Petrobras (PBR)

Pag: 125

(A free translation of the original report in Portuguese)

08.01 – COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER

Including government participations, the year-to-date lifting cost recorded a 3% year-on-year increase. Excluding the impact of the appreciation of the Real, the unit lifting cost dipped by 0.4% .

Including government participations, the domestic unit lifting cost in the third quarter rose by 12% over the 2Q-2007, due to the upturn in the domestic oil reference price.

Pag: 125

GAS AND ENERGY: Gas and Energy recorded a first half of 2007 loss of R$ 531 million (versus a loss of R$ 300 million in the first half of 2006), generated by an increase in the average domestic natural gas transfer cost and reduced sales volumes. These effects were partially offset by the improvement in the energy sales margin due to the lower electricity acquisition costs.

The second quarter of 2007 result was a net loss of R$ 215 million (versus a loss of R$ 316 million in the first quarter of 2007), due to:

• A 5% increase in natural gas sales volume;
  
  
• A reduction in thermoelectric plant operating expenses.

These effects were partially offset by narrower electric power sales margins due to the higher acquisition costs.