Petrobras (PBR)

Import Purchase Volumes and Prices

We continue to import lighter crude oil for blending in our own refineries, as well as smaller quantities of diesel, liquefied petroleum gas, naphtha and other oil products, to attend the demand of the Brazilian retail market. We have continuously upgraded our refineries to handle heavier crude oil in order to reduce our purchases of imported crude oil and oil products by refining a greater portion of our heavier crude oil production. This has positively affected the margin between our net operating revenues and cost of goods sold, since it is less expensive to produce crude oil domestically than it is to import crude oil. However, in 2004 the margin between our net operating revenues and cost of goods sold was lower than in 2003 as a result of an increase of imported crude oil to 155 million barrels in 2004 from 116 million barrels in 2003. This increase was mainly due to the growth of demand of oil products in Brazil that could not be met by our own crude oil production, which decreased in 2004 as compared to 2003. As we further upgrade our refineries to handle larger quantities of our heavy crude oil, our level of imports will tend to decrease. Our imports of crude oil had decreased to 116.1 million barrels in 2003, as compared to 117.6 million barrels of crude oil in 2002.

Prior to December 31, 2001, we were the only company permitted to import oil products to supply the Brazilian market’s demand for these products. Now that other parties are permitted by law to import oil products and supply the market, we continue to reevaluate our strategy in order to achieve an optimal level of imports for our profitability. We imported a total of 40.1 million barrels of oil products in 2004, as compared to 44.5 million barrels of oil products in 2003 and 78.5 million barrels in 2002. See Item 4. “Information on the Company—Refining, Transportation and Marketing-Imports.”