Petrobras (PBR)

16. Accounts payable – temporary agreement on price stabilization in Argentina

In January 2003, pursuant to government actions seeking to stabilize the economic environment in Argentina, the hydrocarbon producing and refining companies signed a temporary agreement aimed at stabilizing the prices of crude oil, gasoline and diesel oil in the Argentine market. Under this agreement, deliveries of crude oil must be billed and paid based on a reference WTI (West Texas Intermediate) price of US$28,50 per barrel. Positive or negative differences between 90% of actual WTI, up to the limit of US$36,00 per barrel, and the reference price are to be realized based on amounts generated in periods during which the actual WTI price is lower than US$28,50 per barrel. After several renewals, the agreement terminated in May 2004. After that date, producers and refiners entered into a new agreement, valid until June 2004, whereby as long as the actual WTI price is between US$32,00 and US$42,00, the related deliveries will be billed and paid at an amount equivalent to 86% of actual WTI price up to a limit of US$36,00 per barrel, thus characterizing a discount over international prices. In August 2004, as the WTI price exceeded US$42,00 per barrel, the Argentine government established a ceiling price in the local market based on international prices, net of withholding amounts for export. After October 2004, hydrocarbon manufacturers and refiners have freely negotiated oil prices, considering the “export parity” as the reference price.