Petrobras (PBR)

Pag: 115

The higher year-on-year result was due to the increase in average domestic oil prices and the 3% increase in daily oil and NGL production

Part of these effects were offset by the higher government take and the increase in exploration costs, the latter due to the write-off of dry and non-commercial wells.

The spread between the average domestic oil sale/transfer price and the average Brent price widened from US$ 10.61/bbl in the first nine months of 2007, to US$ 13.51/bbl in the first nine months of 2008.

The quarter-over-quarter reduction was due to the decline in international oil prices, associated with the following factors:

• The higher government take;

• Higher exploration costs from the write-off of dry or non-commercial wells, as well as geological and geophysical costs;

• Expenses related to the 2008/09 labor agreement.

Part of these effects were offset by the 2% increase in total oil and NGL production and the reduction in the spread between the average domestic oil sale/transfer price and the average Brent price narrowed from US$ 15.92/bbl in the 2Q-2008 to US$ 14.20/bbl in the 3Q-2008.

Pag: 115

The quarterly improvement in the result was due to the following factors:

• Higher oil prices, higher sales volume in Ecuador and from the beginning of operations in the Japanese refinery;

• Lower exploration costs in the USA and Nigeria;

• The constitution of provisions for royalty contingencies in the 1Q-2008.

The higher result was due to the following factors:

• The R$ 632 million reduction in expenses from the amendments to the Petros Plan regulations in 2007;

• The R$ 224 million reduction in tax expenses due to the extinction of the CPMF financial transaction tax, partially offset by the increase in the IOF financial operations tax.

The 2Q-2008 downturn was due to the negative impact of net financial expenses, as detailed on page 9, plus the impact of the negative exchange variation on offshore investments.

Pag: 115

(A free translation of the original report in Portuguese)

08.01 – COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER