Petrobras (PBR)

The behavior of the other components of consolidated net income is shown below:

• A R$ 8,504 million increase in gross profit:

(1) Expenses with transportation, terminals and pipelines.

6

PETROBRAS SYSTEM		Financial Performance

• A R$ 2,927 million increase in operating expenses, notably:

• Selling expenses (R$ 1,579 million) due to higher sales volume in Brazil and abroad, reflecting increased charter expenses and international freight costs (R$ 1,157 million), including the effect of the annual appreciation of the dollar (32%), plus the increase in provisions for doubtful debts (R$ 103 million);

• General and administrative expenses (R$ 1,066 million), due to the rise in personnel costs as a result of the increase in the workforce and collective bargaining agreement in Brazil (R$ 233 million) and abroad (R$ 479 million), including the effect of the annual appreciation of the dollar, as well as third-party consulting, auditing and data processing services in Brazil (R$ 164 million).

• Exploration costs (R$ 1,084 million), due to the write-off of dry and economically unviable wells in Brazil (R$ 971 million), in turn caused by the continuous increase in the number of wells drilled in recent years as a result of the Company’s investment program, the upturn in the unit drilling cost due to the pressure of heightened industrial activity on inputs, and the reduction in the successful exploration ratio, given prospective drilling in higher risk areas in the Santos and Espírito Santo Basins;

• Losses from the impairment of Exploration and Production assets (R$ 479 million), reflecting the reduction in oil prices;

• Other operating expenses (R$ 148 million), due to losses from the devaluation of inventories (R$ 1,381 million), caused by the decline in commodity prices, offset by non-recurring expenses with the Petros Plan in 2007 (R$ 1,050 million) and reduced expenses with health, safety and the environment and contractual charges and fines (R$ 106 million).

The behavior of the other components of consolidated net income is shown below:

• A R$ 8,504 million increase in gross profit:

(1) Expenses with transportation, terminals and pipelines.

6

PETROBRAS SYSTEM		Financial Performance

• A R$ 2,927 million increase in operating expenses, notably:

• Selling expenses (R$ 1,579 million) due to higher sales volume in Brazil and abroad, reflecting increased charter expenses and international freight costs (R$ 1,157 million), including the effect of the annual appreciation of the dollar (32%), plus the increase in provisions for doubtful debts (R$ 103 million);

• General and administrative expenses (R$ 1,066 million), due to the rise in personnel costs as a result of the increase in the workforce and collective bargaining agreement in Brazil (R$ 233 million) and abroad (R$ 479 million), including the effect of the annual appreciation of the dollar, as well as third-party consulting, auditing and data processing services in Brazil (R$ 164 million).

• Exploration costs (R$ 1,084 million), due to the write-off of dry and economically unviable wells in Brazil (R$ 971 million), in turn caused by the continuous increase in the number of wells drilled in recent years as a result of the Company’s investment program, the upturn in the unit drilling cost due to the pressure of heightened industrial activity on inputs, and the reduction in the successful exploration ratio, given prospective drilling in higher risk areas in the Santos and Espírito Santo Basins;

• Losses from the impairment of Exploration and Production assets (R$ 479 million), reflecting the reduction in oil prices;

• Other operating expenses (R$ 148 million), due to losses from the devaluation of inventories (R$ 1,381 million), caused by the decline in commodity prices, offset by non-recurring expenses with the Petros Plan in 2007 (R$ 1,050 million) and reduced expenses with health, safety and the environment and contractual charges and fines (R$ 106 million).