Petrobras (PBR)

Cost of Sales (Excluding Depreciation, Depletion and Amortization)

Cost of sales for 2008 increased 46.3% to U.S.$72,865 million, compared to U.S.$49,789 million for 2007. This increase was principally a result of:

• U.S.$6,318 million increase in the cost of imports due to a 5.9% increase in volumes and a 51.0% increase in average prices;

• U.S.$4,111 million increase in costs for our international trading activities due to increased offshore operations conducted by PifCo;

• a U.S.$3,554 million increase in production taxes and charges imposed by the Brazilian government totaling U.S.$10,975 million for 2008 compared to U.S.$7,420 million for 2007, due to a 35% increase in the reference price for local oil (U.S.$3,087 million of the total), and increased output (U.S.$467 million of the total). This increase in production taxes and charges also includes an increase in the special participation charge (an extraordinary charge payable in the event of high production or profitability from our fields); and

• U.S.$3,524 million increase in costs related to higher sales volumes in the domestic market.

Cost of sales (excluding depreciation, depletion and amortization)

Cost of sales in the nine-month period ended September 30, 2008, increased 66.3% to U.S.$58,090 million, compared to U.S.$34,931 million in the nine-month period ended September 30, 2007. This increase was principally a result of:

• U.S.$5,208 million increase in the cost of imports due to higher volumes and prices;
  
  
• U.S.$4,358 million increase in costs for our international trading activities due to increased offshore operations conducted by PifCo;
  
  
• a U.S.$2,696 million increase in production taxes and charges imposed by the Brazilian government totaling U.S.$ 7,796 million in the nine-month period ended September 30, 2008, compared to U.S.$5,100 million in the nine-month period ended September 30, 2007, due to the 70.0% increase in the reference price for local oil (U.S.$2,373 million), and the increase in output (U.S.$323 million). This increase in production taxes and charges also includes an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields);
  
  
• U.S.$1,548 million increase in costs related to higher sales volumes in the domestic market; and
  
  
• U.S.$754 million increase in costs related to the generation and purchase of energy for sale.

Cost of sales (excluding depreciation, depletion and amortization)

Cost of sales in the first half of 2008 increased 63.6% to U.S.$35,095 million, as compared to U.S.$21,453 million in the first half of 2007. This increase was principally a result of:

• a U.S.$3,145 million increase in the cost of imports due to higher volumes and prices;

• a U.S.$2,704 million increase in costs for our international trading activities, due to increases in volume from offshore operations, conducted by PifCo;

• a U.S.$1,213 million increase in production taxes and charges imposed by the Brazilian government totaling U.S.$ 4,404 million in the first half of 2008, compared to U.S.$3,191 million in the first half of 2007, due to the 44% increase in the reference price for local oil in the first half of 2008 versus the first half of 2007, resulting from the average Brent price on the international market (U.S.$1,014 million), and the increase in output (U.S.$199 million). This increase in production taxes and charges includes an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) in the first half of 2008, as compared to the first half of 2007;

• a U.S.$1,010 million increase in costs related to the increase of our sales volumes in the domestic market; and

• a U.S.$657 million increase in costs related to the generation and purchase of energy for commercialization.

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Cost of sales (excluding depreciation, depletion and amortization)

Cost of sales for the first quarter of 2008 increased 46.7% to U.S.$15,380 million, as compared to U.S.$10,485 million for the first quarter of 2007. This increase was principally a result of:

• a U.S.$2,024 million increase in the cost of imports due to higher volumes and prices;
  
  
• a U.S.$1,058 million increase in costs for our international trading activities, due to increases in volume from offshore operations, conducted by PifCo; and
  
  
• a U.S.$998 million increase in production taxes and charges imposed by the Brazilian government totaling U.S.$2,794 million for the first quarter of 2008, compared to U.S.$1,796 million for the first quarter of 2007. This increase in production taxes and charges includes an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.1,400 million for the first quarter of 2008, as compared to U.S.$950 million for the first quarter of 2007.

Cost of sales (excluding depreciation, depletion and amortization)

Cost of sales for 2007 increased 23.9% to U.S.$49,789 million, as compared to U.S.$40,184 million for 2006. This increase was principally a result of:

• a U.S.$2,472 million increase in the cost of imports due to higher volumes and prices;
  
  
• a U.S.$2,443 million increase in costs associated with a 10.7% increase in our international market prices, including costs related to Pasadena Refinery;
  
  
• a U.S.$1,567 million increase in costs associated with a 10.7% increase in our international market sales volumes, including costs related to Pasadena Refinery;
  
  
• a U.S.$505 million increase in costs for our international trading activities, due to increases in volume from offshore operations, conducted by PifCo; and
  
  
• a U.S.$249 million increase in production taxes and charges imposed by the Brazilian government totaling U.S.$7,692 million for 2007, compared to U.S.$7,443 million for 2006. This increase in production taxes and charges includes an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.$3,933 million for 2007, as compared to U.S.$3,885 million for 2006.

Cost of sales (excluding Depreciation, depletion and amortization)

Cost of sales for the nine-month period ended September 30, 2007 increased 21.1% to U.S.$ 34,931 million, as compared to U.S.$ 28,841 million for the nine-month period ended September 30, 2006. This increase was principally a result of:

• a U.S.$ 3,157 million increase in costs associated with a 27.5% increase in our international market sales volumes, including costs related to Pasadena Refinery;

• a U.S.$ 1,452 million increase in the cost of imports due to higher volumes of products imported;

• a U.S.$ 145 million increase in costs associated with our international trading activities, due to increases in volume from offshore operations, conducted by PifCo; and

• the 8.3% increase in the value of the Real against the U.S. dollar in the nine-month period ended September 30, 2007, as compared to the nine-month period ended September 30, 2006.

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These increases were partially offset by a U.S.$ 344 million decrease in taxes and charges imposed by the Brazilian government totaling U.S.$ 5,242 million for the nine-month period ended September 30, 2007, as compared to U.S.$ 5,586 million for the nine-month period ended September 30, 2006. This decrease in taxes and charges was largely related to a decrease in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.$ 2,708 million for the nine-month period ended September 30, 2007, as compared to U.S.$ 2,922 million for the nine-month period ended September 30, 2006. This decrease was due to the 12% decrease in the reference price for local oil, which averaged U.S.$ 50.76 in the nine-month period ended September 30, 2007, as compared to U.S.$ 53.76 in the nine-month period ended September 30, 2006, reflecting lower reference prices for crude oil on the international markets, and the reduction in the special participation tax due to the natural decline in production in fields subject to special participation, which reduced the applicable tax bracket for those fields.

Cost of sales (excluding Depreciation, depletion and amortization)

Cost of sales for the first half of 2007 increased 24.4% to U.S.$ 21,453 million, as compared to U.S.$ 17,244 million for the first half of 2006. This increase was principally a result of:

• a U.S.$ 2,391 million increase in costs associated with a 27.5% increase in our international market sales volumes, including costs related to Pasadena Refinery;
  
  
• a U.S.$ 1,694 million increase in the cost of imports due to higher volumes of products imported;
  
  
• a U.S.$ 256 million increase in costs associated with our international trading activities, due to increases in volume from offshore operations, conducted by PifCo; and

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• the 6.6% increase in the value of the Real against the U.S. dollar in the first half of 2007, as compared to the first half of 2006.

These increases were partially offset by a U.S.$ 398 million decrease in taxes and charges imposed by the Brazilian government totaling U.S.$ 3,237 million for the first half of 2007, as compared to U.S.$ 3,635 million for the first half of 2006. This decrease in taxes and charges was largely related to a decrease in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.$ 1,671 million for the first half of 2007, as compared to U.S.$ 1,900 million for the first half of 2006; due to the 12% decrease in the reference price for local oil, which averaged U.S.$ 50.76 in the first half of 2007, as compared to U.S.$ 53.76 in the first half of 2006, reflecting lower reference prices for crude oil on the international markets, and the reduction in the special participation tax due to the natural decline in production in fields subject to special participation, which reduced the applicable tax bracket for those fields.

Cost of sales (excluding Depreciation, depletion and amortization)

Cost of sales for the first quarter of 2007 increased 28.9% to U.S.$ 10,455 million, as compared to U.S.$ 8,112 million for the first quarter of 2006. This increase was principally a result of:

• a U.S.$ 1,189 million, in costs associated with a 33.2% increase in our international market sales volumes, including costs related to Pasadena Refinery;
  
  
• a U.S.$ 486 million increase in the cost of imports due to higher prices for the products imported;
  
  
• a U.S.$ 178 million increase in costs associated with our international trading activities, due to increases in volume and prices from offshore operations, conducted by PifCo;
  
  
• a U.S.$ 67 million increase in taxes and charges imposed by the Brazilian government totaling U.S.$ 1,796 million for the first quarter of 2007, as compared to U.S.$ 1,729 million for the first quarter of 2006, including an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.$ 950 million for the first quarter of 2007, as compared to U.S.$ 916 million for the first quarter of 2006;
  
  
• a U.S.$ 38 million increase in taxes and charges imposed by the Bolivian government totaling U.S.$ 85 million for the first quarter of 2007, as compared to U.S.$ 47 million for the first quarter of 2006; and

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• the 3.9% increase in the value of the Real against the U.S. dollar in the first quarter of 2007, as compared to the first quarter of 2006.

Cost of sales (excluding Depreciation, depletion and amortization)

Cost of sales for 2006 increased 34.3% to U.S.$ 40,061 million, as compared to U.S.$ 29,828 million for 2005. This increase was principally a result of:

• a U.S.$ 3,376 million increase in the cost of imports due to higher prices for the products imported and to the increase in the volume of products imported;
  
  
• a U.S.$ 2,588 million increase in costs associated with a 19.4% increase in our international market sales volumes;
  
  
• a U.S.$ 2,033 million increase in taxes and charges imposed by the Brazilian government totaling U.S.$ 7,443 million for 2006, as compared to U.S.$ 5,410 million for 2005, as a result of higher international oil prices and the new interpretation by the ANP prohibiting the deductibility of charges associated with project financing for the Marlim field; including an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) of U.S.$ 3,885 million for 2006, as compared to U.S.$ 3,016 million for 2005, as a result of higher international oil prices and an increase of U.S.$ 249 million due to the new interpretation by the ANP mentioned above;
  
  
• a U.S.$ 187 million expense related to gas produced and re-injected in reserves in the Solimões, Campos and Espírito Santo basins;

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• a U.S.$ 156 million increase in costs associated with our international trading activities, due to increases in volume and prices from offshore operations, conducted by PIFCo; and
  
  
• the 10.7% increase in the value of the Real against the U.S. dollar in 2006, as compared to 2005.

Cost of sales (excluding Depreciation, Depletion and Amortization)

Cost of sales for the nine-month period ended September 30, 2006 increased 34.7% to U.S.$ 28,744 million, as compared to U.S.$ 21,337 million for the nine-month period ended September 30, 2005. This increase was principally a result of:

• a U.S.$ 2,041 million increase in taxes and charges imposed by the Brazilian government totaling U.S.$ 5,586 million for the nine-month period ended September 30, 2006, as compared to U.S.$ 3,545 million for the nine-month period ended September 30, 2005 as a result of higher international oil prices and the new interpretation by the ANP disallowing deductibility of charges associated with project financing for the Marlim field; including an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) to U.S.$ 2,922 million for the nine-month period ended September 30, 2006, as compared to U.S.$ 2,034 million for the nine-month period ended September 30, 2005, as a result of higher international oil prices and an increase of U.S.$ 195 million due to the new interpretation by the ANP mentioned above;

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• a U.S.$ 2,060 million increase in costs associated with a 6.3% increase in our internationallarket market sales volumes;
  
  
• a U.S.$ 2,307 million increase in the cost of imports due to higher prices for the products imported and to the increase in the volume of products imported;
  
  
• a U.S.$ 187 million expense related to gas produced and re-injected in reserves in the Solimões, Campos and Espirito Santo Basins;
  
  
• a U.S.$ 111 million increase in costs associated with our international trading activities, due to increases in volume and prices from offshore operations, conducted by PIFCo; and
  
  
• the 12.6% increase in the value of the Real against the U.S. dollar in the nine-month period ended September 30, 2006, as compared to the nine-month period ended September 30, 2005.

Cost of sales (excluding Depreciation, Depletion and Amortization)

Cost of sales for the first half of 2006 increased 36.1% to U.S.$ 17,169 million, as compared to U.S.$ 12,614 million for the first half of 2005. This increase was principally a result of:

• a U.S.$ 1,464 million increase in taxes and charges imposed by the Brazilian government totaling U.S.$ 3,635 million for the first half of 2006, as compared to U.S.$ 2,171 million for the first half of 2005, including an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) to U.S.$ 1,900 million for the first half of 2006, as compared to U.S.$ 1,265 million for the first half of 2005, as a result of higher international oil prices;
  
  
• a U.S.$ 926 million increase in costs associated with our international trading activities, due to increases in volume and prices from offshore operations, conducted by PIFCo;
  
  
• a U.S.$ 908 million increase in costs associated with a 12.5% increase in our international market sales volumes; and
  
  
• a U.S.$ 616 million increase in the cost of imports due to higher prices for the products imported;
  
  
• a U.S.$ 154 million increase in the cost of imports due to the increase of the volume of products imported; and

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• the 15.0% increase in the value of the Real against the U.S. dollars in the first half of 2006, as compared to the first half of 2005.

Cost of sales (excluding Depreciation, Depletion and Amortization)

Cost of sales for the first quarter of 2006 increased 55.8% to U.S.$ 8,112 million, as compared to U.S.$ 5,206 million for the first quarter of 2005. This increase was principally a result of:

• a U.S.$ 920 million increase in taxes and charges imposed by the Brazilian government totaling U.S.$ 1,729 million for the first quarter of 2006, as compared to U.S.$ 809 million for the first quarter of 2005, including an increase in the special participation charge (an extraordinary charge payable in the event of high production and/or profitability from our fields) to U.S.$ 916 million for the first quarter of 2006, as compared to U.S.$ 421 million for the first quarter of 2005, as a result of higher international oil prices;

• a U.S.$ 444 million increase in costs associated with our international trading activities, due to increases in volume and prices from offshore operations, conducted by PIFCo;

• a U.S.$ 264 million increase in costs attributable to: (1) maintenance and technical services for well restoration, materials, support for vessels, undersea operations, freight with third parties (these prices are tied to international oil prices) consumption of chemical products to clear out and eliminate toxic gases – principally at Marlim; and (2) higher personnel expenses primarily related to: overtime payments as set forth in our collective bargaining agreement; an increase in our workforce; and a revision in the actuarial calculations relating to future health care and pension benefits;

• a U.S.$ 254 million increase in the cost of imports due to higher prices for the products imported;

• a U.S.$ 249 million increase in costs associated with a 9.0% increase in our international market sales volumes;

• a U.S.$ 154 million increase in costs associated with a 1.7% increase in our domestic sales volumes; and

• the 17.7% increase in the value of the Real against the U.S. dollars in the first quarter of 2006, as compared to the first quarter of 2005.