Petrobras (PBR)

a) Management of market risks for petroleum and derivates

Like all of its peers, Petrobras is subject to the volatility of the international energy prices (mainly oil), which may materially affect the Company’s cash flow.

a) Management of market risks for petroleum and derivates

Like all of its peers, Petrobras is subject to the volatility of the international energy prices (mainly oil), which may materially affect the Company’s cash flow.

a) Management of market risks for petroleum and derivates

Like all of its peers, Petrobras is subject to the volatility of the international energy prices (mainly oil), which may materially affect the Company’s cash flow.

Petrobras’ policy for the risk management of the price of oil and oil products consists basically in protecting the import and export margins in some specific short-term positions (up to 6 months). Future contracts, swaps, and options are the instruments used in these hedges. These operations are always tied to actual physical transactions, that is, they are economic hedge transactions (not speculative), in which all positive or negative results are offset by the reverse results of the actual physical market transaction.

In the first quarter of 2007 hedge transactions were conducted for 24,06% of the total volume sold (imports and exports). On March 31, 2007 the open positions on the futures market, as compared to market value, would have presented a loss of approximately R$ 45.250 thousand if it had been settled on this date.

In compliance with specific business conditions, an exceptional long-term economic hedge operation, still outstanding, was effected by the sale of put options for 52 million barrels of WTI oil over the period from 2004 to 2007, to obtain price protection for this quantity of oil to provide the funding institutions of the Barracuda/Caratinga project with a minimum guaranteed margin to cover the debt servicing.

As of March 31, 2007, this transaction, if settled at market values, would represent a cost of approximately R$ 59.708 thousand deriving from the premiums.

(a) Management of market risks for petroleum and derivates

Like all of its peers, PETROBRAS is subject to the volatility of international energy prices (mainly oil), which may materially affect the Company’s cash flow.

As the policy for the risk management of the price of oil and oil products consists basically in protecting the import and export margins in some specific short-term positions (up to 6 months). Futures contracts, swaps, and options are the instruments used in these hedges. These operations are always tied to actual physical transactions, that is, they are economic hedge transactions (not speculative), in which all positive or negative results are offset by the reverse results of the actual physical market transaction.

From January to September 2006, economic hedge transactions were carried out for 23,45% of the total volume traded (imports and exports). At September 30, 2006, the open positions on the futures market, when compared to their market value, would represent a negative result of approximately R$ 88.323 thousand, if liquidated on that date.

In compliance with specific business conditions, an exceptional long-term economic hedge operation, still outstanding, was effected by the sale of put options for 52 million barrels of West Texas Intermediate (WTI) oil over the period from 2004 to 2007, to obtain price protection for this quantity of oil to provide the funding institutions of the Barracuda/Caratinga project with a minimum guaranteed margin to cover the debt servicing.

As of September 30, 2006, this transaction, if settled at market values, would represent a cost of approximately R$ 63.300 thousand originated by premiums.

(a) Management of market risks for petroleum and derivates

Like all of its peers, PETROBRAS is subject to the volatility of international energy prices (mainly oil), which may materially affect the Company’s cash flow.

As the policy for the risk management of the price of oil and oil products consists basically in protecting the import and export margins in some specific short-term positions (up to 6 months). Futures contracts, swaps, and options are the instruments used in these hedges. These operations are always tied to actual physical transactions, that is, they are economic hedge transactions (not speculative), in which all positive or negative results are offset by the reverse results of the actual physical market transaction.

From January to June 2006, economic hedge transactions were carried out for 21.59% of the total volume traded (imports and exports). At June 30, 2006, the open positions on the futures market, when compared to their market value, would represent a negative result of approximately R$ 21.500 thousand, if liquidated on that date.

In compliance with specific business conditions, an exceptional long-term economic hedge operation, still outstanding, was effected by the sale of put options for 52 million barrels of West Texas Intermediate (WTI) oil over the period from 2004 to 2007, to obtain price protection for this quantity of oil to provide the funding institutions of the Barracuda/Caratinga project with a minimum guaranteed margin to cover the debt servicing.

As of June 30, 2006, this transaction, if settled at market values, would represent a cost of approximately R$ 63.100 thousand originated by premiums.

(a) Management of market risks for petroleum and derivates

Like all of its peers, PETROBRAS is subject to the volatility of the international energy prices (mainly oil), which may materially affect the Company’s cash flow.

As per the policy for the risk management of the price of oil and oil products consists basically in protecting the import and export margins in some specific short-term positions (up to 6 months). Future contracts, swaps, and options are the instruments used in these hedges. These operations are always tied to actual physical transactions, that is, they are economic hedge transactions (not speculative), in which all positive or negative results are offset by the reverse results of the actual physical market transaction.

From January to March 2006, economic hedge transactions were carried out for 15.03% of the total volume traded (imports and exports). At March 31, 2006, the open positions on the futures market, when compared to their market value, would represent a negative result of approximately R$ 6.000 thousand, if liquidated on that date.

In compliance with specific business conditions, an exceptional long-term economic hedge operation, still outstanding, was effected by the sale of put options for 52 million barrels of West Texas Intermediate (WTI) oil over the period from 2004 to 2007, to obtain price protection for this quantity of oil to provide the funding institutions of the Barracuda/Caratinga project with a minimum guaranteed margin to cover the debt servicing.

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As of March 31, 2006, this transaction, if settled at market values, would represent a cost of approximately R$ 63.300 thousand originated by premiums.