59 means high risk exposure, 60-74 means very high riskexposure, and 75-100 means extremely high risk exposure.

The RRI is made of an environmental, a social, and a governance component. The percentageof the environmental, social, and governance contribution to the RRI of Petroleo Brasileiro isbased on the number of risk incidents related to environmental, social, and governance issues.

• The Current RRI denotes the current level of media and stakeholder coverage of a companyrelated to ESG issues.

• The Peak RRI equals to the highest level of the RRI over the last two years – a proxy foroverall ESG-related reputational risk exposure.

• The RRI Change shows the increase or decrease of the RRI within the past 30 days.

Company Report: Petroleo Brasileiro - August 31, 2018 3

Section 1: ESG Risk Analytics and Metrics

The RepRisk RatingCompany: Petroleo Brasileiro

RepRisk Rating as of August 31, 2018

The RepRisk Rating is a proprietary risk metric that captures and quantifies a company’s riskexposure related to ESG issues. It combines a company’s own ESG risk exposure (Peak RRI)with the ESG risk exposure of the countries and the sectors in which the company has beenexposed to risks.

The RepRisk Rating ranges from AAA to D.

AAA AA A

Low ESG Risk Exposure

RepRisk Rating

BBB BB B

Medium ESG Risk Exposure

CCC CC C

High ESG Risk Exposure

D

Very high ESG RiskExposure

Based on RepRisk’s strict, rules-based methodology, the Rating is updated daily for allcompanies in the RepRisk ESG Risk Platform. It is the cornerstone of RepRisk’s corporatebenchmarking report, the Benchmarking Brief, and facilitates corporate benchmarking andESG integration. To learn more about the Benchmarking Brief, please visit:www.reprisk.com/brief.

Company Report: Petroleo Brasileiro - August 31, 2018 4

Section 1: ESG Risk Analytics and Metrics

ESG IssuesCompany: Petroleo Brasileiro

The two heat maps below highlight the ESG Issues that have been mostly associated withPetroleo Brasileiro over the last two years and over the last ten years.

The Issues are highlighted in relation to both the number and severity of the risk incidents.The heat map displays all 28 ESG Issues that comprise the core of the RepRisk’s researchscope (see page 2).

ESG Issues heat map for the last two years (August 31, 2016 to August 31, 2018)

Environmental Social GovernanceEnvironmental Footprint Community Relations Employee Relations Corporate Governance

Climate change, GHGemissions, and globalpollution

Human rights abuses,corporate complicity

Forced labor Corruption, bribery, extortion,money laundering

Local pollution Impacts on communities Child labor Executive compensationissues

Impacts on landscapes,ecosystems, and biodiversity

Local participation issues Freedom of association andcollective bargaining

Misleading communication,e.g. “greenwashing”

Overuse and wasting ofresources

Social discrimination Discrimination in employment Fraud

Waste issues Occupational health andsafety issues

Tax evasion

Animal mistreatment Poor employment conditions Tax optimization

Anti-competitive practices

Cross-cutting Issues: always in combination with one of the ESG Issues above

Controversial products and services

Products (health and environmental issues)

Violation of international standards

Violation of national legislation

Supply chain issues

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 5

Section 1: ESG Risk Analytics and MetricsESG IssuesCompany: Petroleo Brasileiro

ESG Issues heat map for the last ten years (August 31, 2008 to August 31, 2018)

Environmental Social GovernanceEnvironmental Footprint Community Relations Employee Relations Corporate Governance

Climate change, GHGemissions, and globalpollution

Human rights abuses,corporate complicity

Forced labor Corruption, bribery, extortion,money laundering

Local pollution Impacts on communities Child labor Executive compensationissues

Impacts on landscapes,ecosystems, and biodiversity

Local participation issues Freedom of association andcollective bargaining

Misleading communication,e.g. “greenwashing”

Overuse and wasting ofresources

Social discrimination Discrimination in employment Fraud

Waste issues Occupational health andsafety issues

Tax evasion

Animal mistreatment Poor employment conditions Tax optimization

Anti-competitive practices

Cross-cutting Issues: always in combination with one of the ESG Issues above

Controversial products and services

Products (health and environmental issues)

Violation of international standards

Violation of national legislation

Supply chain issues

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 6

Section 1: ESG Risk Analytics and Metrics

UN Global Compact PrinciplesCompany: Petroleo Brasileiro

The two spider charts below show the alleged breaches of the Ten Principles of the UN GlobalCompact (UNGC) by Petroleo Brasileiro over the last two years and over the last ten years. Thecalculation is based on both the number and severity of the risk incidents associated witheach Principle.

Alleged breaches of the UNGC Principles over the last twoyears (August 31, 2016 to August 31, 2018)

Alleged breaches of the UNGC Principles over the last tenyears (August 31, 2008 to August 31, 2018)

Low risk Medium risk High risk Very high risk

The Ten Principles of the UN Global Compact

Principle 1 – Human RightsBusinesses should support and respect the protection ofinternationally proclaimed human rights.

Principle 2 – Human RightsBusinesses should make sure that they are not complicit inhuman rights abuses.

Principle 3 – LabourBusinesses should uphold the freedom of association and theeffective recognition of the right to collective bargaining.

Principle 4 – LabourBusinesses should uphold the elimination of all forms offorced and compulsory labour.

Principle 5 – LabourBusinesses should uphold the effective abolition of childlabour.

Principle 6 – LabourBusinesses should uphold the elimination of discrimination inrespect of employment and occupation.

Principle 7 – EnvironmentBusinesses should support a precautionary approach toenvironmental challenges.

Principle 8 – EnvironmentBusinesses should undertake initiatives to promote greaterenvironmental responsibility.

Principle 9 – EnvironmentBusinesses should encourage the development and diffusionof environmentally friendly technologies.

Principle 10 – Anti-CorruptionBusinesses should work against corruption in all its forms,including extortion and bribery.

Company Report: Petroleo Brasileiro - August 31, 2018 7

Section 1: ESG Risk Analytics and Metrics

ESG Topic TagsCompany: Petroleo Brasileiro

The two heat maps below highlight the ESG Topic Tags that have been mostly associated withPetroleo Brasileiro over the last two years and over the last ten years.

The ESG Topic Tags are highlighted in relation to both the number and severity of the riskincidents. The heat map displays all 57 ESG Topic Tags, which are an extension of RepRisk’score research scope of 28 ESG Issues (see page 2).

ESG Topic Tag heat map for the last two years (August 31, 2016 to August 31, 2018)

Abusive/Illegal fishing Agricultural commodityspeculation

Alcohol Animal transportation

Arctic drilling Asbestos Automatic and semi-automaticweapons

Biological weapons

Chemical weapons Cluster munitions Coal-fired power plants Conflict minerals

Coral reef Cyberattack Deep sea drilling Depleted uranium munitions

Diamonds Drones Endangered species Forest burning

Fracking Fur and exotic animal skins Gambling Gender inequality

Genetically modifiedorganisms (GMOs)

Genocide/Ethnic cleansing High conservation valueforests

Human trafficking

Hydropower (dams) Illegal logging Indigenous people Involuntary resettlement

Land grabbing Land mines Marijuana / Cannabis Migrant labor

Monocultures Mountaintop removal mining Negligence Nuclear power

Nuclear weapons Offshore drilling Oil sands Palm oil

Pornography Predatory lending Privacy violations Protected areas

Rare earths Sand mining and dredging

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 8

Section 1: ESG Risk Analytics and MetricsESG Topic TagsCompany: Petroleo Brasileiro

ESG Topic Tag heat map for the last ten years (August 31, 2008 to August 31, 2018)

Abusive/Illegal fishing Agricultural commodityspeculation

Alcohol Animal transportation

Arctic drilling Asbestos Automatic and semi-automaticweapons

Biological weapons

Chemical weapons Cluster munitions Coal-fired power plants Conflict minerals

Coral reef Cyberattack Deep sea drilling Depleted uranium munitions

Diamonds Drones Endangered species Forest burning

Fracking Fur and exotic animal skins Gambling Gender inequality

Genetically modifiedorganisms (GMOs)

Genocide/Ethnic cleansing High conservation valueforests

Human trafficking

Hydropower (dams) Illegal logging Indigenous people Involuntary resettlement

Land grabbing Land mines Marijuana / Cannabis Migrant labor

Monocultures Mountaintop removal mining Negligence Nuclear power

Nuclear weapons Offshore drilling Oil sands Palm oil

Pornography Predatory lending Privacy violations Protected areas

Rare earths Sand mining and dredging

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 9

Section 1: ESG Risk Analytics and Metrics

Country ESG Risk ExposureCompany: Petroleo Brasileiro

The two maps below highlight the countries where ESG risk incidents have been detected forPetroleo Brasileiro over the last two years and over the last ten years. The countries arehighlighted in relation to both the number and severity of the risk incidents.

In the last two years, ESG risk incidents for Petroleo Brasileiro have been detected in 28countries, as shown in the map below.

Country ESG risk exposure over the last two years (August 31, 2016 to August 31, 2018)

Country & Territory ranking

1. Brazil 6. Singapore

2. United States of America 7. Argentina

3. Switzerland 8. Uruguay

4. Benin 9. Andorra

5. Bahamas 10. Colombia

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 10

Section 1: ESG Risk Analytics and MetricsCountry ESG Risk ExposureCompany: Petroleo Brasileiro

In the last ten years, ESG risk incidents for Petroleo Brasileiro have been detected in 57countries, as shown in the map below.

Country ESG risk exposure over the last ten years (August 31, 2008 to August 31, 2018)

Country & Territory ranking

1. Brazil 6. Argentina

2. United States of America 7. Netherlands

3. Switzerland 8. Monaco

4. Peru 9. Panama

5. Benin 10. Bolivia

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 11

Section 1: ESG Risk Analytics and Metrics

ProjectsCompany: Petroleo Brasileiro

RepRisk also captures risk incidents related to projects (e.g. mines, pipelines, dams, chemicalplants, factory complexes, etc.), which in turn are related to companies.

The two tables below highlight the projects that have been mostly linked to Petroleo Brasileiroover the last two years and over the last ten years. The projects are highlighted in relation toboth the number and severity of the risk incidents.

Projects most associated with Petroleo Brasileiro over the last two years (August 31, 2016 to August 31, 2018)

Ranking Project Country

1. Abreu e Lima Refinery (also known as Refinaria do Norte; Rnest) Brazil

2. Petrochemical Complex of Rio de Janeiro (Comperj) Brazil

3. Pasadena Oil Refinery (Pasadena Refining System Inc) United States of America

4. Getulio Vargas Refinery (Repar) Brazil

5. Vitoria 10000 Drillship (Navio-sonda Vitoria 10000) Marshall Islands

Low risk Medium risk High risk Very high risk

Projects most associated with Petroleo Brasileiro over the last ten years (August 31, 2008 to August 31, 2018)

Ranking Project Country

1. Abreu e Lima Refinery (also known as Refinaria do Norte; Rnest) Brazil

2. Petrochemical Complex of Rio de Janeiro (Comperj) Brazil

3. Pasadena Oil Refinery (Pasadena Refining System Inc) United States of America

4. Getulio Vargas Refinery (Repar) Brazil

5. Refinaria Duque de Caxias (Refinery Duque de Caxias, Reduc) Brazil

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 12

Section 1: ESG Risk Analytics and Metrics

Non-Governmental OrganizationsCompany: Petroleo Brasileiro

Non-Governmental Organizations (NGOs) refer to a wide variety of civil society organizations– research, conservation, and activist organizations, as well as labor unions, political parties,industry associations, think tanks, and resistance movements. They are an important source ofrisk information within RepRisk’s daily screening of media, stakeholder, and third-partysources.

The two tables below highlight the NGOs that have been mostly associated with PetroleoBrasileiro over the last two years and over the last ten years. The NGOs are highlighted inrelation to both the number and severity of the risk incidents.

NGOs most associated with Petroleo Brasileiro over the last two years (August 31, 2016 to August 31, 2018)

Ranking NGO Country

1. Brazilian Workers' Party (Partido dos Trabalhadores; PT) Brazil

2. Democratic Movement Party (Partido do Movimento Democratico do Brasil; PMDB) Brazil

3. Progressive Party (Partido Progressista; PP; Brazil) Brazil

4. Sierra Club United States of America

5. Brazilian Labor Party (Partido Trabalhista Brazileiro; PTB) Brazil

Low risk Medium risk High risk Very high risk

NGOs most associated with Petroleo Brasileiro over the last ten years (August 31, 2008 to August 31, 2018)

Ranking NGO Country

1. Brazilian Workers' Party (Partido dos Trabalhadores; PT) Brazil

2. Democratic Movement Party (Partido do Movimento Democratico do Brasil; PMDB) Brazil

3. Progressive Party (Partido Progressista; PP; Brazil) Brazil

4. Associacao dos Homens e Mulheres do Mar (Association of Fishermen; AHOMAR) Brazil

5. Federacao Unica dos Petroleiros (FUP; United Oil Workers' Federation) Brazil

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 13

Section 2: ESG Risk Research

CasesCompany: Petroleo Brasileiro

On a daily basis, RepRisk screens over 80,000 media, stakeholder, and third-party sources in15 languages in order to identify, filter, analyze, and quantify ESG risk incidents related tocompanies.

RepRisk groups all risk incidents related to a major scandal, or to systematic issues for acompany in a particular country, into a Case.

The two tables below provide the top Cases for Petroleo Brasileiro over the last two years andover the last ten years. The Cases are highlighted in relation to both the number and severityof risk incidents.

Top Cases over the last two years (August 31, 2016 to August 31, 2018)

Ranking Case Latest riskincident

Number ofrisk incidents

1. Arrests and investigations connected with Lava Jato corruption and bid-riggingallegations

August 27, 2018 216

2. BRL multi billion embezzlement scheme linked to Brazilian pension funds April 03, 2018 12

3. Corruption and cartel formation among oil companies and oil distributors July 25, 2018 10

4. Corruption and overspending on Abreu e Lima Refinery and Premium I and II Refineries July 18, 2018 7

5. Corruption related to funds for building contracts April 12, 2018 7

Low risk Medium risk High risk Very high risk

Top Cases over the last ten years (August 31, 2008 to August 31, 2018)

Ranking Case Latest riskincident

Number ofrisk incidents

1. Arrests and investigations connected with Lava Jato corruption and bid-riggingallegations

August 27, 2018 502

2. Social and environmental impacts of projects in the Guanabara Bay including the Reducrefinery

May 21, 2018 25

3. Environmental and safety risks associated with oil spills and deep-sea drilling May 06, 2018 26

4. Corruption and overspending on Abreu e Lima Refinery and Premium I and II Refineries July 18, 2018 22

5. Overpaying on purchase of Pasadena refinery July 26, 2018 20

Low risk Medium risk High risk Very high risk

Company Report: Petroleo Brasileiro - August 31, 2018 14

Section 2: ESG Risk Research

Risk incidentsCompany: Petroleo Brasileiro

Risk incidents are analyzed according to the reach (influence) of the source, as well as theseverity (harshness) and novelty (newness) of the issues addressed. Incidents are onlyentered once into the RepRisk ESG Risk Platform, unless the risk profile of the incidentchanges – i.e. the incident is escalated to a more influential source, appears again after sixweeks, or additional issues emerge (escalation / re-occurence).

RepRisk also distinguishes between sharp and unsharp criticism. Unsharp criticism refers torisk incidents where the company is mentioned but the exact nature of the criticism is notprecisely defined. This might happen for example in the case of reports mentioning largeamounts of companies for a large and distinct set of issues. In such cases, any relations arenot counted for the company and the RRI receives a minimal effect.

The table below contains the severity breakdown of all the risk incidents of Petroleo Brasileirofrom August 31, 2015 to August 31, 2018, as identified in RepRisk's Platform. It also includesthe number of unsharp criticism and recurring risk incidents.

Risk incident breakdown for time period: August 31, 2015 - August 31, 2018

Total number of incidents Very severecriticism

Severecriticism

Less severecriticism

Unsharpcriticism

Thereofrecurring

711 2 279 366 64 638

The remainder of this report contains all of the individual risk incidents for Petroleo Brasileirofrom August 31, 2015 to August 31, 2018, as captured by RepRisk. If a risk incident is linked toone of the major Cases displayed in the two tables above, this will be marked accordingly.

Company Report: Petroleo Brasileiro - August 31, 2018 15

Section 2: ESG Risk ResearchRisk incidentsCompany: Petroleo Brasileiro

August 27, 2018Wall Street Journal; The(wsj.com)

Drilling contract between Vantage International and Petrobras linked tocorruption

A Netherlands court has allowed Vantage Drilling International to attachsome Petroleo Brasileiro (Petrobras) assets in the country such as bankaccounts and shares Petrobras may have in companies incorporated in theNetherlands. The ruling favors Vantage, which is trying to collect a USD 622million arbitration award related to a drilling contract that Petrobrascanceled in 2015. Originally, Petrobras' contract with Vantage called forVantage's Titanium Explorer deepwater rig to drill for Petrobras until 2020.Apparently, the drilling contract got entangled in Brazil's Operation CarWash investigation into corruption at Petrobras, where investigatorsalleged it was procured through corruption.

https://www.wsj.com/articles/vantage-protects-interests-in-pursuit-of-622-million-petrobras-award-1535397713

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering

Related CountriesBrazil

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

August 13, 2018Estado de Sao Paulo; O(estadao.com.br;Estadao)

Former Mendes Junior executives ordered to serve prison sentences insecond instance for corruption in Brazil (Portuguese)

On August 13, 2018, Brazil's Lava Jato task force requested three formerMendes Junior executives to serve their prison sentences in the secondinstance. The defendants have been sentenced to prison sentences between11 and 27 years by a Brazilian Federal Court for paying approximately BRL31.5 million in bribes to Petrobras directors. The court has charged theMendes Junior executives with corruption, money laundering, and criminalassociation.

https://politica.estadao.com.br/blogs/fausto-macedo/moro-manda-prender-cupula-da-mendes-junior-em-2-a-instancia/

Related ESG IssuesCorruption, bribery, extortionand money laundering

Related CountriesBrazil

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

Company Report: Petroleo Brasileiro - August 31, 2018 16

Section 2: ESG Risk ResearchRisk incidentsCompany: Petroleo Brasileiro

August 09, 2018Procuradoria Geral daRepublica (MPF; PGR;mpf.mp.br)

Petrobras receives BRL 1 billion reimbursement for losses linked tofraud, overcharged contracts, and corruption in Brazil (Portuguese)

As part of a resource-return ceremony that was held by Brazil's Ministry ofPublic Prosecution in the state of Parana on August 9, 2018, Petrobrasreceived a return of approximately BRL 1 billion through cooperation andleniency agreements that Brazilian authorities closed with 17 individualsand four companies, including Keppel Fels and Braskem. Thereimbursement is for financial losses Petrobras suffered due to a massivebribes-for-inflated contracts scheme. Under leniency agreements signedwith Brazil's Federal Public Ministry, Federal Police, and others, Keppel Felshas returned about BRL 687.52 million; Braskem BRL 201.23 million;Camargo Correa BRL 1.03 million; and Carioca Engenharia BRL 3,221. It isreported that this is the largest amount that Petrobras received in a singleperiod since the launch of Operation Car Wash in 2014. Crimes that havebeen investigated within the operation include criminal organization,destruction of evidence, threatening of witnesses, money laundering, anddiversion of public funds. Authorities from the US and Switzerland havealso participated in the probe.

http://www.mpf.mp.br/pr/sala-de-imprensa/noticias-pr/lava-jato-petrobras-recebe-repasse-de-r-1-bilhao

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Fraud

Related CountriesBrazil

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

July 27, 2018Globo; O(oglobo.globo.com)

SBM do Brasil reaches BRL 1.22 billion agreement with Brazilianagencies for involvement in Petrobras corruption scheme (Portuguese)

SBM do Brasil (SBM) has reached a leniency agreement with Brazil's FederalPublic Ministry (MPF) that requires the company to pay BRL 1.22 billion toPetrobras, the MPF, and Brazil's Council for Financial Activities Control forfinancial damages that resulted from a corruption scheme that wasoperated between the two firms from 1997 to 2012. The agreement willallow SBM to participate in Petrobras tenders again. Corruption allegationssurrounding the deals between SBM and Petrobras first surfaced inFebruary 2014. Investigators found out that SBM had been receiving insiderinformation from a Petrobras official regarding Petrobras bids. In return,SBM transferred kickbacks to Petrobras' Swiss offshore accounts that hadbeen set up under the names of shell companies. The MPF estimates thatundue payments made between the two firms amount to USD 42 million. In2015, Brazil's Federal Police arrested the Petrobras official who hadoperated the scheme and denounced 12 individuals for their involvement inthe illegal network. Moreover, the MPF discovered a USD 300,000 paymentthat had been made by SBM for the 2010 presidential campaign of Brazil'sWorkers' Party upon the request from Petrobras representatives. Furthercrimes that the MPF investigated included tax evasion, misappropriation ofpublic funds, and money laundering.

https://oglobo.globo.com/brasil/sbm-faz-acordo-de-leniencia-vai-pagar-122-bilhao-petrobras-22923379

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Anti-competitivepractices

Related CountriesBrazil; Switzerland

CaseEmployee corruption leadingto losses from contracts withSBM group of companies forleasing floating productionstorage and offloading(FPSO) units

Company Report: Petroleo Brasileiro - August 31, 2018 17

Section 2: ESG Risk ResearchRisk incidentsCompany: Petroleo Brasileiro

July 26, 2018Reuters News(reuters.com)

Petrobras subsidiary Pasadena Refining System to pay USD 3.5 millionsettlement on lawsuit over toxic emissions

Petrobras subsidiary Pasadena Refining System (PRSI) has agreed to payUSD 3.5 million to resolve a lawsuit over years of alleged toxic emissionsfrom its Pasadena Oil Refinery. The lawsuit was filed by Environment Texasand the Sierra Club Lone Star chapter. The plant has allegedly beenreleasing pollutants such as sulfur dioxide at amounts in excess ofpermitted levels due to repeated mechanical breakdowns and operationaldeficiencies. The settlement awaits a federal judge's approval. The purchasewas examined by Brazilian authorities as part of its corruptioninvestigations into Petrobras, after the Brazilian audit court found that thedeal caused over USD 580 million in losses to the company.

https://uk.reuters.com/article/refinery-lawsuit-petrobras-pasadena/update-1-settlement-reached-in-petrobras-texas-refinery-emissions-case-idUKL1N1UM1BX

Related ESG IssuesLocal pollution; Violation ofnational legislation;Corruption, bribery, extortionand money laundering

Related CountriesUnited States of America;Brazil

CaseSocial impacts and pollutioncaused by Pasadena OilRefinery; Overpaying onpurchase of Pasadenarefinery

July 25, 2018trf4.jus.br (Turma doTribunal RegionalFederal da 4a Regiao)

Brazil's Attorney General initiates class action lawsuit against MendesJunior, Andrade Gutierrez, KTY Engenharia, and others for corruptionrelated to Petrobras contracts (Portuguese)

This news covers less severe criticism and incidents from a Portugueselanguage news source.

https://www2.trf4.jus.br/trf4/controlador.php?acao=noticia_visualizar&id_noticia=13810

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Fraud; Anti-competitive practices

Related CountriesBrazil

CaseCorruption and cartelformation among oilcompanies and oildistributors

Company Report: Petroleo Brasileiro - August 31, 2018 18

Section 2: ESG Risk ResearchRisk incidentsCompany: Petroleo Brasileiro

July 19, 2018Globo (g1.globo.com)

Sentence for corruption of Galvao Engenharia's former president upheldin Brazil (Portuguese)

On July 19, 2018, the Federal Regional Court of the 4th Region ruled touphold the conviction of the former president of Galvao Engenharia,previously sentenced in March 2015 to over 20 years for money laundering,active corruption, and conspiracy linked to the Lava Jato investigations onPetrobras corruption in Brazil. As revealed by the investigations, GalvaoEngenharia together with other corporations committed crimes againstPetrobras, corrupting public employees and laundering the illicitly obtainedmoney. According to the Federal Public Ministry, Galvao Engenharia alongwith other major Brazilian companies created since 2006 a cartel tosystematically undermine the contracting of large works in the Petrobrastenders, including those of the Abreu e Lima Refinery and the PetrochemicalComplex of Rio de Janeiro. In the view of the prosecutors, the companiesarranged the distribution of the Petrobras contracts using pre-establishedrules. The appeal of sentence was also denied to other two defendants inthe case, who were sentenced to over 14 years and 13 years ofimprisonment, respectively, for active corruption, money laundering andconspiracy.

https://g1.globo.com/rs/rio-grande-do-sul/noticia/2018/07/19/queiroz-galvao-filho-tem-pena-mantida-na-segunda-instancia-da-lava-jato.ghtml

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Anti-competitivepractices

Related CountriesBrazil

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

July 18, 2018Estadao Conteudo(estadaoconteudo.com.br)

Former Petrobras director sentenced for corruption involving deal withCompagnie Beninoise des Hydrocarbures (Portuguese)

A Brazilian federal court has sentenced a former Petrobras director to overeight years of imprisonment for corruption involving the exploitation rightsof an oil field in Benin [Note of the RepRisk Analyst: refers to Petrobras'Block 4], which was managed by Compagnie Beninoise des Hydrocarbures(CBH). Reportedly, the deal involved the payment of USD 1.5 million inbribes to a former president of the Chamber of Deputies, who apparentlytransferred the money to a secret bank account in Switzerland. According tothe Federal Ministry of Public Prosecution, the bank account was managedby the former deputy’s wife, who was also sentenced to over two years ofimprisonment.

http://dc.clicrbs.com.br/sc/noticias/noticia/2018/07/mulher-de-eduardo-cunha-e-condenada-pelo-tribunal-da-lava-jato-10512525.html

Related ESG IssuesCorruption, bribery, extortionand money laundering;Violation of nationallegislation

Related CountriesBrazil; Benin; Switzerland

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

Company Report: Petroleo Brasileiro - August 31, 2018 19

Section 2: ESG Risk ResearchRisk incidentsCompany: Petroleo Brasileiro

July 18, 2018Agencia Brasil(agenciabrasil.ebc.com.br)

Petrobras ex-director fined for cartel practices causing losses worth BRL2.7 billion in Brazil (Portuguese)

On July 18, 2018, the Federal Court of Accounts in Brazil ordered the formersupply director of Petrobras to pay a fine worth almost BRL 60,000 to theBrazilian National Treasury for participating in a cartel. Allegedly, the ex-director received bribes from the cartel in exchange for granting itPetrobras contracts without bids related to the Abreu e Lima Refinery(Rnest). It is said that the practices led to overbilling in the construction ofRnest, causing losses worth BRL 2.7 billion to the state-owned Petrobras.

http://m.jb.com.br/pais/noticias/2018/07/18/tcu-multa-renato-duque-por-irregularidades-na-refinaria-abreu-e-lima/

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Anti-competitivepractices

Related CountriesBrazil

CaseCorruption and overspendingon Abreu e Lima Refinery andPremium I and II Refineries

July 09, 2018Reuters Brazil (online)

Odebrecht signs leniency agreement worth BRL 2.77 billion withBrazilian authorities over corrupt and fraudulent practices (Portuguese)

Odebrecht has signed a leniency deal with Brazil's Attorney General of theUnion, Office of the Controller General, and the Ministry of Transparency,Oversight and Control where the firm agrees to pay BRL 2.77 billion indamages during the next 22 years for corrupt arrangements in 11 contractsand fraudulent conduct in 38 contracts with Brazilian public entities. Thedeal expands on a BRL 3.1 billion agreement that Odebrecht reached withthe Brazilian Federal Public Ministry (MPF) in cooperation with Swiss andUS authorities in 2017. According to prosecutors, the new fine, whichcovers all companies of the Odebrecht Group, will be deducted from thesum that the firm had agreed to pay in the previous MPF deal. Of the totalsum are to be paid BRL 900 million as a compensation for paying bribes;BRL 1.3 billion that equal the amount Odebrecht reaped from illegalpayments; and BRL 442 million to settle violations of anti-corruption andcorporate misconduct regulations. Among the contracts at federal level thathave been affected by Odebrecht's conduct and that are part of the newagreement are contracts with Petrobras, FI-FGTS, Infraero, Eletrobras,Valec, Trensurb, and ports. Odebrecht has also agreed to pay a BRL 40million fine for irregularities outside of Brazil. The company is participatingin investigations in 14 other countries.

https://br.reuters.com/article/topNews/idBRKBN1JZ2VB-OBRTP

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering; Fraud

Related CountriesBrazil

CaseArrests and investigationsconnected with Lava Jatocorruption and bid-riggingallegations

July 08, 2018BBC (bbc.com)

Former Brazilian president accused of accepting bribes from Petrobrasand OAS to remain in prison after judge overrules his release

This news covers less severe criticism and incidents from an Englishlanguage news source.

https://www.bbc.com/news/world-latin-america-44759692

Related ESG IssuesViolation of nationallegislation; Corruption,bribery, extortion and moneylaundering

Related CountriesBrazil

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