Petrobras (PBR)

Pag: 116

The year-on-year reduction in the Supply result in the 9M-2008 was due to higher oil acquisition/transfer costs and the increase in oil product import costs, reflecting the behavior of international prices.

These effects were partially offset by the increase in oil product average realization prices in Brazil and abroad.

The quarter-on-quarter decline was due to:

• The liquidation, in the 3Q-2008, of inventories acquired at a higher cost in the previous quarter;

• Expenses related to the 2008/2009 labor agreement;

• Provisions for the reduction of inventories to market value;

• Gains from the changes in capital structure on controlled companies (R$ 409 million) booked under non-operating result in the 2Q-2008;

• Reduction in results from equity income in companies reflecting the impact of the devaluation of the Real against the Dollar on the debt of the investees.

These effects were partially offset by higher average realization prize of oil products in the domestic market and higher sales volumes.

Pag: 116

(A free translation of the original report in Portuguese)

08.01 – COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER

Pag: 116

Including government take, the first half of 2007 lifting cost fell by 2% year-on-year due to the slide in the average Brazilian oil price used as a reference to assess the government take (which is tied to the international price) and the reduction in the tax rate in those fields with a natural decline in production.

The domestic unit lifting cost in the second quarter of 2007 rose by 11% over the first quarter of 2007, due to the increase in government take, linked to higher international oil prices during the period.