Petrobras (PBR)

c) Realization of deferred income tax and social contribution

In the Parent company, the realization of deferred tax credit assets in the amount of R$ 2.462.269 thousand does not depend on future income because they will be absorbed annually by the realization of the deferred tax liability. In the Consolidated statements, for the portion that exceeds the Parent Company's balance, when applicable, the managements of the subsidiaries, based on projections they have made, expect to offset these credits in a period of up to 10 years.

The subsidiary Petrobras Energia S.A. (Pesa) and its subsidiaries have tax credits arising from accumulated tax losses amounting to approximately R$ 51.564 thousand (US$ 29.000 thousand) which are not recorded in their assets. In accordance with specific tax legislation in Argentina and other countries where Pesa has investments, which defines the expiration date for such credits, these credits may only be offset against future taxes payable until 2010 at the latest, limited to R$ 5.334 thousand (US$ 3.000 thousand), and from 2010 onwards limited to R$ 46.230 thousand (US$ 26.000 thousand).

In addition, the subsidiary Petrobras America Inc. (PAI) has unrecorded tax credits amounting to the equivalent of R$ 1.039.104 thousand (US$ 584.390 thousand) resulting from accumulated tax losses, arising mainly from oil and gas exploration and production activities. In accordance with specific legislation in the United States, where PAI has its headquarters, tax credits expire after 20 years. Accordingly, the amounts of R$ 2.708 thousand (US$ 1.523 thousand) until 2024, R$ 10.349 thousand (US$ 5.820 thousand) until 2025, R$ 201.361 thousand (US$ 113.245 thousand) until 2026, R$ 231.141 thousand (US$ 129.993 thousand) until 2027, R$ 331.985 thousand (US$ 186.708 thousand) until 2028 and R$ 261.560 thousand (US$ 147.101 thousand) in 2029 may be offset.

c) Realization of deferred income tax and social contribution

In the Parent Company, the realization of deferred tax credit assets in the amount of R$ 2.321.893 thousand does not depend on future income because they will be absorbed annually by the realization of the deferred tax liability. In the Consolidated statements, for the portion that exceeds the Parent Company’s balance, when applicable, the managements of the subsidiaries, based on projections that they have made, expect to offset these credits within a period of up to 10 years.

The subsidiary Petrobras Energia S.A. (Pesa) and its subsidiaries have tax credits arising from accumulated tax losses amounting to, approximately, R$ 224.434 thousand (US$ 115.000 thousand) which are not recorded in their assets. In accordance with specific tax legislation in Argentina and other countries where Pesa has investments that define the expiration date for such credits, these credits may only be offset against future taxes payable, at the most until 2009, limited to R$ 173.692 thousand (US$ 89.000 thousand), and from 2010 onwards R$ 50.742 thousand (US$ 26.000 thousand).

In addition, the subsidiary Petrobras America Inc. (PAI) has unrecorded tax credits amounting to the equivalent of R$ 1.012.716 thousand (US$ 518.916 thousand) resulting from accumulated tax losses, arising mainly from oil and gas exploration and production activities. In accordance with specific legislation in the United States, where PAI has its headquarters, tax credits expire after 20 years. Accordingly, the amounts of R$ 4.758 thousand (US$ 2.438 thousand) until 2024, R$ 17.512 thousand (US$ 8.973 thousand) until 2025, R$ 221.009 thousand (US$ 113.245 thousand) until 2026, R$ 253.999 thousand (US$ 130.149 thousand) until 2027, R$ 393.345 thousand (US$ 201.550 thousand) until 2028 and R$ 122.093 thousand (US$ 62.561 thousand) in 2029 may be offset.

c) Realization of deferred income tax and social contribution

The realization of deferred tax credits in the parent company in the amount of R$ 3.045.810 thousand does not depend on future income because they will be absorbed annually by realizing the deferred tax liabilities. In the consolidated statements, for the portion exceeding the Parent company’s balance, when applicable, the managements of the subsidiaries, based on projections made, expects to offset these credits over the period of ten years.

The subsidiary Petrobras Energia S.A. (Pesa) and its subsidiaries have tax credits arising from accumulated tax losses amounting to approximately US$ 149.000 thousand (R$ 285.231 thousand), which were not recorded in their assets. In accordance with specific legislation in Argentina and other countries where Pesa has investments that define the expiration date for such credits, these credits may be offset against future taxes payable limited to US$ 95.000 thousand (R$ 181.858 thousand) until 2009 and, from 2010 onwards, US$ 54.000 thousand (R$ 103.372 thousand).

In addition, the subsidiary Petrobras America Inc. - PAI has unrecorded tax credits amounting to US$ 250.901 thousand (R$ 480.300 thousand) arising from accumulated tax losses, primarily from oil and gas exploration and production activities. In accordance with specific legislation in the United States, where PAI has its registered offices, tax credits expire after 20 years. As such, these credits may be offset against future taxes payable, limited to US$ 84.089 thousand (R$ 160.971 thousand) until 2027, US$ 108.175 thousand (R$ 207.079 thousand) until 2028 and US$ 58.637 thousand (R$ 112.250 thousand) until 2029.

Some subsidiaries abroad have accumulated tax losses in the exploration stage. These credits will be recognized through the generation of future taxable income if the venture is successful.

c) Realization of deferred income tax and social contribution

At the Parent Company level, realization of deferred tax credits amounting to R$ 2.939.046 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability. In the consolidated statements, for the portion exceeding the Parent Company’s balance, when applicable, the management of the subsidiaries expects to offset these credits over ten years, based on the projections made.

c) Realization of deferred income tax and social contribution

At the Parent Company level, realization of deferred tax credits amounting to R$ 2.898.402 does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability. In the consolidated statements, for the portion exceeding the Parent Company’s balance, when applicable, the management of the subsidiaries expects to offset these credits over ten years, based on the projections made.

The subsidiary Petrobras Energia S.A. (Pesa) and its subsidiaries have tax credits arising from accumulated tax losses amounting to approximately US$ 115.000 thousand (R$ 203.700), which were not recorded in asset accounts. In accordance with specific legislation in Argentina and other countries where Pesa has investments that define the expiration date for such credits, these credits may be offset against future taxes payable limited to US$ 76.000 thousand (R$ 134.619) until 2009 and to US$ 39.000 thousand (R$ 69.081) as from 2010.

Some subsidiaries abroad have tax losses, accumulated during the exploratory stage. These credits will be recognized if the enterprise is successful, against taxable income generated in the future.

c) Realization of deferred income tax and social contribution

At the Parent Company level, realization of deferred tax credits amounting to R$ 2.692.201 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability.

For the portion exceeding the Parent Company’s balance, when applicable, in the Consolidated statements the management of the subsidiaries expects to carry forward these credits up to ten years, based on the projections made.

The subsidiary Petrobras Energia S.A. (PESA) and its subsidiaries have tax credits resulting from accumulated tax losses of approximately R$ 508.119 thousand that are not recorded in its assets. As the specific tax legislation in Argentina and other countries where PESA has investments, stipulate a limitation period for such credits, they may only be used to offset future taxes, due until 2007, in the amount of R$ 372.361 thousand, and from 2008 onwards, R$ 135.758 thousand.

The subsidiary Petrobras América Inc. (PAI) has tax credits resulting from accumulated tax losses of approximately R$ 154.630 thousand (US$ 84million) that are not recorded in its assets and which in accordance with US legislation, will lapse in 2026.

c) Realization of deferred income tax and social contribution

At the Parent Company level, realization of deferred tax credits amounting to R$ 3.208.047 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability.

For the portion exceeding the Parent Company’s balance, when applicable, in the Consolidated statements the management of the subsidiaries expects to carry forward these credits up to ten years, based on the projections made.

The subsidiary Petrobras Energia S.A. - PESA has tax credits resulting from accumulated tax losses of approximately R$ 553.540 thousand that are not recorded in its assets. As the specific tax legislation in Argentina and other countries where PESA has investments, stipulate a limitation period for such credits, they may only be used to offset future taxes, due until 2007, in the amount of R$ 529.559 thousand, and from 2008 onwards, R$ 23.981 thousand.

Realization of deferred income tax and social contribution

At the Parent Company level, realization of deferred tax credits amounting to R$ 2.224.389 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability.

For the portion exceeding the Parent Company’s balance, when applicable, in the consolidated statements the Management of the subsidiaries expects to carry forward these credits up to ten years, based on the projections made.

The subsidiary Petrobras Energia S.A. - Pesa has tax credits arising from accumulated tax losses amounting to approximately R$ 539.304 thousand, which were not recorded in asset accounts. In accordance with specific legislation in Argentina and other countries where Pesa has investments that define the expiration date for such credits, these credits may be offset against future taxes payable limited to R$ 513.596 thousand until 2007 and to R$ 25.708 thousand as from 2008.

At the parent company, the unrecorded portion of R$ 277.323 thousand refers to the estimated expenses to dismantle the area, to be performed in over 10 years, as per CVM Instruction 371/2002.

Realization of deferred income tax and social contribution

At the parent company level, realization of deferred tax credits amounting to R$ 3.524.421 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability.

Based on forecasts, the management of subsidiaries expects to offset the consolidated credit amounts in excess of the balance recorded by the parent company where applicable within a 10-year period.

As of September 30, 2006, TBG, a subsidiary of Petrobras’ subsidiary GASPETRO, had accumulated income tax losses carried forward amounting to R$ 252.780 thousand (R$ 310.670 thousand in September 30, 2005), which can be offset against taxes up to a limit of 30% of annual taxable income, based on Law No. 9.249/95, which, in the opinion of TBG management, will occur within the useful life of the Bolivia-Brazil Gas Pipeline project. However, considering the accounting for deferred tax assets in accordance with CVM Pronouncement No. 371 insofar as it relates to the determination of taxable income in three of the past five financial years and the long term estimate for utilization, these credits are not recorded in the consolidated financial statements as of September 30, 2006 and 2005. The accounting recognition of these credits will be reviewed annually.

The subsidiary Petrobras Energia Participações S.A. - PESA has tax credits arising from accumulated tax losses amounting to approximately R$ 736.565 thousand, which were not recorded in asset accounts. In accordance with

Realization of deferred income tax and social contribution

At the parent company level, realization of deferred tax credits amounting to R$ 2.117.255 thousand does not depend on future income since these credits will be absorbed annually by realizing the deferred tax liability.
Based on forecasts, the management of subsidiaries expects to offset the consolidated credit amounts in excess of the balance recorded by the parent company where applicable within a 10-year period.

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As of June 30, 2006, TBG, a subsidiary of GASPETRO, had accumulated income tax losses carried forward amounting to R$ 254.963 thousand (R$ 337.521 thousand in June 30, 2005), which can be offset against taxes up to a limit of 30% of annual taxable income, based on Law No. 9.249/95, which, in the opinion of TBG management, will occur within the useful life of the Bolivia-Brazil Gas Pipeline project. However, considering the accounting for deferred tax assets in accordance with CVM Pronouncement No. 371 insofar as it relates to the determination of taxable income in three of the past five financial years and the long term estimate for utilization, these credits are not recorded in the consolidated financial statements for June 30, 2006. The accounting recognition of these credits will be reviewed annually.

The subsidiary Petrobras Energia Participações S.A. – PESA has tax credits arising from accumulated tax losses amounting to approximately R$ 733.966 thousand, which were not recorded in asset accounts. In accordance with specific legislation in Argentina and others countries where PESA has investments that define the expiration date for such tax credits, these credits may be offset against future taxes payable limited to R$ 705.460 thousand until 2007, and to R$ 28.506 thousand as from 2011.

e) The reconciliation of income tax and social contribution

The reconciliation of income tax and social contribution determined in accordance with statutory rates and the related amounts recorded from January to June 2006 and 2005 is summarized below:

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