Petrobras (PBR)

The Board of Directors approves changes to Petrobras System’s
Investment Budget for 2007

(Rio de Janeiro, January 19, 2007). - PETRÓLEO BRASILEIRO S/A - PETROBRAS, [Bovespa: PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA, BCBA: APBR/APBRA], a Brazilian international energy company, announces its Board of Directors has approved the update of Petrobras System’s Annual Business Plan for 2007.

The Budget Plan detailing process, to formulate the 2007 Annual Business Plan, pointed to the need to adjust the budget by incorporating: New project inclusions, priority project anticipation, and changes in scope, cost adjustments and updates to more current accounting practices.

This update resulted in a R$ 7,542 million addition to the budget, topping out at a total investment of R$ 54,998 million for 2007 (up from the previous estimate of R$ 47,456 million).

This R$ 7,542 million budget increase seeks to prioritize and optimize the company’s project portfolio in order to update and adapt the goals set forth by the 2007-2011 Business Plan. The proposed updates derive mainly from:

• R$ 3,328 million for projects connected to the PLANGÁS (the Gas Production Anticipation Plan) aimed at quickly boosting the natural gas offer to the Brazilian market;
• R$ 2,046 million derived from project inclusions (R$ 3,108 million) and exclusions (R$1,062 million) from the portfolio that had originally been planned for 2007;
• R$ 1,175 million resulting from project execution cost increases;
• R$ 908 million coming from project postponements and anticipations;
• R$ 711 million derived from changes made to the accounting rule that requires programmed stoppages expenses at the units to be classified as investments, and;
• A reduction in the order of R$ 626 million caused by changes made to project scopes, to the business model, as well as other factors.