Petrobras (PBR)

d) Investments in Venezuela

In March 2006, PESA, through its subsidiaries and affiliated companies in Venezuela, signed heads of agreement with PDVSA and Corporación Venezolana del Petróleo S.A. (CVP) with the aim of concretizing the migration of the operating agreements to the type for private and public joint stock companies, in accordance with legal articles. The heads of agreement established that the stake of the private partners in the private and public joint stock companies is 40% and the stake of the government of Venezuela is 60%.

In accordance with the corporate and governance structure established for the private and public joint stock companies, as from April 1, 2006 PESA stopped recording the assets, liabilities and results referring to the aforementioned operations in the consolidated statements and began to present them as corporate investments in affiliated companies, valued by the equity accounting method. Recovery of these investments is tied to the volatility of oil prices, social, economic and regulatory conditions in Venezuela and, particularly, to the interests of its shareholders with respect to the development of oil reserves. Accordingly, in order to adjust the book value of the investment to its estimated recoverable value, impairment equivalent to R$ 55.425 (US$ 23.115 thousand) in 2008 and R$ 119.588 (US$ 67.514 thousand) in 2007 was recognized.

(c) Investments in Venezuela

In March, 2006, through its subsidiaries and affiliated companies in Venezuela, PESA executed with PDVSA and Corporación Venezolana del Petróleo S.A. (CVP), Memoranda of Understanding (MOU) for the purpose of completing the migration of the operating partnerships to the form of mixed capital companies in accordance with legal articles. The MOU established that the interest held by the private partners in the mixed capital companies is 40%, with the Venezuelan government holding an interest of 60%.

According to the corporate and governance structure specified for the mixed capital companies, as from April 01, 2006, PESA no longer recorded the assets, liabilities and results referring to the aforesaid operations in consolidated statements, presenting them as equity method investments. Recovery of these investments is strongly tied to the volatility of oil prices, social, economic and regulatory conditions in Venezuela and, in particular, to shareholders’ interest in developing the oil reserves. Consequently a provision for loss on investments has been made in the amount of US$23 in 2008, (US$67 in 2007).

(b) Investments in Venezuela

In March, 2006, through its subsidiaries and affiliated companies in Venezuela, PESA executed with PDVSA and Corporación Venezolana del Petróleo S.A. (CVP), Memoranda of Understanding (MOU) for the purpose of completing the migration of the operating partnerships to the form of mixed capital companies. The MOU establish that the interest held by the private partners in the mixed capital companies is 40%, with the Venezuelan government holding an interest of 60%. According to the terms of the MOU, CVP recognized divisible credits transferable to the private companies with an interest in the mixed capital companies, which shall not be charged interest and may be used as payment of the acquisition bonus for any new mixed capital company project, to develop oil exploration and production activities or to license the development of gas exploration and production operations in Venezuela. The credits assigned to PESA correspond to US$88.5, which were not booked in the accounting records.

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10. Investments in Non-Consolidated Companies and Other Investments (Continued)

(b) Investments in Venezuela (Continued)

The migration of the contracts produced economic effects as from April 01, 2006. In August 2006, the conversion contracts for Oritupano Leona, La Concepción, Acema and Mata had been executed and the companies Petroritupano S.A., Petrowayú S.A., Petrovenbras S.A. and Petrokariña S.A. were formed, which each operate in the abovementioned areas, respectively.

According to the corporate and governance structure specified for the mixed capital companies, as from April 01, 2006, PESA no longer recorded the assets, liabilities and results referring to the aforesaid operations in consolidated statements, presenting them as corporate investments in associated companies appraised according to the equity method. Recovery of these investments is strongly tied to the volatility of oil prices, social, economic and regulatory conditions in Venezuela and, in particular, to shareholders’ interest in developing the oil reserves. Consequently a provision for loss on investments has been made in the amount of US$61.

d) Investments in Venezuela

d.1) Review of the operating partnerships in Venezuela

In April 2005, the “Ministry of Energy and Petroleum of Venezuela” (MEP) instructed the company Petróleos de Venezuela S.A. (PDVSA) to review the thirty-two operating partnerships executed by PDVSA’s affiliates with oil companies between 1992 and 1997.

d) Investments in Venezuela

d.1) Review of the operating partnerships in Venezuela

In April 2005, the “Ministry of Energy and Petroleum of Venezuela” (MEP) instructed the company Petróleos de Venezuela S.A. (PDVSA) to review the thirty-two operating partnerships executed by PDVSA’s affiliates with oil companies between 1992 and 1997.

(iv) Investments in Venezuela

• Review of the operating partnerships

In April 2005, the “Ministério de Energia y Petróleo de Venezuela” (MEP) instructed the company Petróleos de Venezuela S.A. (PDVSA) to review the thirty-two operating partnerships executed by PDVSA’s affiliates with oil companies between 1992 and 1997, including the contracts executed by Petrobras Energia, through its subsidiaries and associated companies in Venezuela, which regulate the exploration of the Oritupano Leona, La Concepción, Acema and Mata areas.

On September 29, 2005, and as a preliminary procedure for tailoring the operating partnerships to the new business framework, by way of its subsidiaries and associated companies in Venezuela, Petrobras Energia executed the Transitory Agreements with PDVSA, by which it undertook to negotiate the terms and conditions for converting the operating partnerships covering the areas Oritupano Leona, La Concepción, Acema and Mata into mixed capital companies.

On December 31, 2005, Pesa recorded a loss equal to R$ 327.698 thousand incurred by adjusting the carrying amount of the assets in Venezuela to their recoverable value.

By way of its subsidiaries and associated companies in Venezuela, in March 2006 Pesa executed with PDVSA and Corporación Venezolana del Petróleo S.A. (CVP) Memoranda of Understanding (MDE) for the purpose of completing the migration of the operating partnerships covering the areas Oritupano Leona, La Concepción, Acema and Mata to the form of mixed capital companies. The MDE establish that the interest held by the private partners in the mixed capital companies is 40%, with the Venezuelan government holding an interest of 60%. According to the terms of the MDE, CVP shall recognize divisible credits transferable to the private companies with an interest in the mixed capital companies, which shall not be charged interest and may be used as payment of the acquisition bonus for any new mixed capital company project, to develop oil exploration and production activities or to license the development of gas exploration and production operations in Venezuela. The credits assigned to Pesa correspond to US$ 88,5 million.

Migration from the contracts produced economic effects as from April 01, 2006. In August 2006, the conversion contracts for Oritupano Leona, La Concepción, Acema and Mata had been executed and the companies Petroritupano S.A., Petrowayú S.A., Petrovenbras S.A. and

(iv) Investments in Venezuela

Review of the operating partnerships in Venezuela

In April 2005 the Venezuelan Ministry of Energy and Oil (MEP) instructed the company Petróleos de Venezuela S.A. (PDVSA) to review the thirty-two operating partnerships executed by PDVSA’s affiliates with oil companies between 1992 and 1997, including the contracts executed by Petrobras Energia Venezuela S.A., a subsidiary of PESA, which regulate the exploration of the Oritupano Leona, La Concepción, Acema and Mata areas. The MEP instruction established that PDVSA should take all the measures necessary to convert the operating partnerships into mixed capital companies, where the Venezuelan Government would have an interest in excess of 50%, by way of PDVSA.

On September 29, 2005 and as a preliminary procedure for tailoring the operating partnerships to the new business framework, by way of its subsidiaries and associated companies in Venezuela, Petrobras Energia executed the Transitory Agreements with PDVSA, by which it undertook to negotiate the terms and conditions for converting the operating partnerships covering the areas Oritupano Leona, La Concepción, Acema and Mata into mixed capital companies. The transitory agreement for the Oritupano Leona area was executed subject to prior approval by the Ordinary Shareholders Meeting of Petrobras Energia S.A. and an Extraordinary Meeting of Petrobras Energia Participaciones S.A., which resolved to approve the agreement.

By way of its subsidiaries and associated companies in Venezuela, in March 2006 PESA executed with PDVSA and Corporación Venezolana del Petróleo S.A. (CVP) Memoranda of Understanding (MDE) for the purpose of completing the migration of the operating partnerships covering the areas Oritupano Leona, La Concepción, Acema and Mata to the form of mixed capital companies. The MDE establish that the interest held by the private partners in the mixed capital companies shall be 40%, while the Venezuelan government shall hold an interest of 60%. According to the terms of the MDE, CVP shall recognize divisible credits transferable to the private companies with an interest in the mixed capital companies, which shall not be charged interest and may be used as payment of the acquisition bonus for new areas, to develop oil exploration and production activities or to license the development of gas exploration and production operations in Venezuela. The credits assigned to PESA correspond to US$ 88.5 million, equal to R$ 192.000 thousand.

The indirect interests held by PESA in the areas of Oritupano Leona, La Concepción, Acema and Mata are therefore 22%, 36%, 34,5% and 34,5% respectively.

On December 31, 2005 PESA recorded a loss equal to R$ 327.698 thousand to adjust the book value of the Venezuelan assets to their recoverable value, of which R$ 198.960 thousand corresponds to operating assets, R$ 84.265 thousand to the reversal of tax credits and R$ 44.473 thousand to corporate investments not including amortization of the discount derived from the acquisition by PPSL and the share of control of PEPSA in 2002 and the share of PEPSA minority shareholders, in

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the results, corresponded to an effective loss for PETROBRAS of R$ 1.720 thousand. The memoranda executed with PDVSA and CVP did not result in changes to the estimated loss recognized in 2005.

Migration of the contracts shall produce economic effects as from April 01, 2006. By June 30, 2006 no significant advances have been recorded in the quest to conclude the partnership conversion process. Among other formalities, it remains to execute the conversion contracts corresponding to the Oritupano Leona, Acema and Mata areas, to incorporate the mixed capital companies and to decree the transfer of rights. During the transition period and until all of the requirements to conclude the process have been performed, the consortia’s operations shall continue to be conducted by PESA under the supervision of an integrated operating committee, on which PDVSA representatives shall form the majority. Due to the constraints imposed by the current corporate situation, the income from the operations in the second quarter of 2006 has been estimated using the best information available.

According to the corporate governance structure specified for the mixed capital companies, from April 01, 2006 PESA no longer recorded the assets, liabilities and results referring to the aforesaid operations in consolidated statements, presenting them as corporate investments in associated companies calculated according to the equity method.