Petrobras (PBR)

a.2) New Hydrocarbons Law

In April 2006, the “Ley Reformatória” which amended the “Ley de Hidrocarburos” was enacted in Ecuador and regulated in July 2006, establishing that the Government shall hold a minimum interest of 50% in the extraordinary revenues generated by increases to the sale price of Ecuadorian oil as compared to the monthly average oil sale price established at the date the respective oil sale contracts were executed, stated in the currency of the month of settlement.

In January 2007, EcuadorTLC, a subsidiary of Pesa, paid the amount equivalent to R$ 46.053 thousand charged by Petroecuador, relating to the period from April to December 2006, and from this date onwards, despite disagreeing with the change, EcuadorTLC began making the payments based on the criteria established by Petroecuador.

In July 2007, Petroecuador notified EcuadorTLC of the differences in the value calculated for the Palo Azul field relating to the period from January to June 2007 in the amount equivalent to R$ 25.470 thousand, using a different methodology to calculate the shares. EcuadorTLC requested that Petroecuador reconsider the criteria utilized for the calculation, as it maintains that it had applied the criteria suggested by the Attorney General and the same method of calculation used by Petroecuador in January and February 2007.

In October 2007, the “Dirección Nacional de Hidrocarburos” (DNH) notified EcuadorTLC of a new charge, relating to the period from April 25, 2006 to December 31, 2006, including interest, which implies an additional expense of US$ 30 million.

On October 18, 2007 the Hydrocarbons Law was amended, increasing the State’s share in the extraordinary surpluses in the price of the oil to 99%, thus reducing the share of the oil companies to 1%. On December 28, Ecuador’s Constituent Assembly passed the “Ley de Equidad Tributaria”, which implements a major tax reform, including new taxes, as from January 01, 2008

The set of changes produced by the above-mentioned reform altered the terms established by the parties with regard to the approval of the respective participation agreements, affecting projections of profitability of the current business operations in Ecuador and the ability to recoup the investments made. Consequently, in order to adjust the book value of the assets to their estimated recovery value, a provision amounting to R$ 308.796 thousand (US$ 174.333 thousand).

On January 18, 2008, Petroecuador informed the existence of a single debt of US$ 66 million, corresponding to the differences accumulated between April 2006 and December 2007.

a.2.) New Hydrocarbons Law

In April 2006, the “Ley Reformatória” which amended the “Ley de Hidrocarburos” was enacted in Ecuador and regulated in July 2006, establishing that the Government shall hold a minimum interest of 50% in the extraordinary revenues generated by increases to the sale price of Ecuadorian oil as compared to the monthly average oil sale price established at the date the respective oil sale contracts were executed, stated in the currency of the month of settlement.

In January 2007, EcuadorTLC, a subsidiary of Pesa, paid the amount equivalent to R$ 46.053 thousand charged by Petroecuador, relating to the period from April to December 2006, and from this date onwards, despite disagreeing with the change, EcuadorTLC began making the payments based on the criteria established by Petroecuador.

In July 2007, Petroecuador notified EcuadorTLC of the differences in the value calculated for the Palo Azul field relating to the period from January to June 2007 in the amount equivalent to R$ 25.470 thousand, using a different methodology to calculate the shares. EcuadorTLC requested that Petroecuador reconsider the criteria utilized for the calculation, as it maintains that it had applied the criteria suggested by the Attorney General and the same method of calculation used by Petroecuador in January and February 2007.

New Hydrocarbons Law

Supreme Decree 28.701 came into force in Bolivia on May 01, 2006, which nationalized all natural hydrocarbon resources, obliging companies currently producing gas and oil to transfer ownership of the entire hydrocarbon production to YPFB.

On October 28, 2006, Petrobras Bolivia and its partners signed operating agreements with YPFB for the operations of the San Alberto, San Antonio, Rio Hondo and Ingre blocks, which came into effect on May 02, 2007. These contracts establish that the revenues, royalties, shareholdings, IDH, transportation and compression will be absorbed by YPFB, reimbursing the production costs and investments made by the Company and paying remuneration calculated in accordance with the variable participation table, specified in the contracts.

On June 25, 2007, a share purchase agreement for the shares of PBR was signed, transferring all the shares to YPFB for the amount of US$ 112 million in two installments, the first of which was settled on June 11, 2007 and the second on August 13, 2007. The capital gain on this transaction is calculated in the amount equivalent to R$ 66.195 on December 31, 2007 (US$ 37.371 thousand).

Law 3.740 - Sustainable Development of the Hydrocarbons Sector was enacted on August 31, 2007, repealing the Impuesto a las Utilidades Extraordinárias por Extracción de Recursos Naturales no Renovables and enabling YPFB to participate in the revenues originating from the abovementioned operating contracts.

Pursuant to the above mentioned decree 28.701, the Bolivian government nationalized the shares required for YPFB to gain control, with at least 50% plus one share, of Petrobras Bolivia Refinación S.A. (PBR), in which Petrobras, indirectly, was the sole shareholder (Petrobras Bolivia Inversiones e Servicios S.A. - 51% and Petrobras Energia Internacional S.A. - 49%).

In addition, the contract stipulates that the net income calculated by PBR for the period from April 01 to June 25, 2007, in the amount equivalent to R$ 36.583, will be paid to the seller by May 31, 2008.

Petrobras is currently in the process of closing down its distribution operations of oil products in Bolivia.

b.1) New Hydrocarbons Law

Supreme Decree 28.701 came into force in Bolivia on May 01, 2006, which nationalized all natural hydrocarbon resources, obliging companies currently producing gas and oil to transfer ownership of the entire hydrocarbon production to YPFB.

In addition, by means of the above mentioned decree, the Bolivian government nationalized the shares required for YPFB to gain control, with at least 50% plus 100% of the shares, of Petrobras Bolivia Refinación S.A. (PBR), in which Petrobras, indirectly, is the sole shareholder (Petrobras Bolivia Inversiones e Servicios S.A. – 51% e Petrobras Energia Internacional S.A. – 49%).

On October 28, 2006, Petrobras Bolivia and its partners signed operating agreements with YPFB for the operations of the San Alberto, San Antonio, Rio Honda and Ingre blocks, that are operated by Petrobras, which were registered and came into effect on May 02, 2007. These contracts establish that the revenues, royalties, shareholdings, IDH, transportation and compression will be absorbed by YPFB, reimbursing the production costs and investments made by the Company to the titleholder (Petrobras), and paying remuneration calculated in accordance with the variable participation table, specified in the contracts.

b.1) New Hydrocarbons Law

Supreme Decree 28.701 came into force in Bolivia on May 01, 2006, which nationalized all natural hydrocarbon resources, obliging companies currently producing gas and oil to transfer ownership of the entire hydrocarbon production to YPFB.

In addition, by means of the above mentioned decree, the Bolivian government nationalized the shares required for YPFB to obtain at least 50% plus 1 of the shares of Petrobras Bolivia Refinación S.A. – PBR, in which Petrobras, indirectly, is the sole shareholder (Petrobras Bolivia Inversiones e Servicios S.A. – 51% e Petrobras Energia Internacional S.A. – 49%).

On October 28, 2006 Petrobras and its partners signed operating agreements with YPFB for the operations of the San Alberto, San Antonio, Rio Honda and Ingre blocks, that are operated by Petrobras, which were registered and came into effect on May 02, 2007. These contracts establish that the revenues, royalties, shareholdings, IDH, transportation and compression will be absorbed by YPFB, reimbursing the production costs and investments made by the Company to the titleholder (Petrobras), and paying remuneration calculated in accordance with the variable participation table, specified in the contracts.

New Hydrocarbons Law

In April 2006 the Law which amended the Hydrocarbons Law (Ley de Hidrocarburos) was enacted in Ecuador, which establishes that the Government shall hold a minimum interest of 50% in the extraordinary revenues generated by increases to the sale price of Ecuadorian oil (average monthly effective FOB sale price) as compared to the monthly average oil sale price established in the contract, stated in the currency of the month of settlement. In July, 2006 the regulations of said Law were published. As at September 30, 2006 the effects of the new regulation impacted a total loss equivalent to R$ 1.305 thousand to PESA.

New Hydrocarbons Law

In April 2006 the Law which amended the Hydrocarbons Law (Ley de Hidrocarburos) was enacted in Ecuador, which establishes that the Government shall hold a minimum interest of 50% in the extraordinary revenues generated by increases to the sale price of Ecuadorian oil (average monthly effective FOB sale price) as compared to the monthly average oil sale price established in the contract, stated in the currency of the month of settlement. On July 13, 2006 the regulations of said Law were published. Up to June 30, 2006 a loss equal to R$ 21.050 thousand had been calculated.

New Hydrocarbons Law

The New Hydrocarbons Law No. 3058, effective May 19, 2005 in Bolivia, revoked the former Hydrocarbons Law No. 1689, dated April 30, 1996.

The new law establishes, among other matters, higher tax burden for companies of the sector, through royalties of 18% and a direct tax on hydrocarbons (IDH) of 32%, to be applied directly on 100% of the production, on top of taxes in force by operation of Law No. 843. In addition, the new legislation determines substitution of shared risk contracts for new contracts observing the models established in the Law, and introduces changes in the oil products distribution activity.

On May 20, 2005, contracts were entered into for association among YPFB (Bolivian state-owned company) and fuel distribution companies to extend the term of Distributors’ operations up until YPFB accumulates sufficient funds to develop this segment all over the national territory.

As of May 1, 2006, Supreme Decree 28.701 shall be in force in Bolivia, through which, the natural hydrocarbon resources shall be nationalized. As a consequence, the companies that are currently engaged in gas and petroleum production activities, will have to transfer the ownership of all hydrocarbon production to Yacimientos Petrolíferos Fiscales Bolivianos (YPFB).

The aforementioned Decree established that those fields whose average certified natural gas production in the year 2005 was greater than 100 million cubic feet per day, such as the fields in San Alberto and San Antonio in which the Company operates, shall distribute the amount of its production according to the following: 82% to the Bolivian government (18% for royalties and participation, 32% for “Direct Tax on Hydrocarbons (IDH)” and 32% through an additional participation for YPFB) and

29

18% for the Companies to cover operational costs, investment amortization and remuneration.

In addition, a transition period of 180 days has been established in which the Companies that are currently in operation shall enter into new agreement established by YPFB. Those companies that have not entered into agreements at the end of the aforementioned deadline will not be allowed to continue operating in the country.

On the other hand, by this decree the State nationalizes the shares necessary for YPFB to control, with a minimum of 50% plus 1 of Petrobras Bolívia Refinación S.A. (PBR), of which PETROBRAS indirectly holds 100% interest (Petrobras International Braspetro B.V. – 51% e Petrobras Energia S.A. – 49%) and will indicate the YPFB representatives to participate of the PBR management, as to sign new contracts to guarantee the control and management by the Bolivian hydrocarbon authorities. PETROBRAS understands that, to become effective the YPFB designations of the new management, as well as the transfer of the 50% plus 1 shares, a sort of procedures and legal and statutory formalities, in accordance with the Bolivian Constitution and Republic laws, will have to be followed.

In addition, YPFB shall take control of hydrocarbon distribution in the country as of July 1, 2006, maturity date of the agreements with the large private petroleum byproduct distributors and through which Petrobras Bolívia Distribuición has been operating on two blocks in the country.

Up to the present time the Bolivian government has not issued the corresponding regulatory Decrees and the Company continues its normal operations in the same manner has it has until now. However, the impacts and corresponding scope of the aforementioned Decree are being evaluated.

On May 11, 2006 was held in La Paz, a meeting between the Minister of Mines and Energy of Brazil and Bolívia and the Chief Executive Officer of PETROBRAS and YPFB, basically to establish a working plan reflecting the Brazil and Bolivia interests in reconcile their interests.