Petrobras (PBR)

1. Change in the Oil and Alcohol Accounts

The Governmental Audit, constituted by ANP Decree No. 50, on April 19, 2002, in June of 2004 presented the final audit report confirming and certifying the amount due on the oil and alcohol accounts as R$ 748 million, referring to the period from July 1, 1998 to December 31, 2001. On December 31, 2004 the oil and alcohol balance accounts achieve R$749 million.

As defined in Law No. 10.742 dated October 6, 2003, the rectification of accounts with the government should have occurred by June 30, 2004. After having furnished all the information required by the National Treasury Secretary – STN, Petrobras is in discussion with the Ministry of Mines and Energy – MME, endeavoring to bridge the gap that still exists between the two parties with the objective of concluding the rectification of accounts with the government as per Provisional Measure No, 2,181-45, dated August 24, 2001.

With the intent of guaranteeing payment of the amount due on the oil, by-products and alcohol accounts, on June 30, 2004, there were 138,791 National Treasury Shares – Series H (NTN-H), in the amount of R$ 173 million issued in favor of Petrobras. These were, however, less than the value of the accounts. On July 2, 2004, the Government effected a deposit in the amount of R$ 173 million corresponding to the NTNs-H, as they had expired, in partial guarantee of the amount of the accounts, of which R$ 8 million was made available to PETROBRAS and the remaining amount of R$ 165 million is in an open account, in favor of the Company, as a blocked deposit linked to the STN order.

The value of the accounts may be paid by issuing National Treasury shares in an amount equal to the final value of the account rectification or other amounts that Petrobras may owe to the federal government, including for taxes or a combination of the foregoing options.

1. Change in the Oil and Alcohol Accounts

The Governmental Audit, constituted by ANP Decree No. 50, on April 19, 2002, in June of 2004 presented the final audit report confirming and certifying the amount due on the oil and alcohol accounts as R$ 748 million, referring to the period from July 1, 1998 to December 31, 2001. On December 31, 2004 the oil and alcohol balance accounts achieve R$749 million.

As defined in Law No. 10.742 dated October 6, 2003, the rectification of accounts with the government should have occurred by June 30, 2004. After having furnished all the information required by the National Treasury Secretary – STN, Petrobras is in discussion with the Ministry of Mines and Energy – MME, endeavoring to bridge the gap that still exists between the two parties with the objective of concluding the rectification of accounts with the government as per Provisional Measure No, 2,181-45, dated August 24, 2001.

With the intent of guaranteeing payment of the amount due on the oil, by-products and alcohol accounts, on June 30, 2004, there were 138,791 National Treasury Shares – Series H (NTN-H), in the amount of R$ 173 million issued in favor of Petrobras. These were, however, less than the value of the accounts. On July 2, 2004, the Government effected a deposit in the amount of R$ 173 million corresponding to the NTNs-H, as they had expired, in partial guarantee of the amount of the accounts, of which R$ 8 million was made available to PETROBRAS and the remaining amount of R$ 165 million is in an open account, in favor of the Company, as a blocked deposit linked to the STN order.

The value of the accounts may be paid by issuing National Treasury shares in an amount equal to the final value of the account rectification or other amounts that Petrobras may owe to the federal government, including for taxes or a combination of the foregoing options.