Petrobras (PBR)

(c) Adaptation to the Law 11,638/2007

Law 11,638/07 was enacted on December 28, 2007, and amends and repeals provisions of Laws 6,404 and 6,385, which governed financial statements preparation for Brazilian companies, in order to adjust Brazilian Accounting Practices to the international financial reporting standards (IFRS), affecting the Company’s net income and shareholders’ equity, which are basis for dividend and interest on equity payment.

The Company is currently evaluating the potential impacts of this law.

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Table of Contents

31.1 Adaptation to the Law 11.638/2007

Law 11.638/07 was enacted on December 28, 2007, and amends and repeals provisions of Law 6.404, of December 15, 1976, and Law 6.385, of December 07, 1976, which deal with the preparation of the financial statements, in order to adjust Brazilian accounting practices to the international financial reporting standards (IFRS).

Among the principal changes made, we draw attention to the following matters which, in the view of our Management, might affect the presentation of our financial statements, as a result of new criteria for calculating income and the Company’s equity and financial position, as from 2008:

• Investments in financial instruments, including derivatives, and in credit rights and marketable securities in current or non-current assets, when “available for sale” or “for negotiation”. Other financial instruments are evaluated at cost, restated or adjusted in accordance with the probable realization value, whichever is lower. The Company has already disclosed these effects in specific Notes.
  
  
• Operations involving transformation, merger, consolidation or spin-off, between independent parties in which there is effective transfer of control.