Petrobras (PBR)

Pag: 128

(A free translation of the original report in Portuguese)

08.01 – COMMENTS ON THE CONSOLIDATED PERFORMANCE IN THE QUARTER

In quarter-over-quarter terms, average unit international refining costs increased by 18% in the 3Q-2007 due to scheduled and unscheduled stoppages in the USA and the sale of the Bolivian refineries.

Pag: 128

CORPORATE: Corporate activities generated a loss of R$ 4.335 million in the first half of 2007, versus a loss of R$ 2.983 million in the first half of 2006, as a result of:

• Expenses of R$ 642 million from the financial incentive to pension plan participants in exchange for their acceptance of the amended plan; 
  
  
• The R$ 1.421 million increase in net financial expenses, as detailed on page 6; 
  
  
•  The R$ 231 million increase in general and administrative expenses resulting from higher third-party services and personnel expenses, the latter due to the expansion of the workforce in 2006 and the collective bargaining agreement. 
  

These effects were partially offset by the recognition of interest on own capital, which generated a fiscal benefit of R$ 746 million.

In the second quarter of 2007, corporate activities generated a loss of R$ 1.745 million, versus a loss of R$ 2.590 million in the first quarter of 2007, mainly due to:

• The R$ 563 million reduction in income tax expenses due to the recognition of interest on own capital, which generated a fiscal benefit of R$ 746 million;
  
  
• The first quarter of 2007 realization of expenses from the financial incentive to pension plan participants in exchange for their acceptance of the new regulations (R$ 632 million).

These effects were partially offset by the R$ 106 million increase in net financial expenses (see page 8).