Petrobras (PBR)

Refining Costs

Excluding the impact of the depreciation of the Real, our year-on-year refining costs in Brazil increased 1.0% due to higher personnel expense from the 2008-09 collective bargaining agreement, higher costs with materials and lower output.

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International refining costs decreased due to higher processed crude volumes, attributable to the resumption of normal operations at the Pasadena Refinery after a scheduled stoppage in the first quarter of 2008, and the inclusion of the NSS Refinery beginning in April 2008, where refining costs are lower than the international average.

Refining Costs

Excluding the impact of the depreciation of the Real, our year-on-year refining costs in Brazil fell by 4.0% due to reduced expenses from scheduled stoppages, third-party services and lower electricity costs.

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International refining costs decreased due to higher processed crude volume and lower maintenance costs, attributable to the resumption of normal operations at the Pasadena Refinery and the inclusion of the NSS Refinery beginning in April 2008, where refining costs are lower than the international average.

Refining Costs

Excluding the impact of the appreciation of the Real, our refining costs in Brazil increased 8.0% in 2008 due to higher personnel expenses, increased electricity costs and increased scheduled stoppages.

International refining costs increased due to higher costs at the Pasadena refinery in the United States caused by scheduled stoppages, technical problems at the U.S. catalytic cracking unit and reduced volumes of processed crude oil in 2008.

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Refining Costs

Domestic refining costs increased 36.3% to U.S.$3.57 per barrel of oil equivalent in the first half of 2008, as compared to U.S.$2.62 per barrel of oil equivalent in the first half of 2007. Excluding the impact of the appreciation of the Real, our refining costs increased 16.0% in the first half of 2008 as compared to the first half of 2007, as a result of higher electricity consumption, maintenance and repair services, due to greater complexity of our existing refineries and the increased demand, salary adjustments, and higher scheduled stoppages.

International refining costs increased 122.1% to U.S.$5.82 per barrel of oil equivalent in the first half of 2008, as compared to U.S.$2.62 per barrel of oil equivalent in the first half of 2007, due to the scheduled stoppage in the Pasadena refinery associated with the decrease of processed crude oil volume in the first half of 2008.

Refining Costs

Domestic refining costs increased 42.1% to U.S.$3.61 per barrel of oil equivalent for the first quarter of 2008, as compared to U.S.$2.54 per barrel of oil equivalent for the first quarter of 2007. Excluding the impact of the appreciation of the Real, our refining costs increased 21.0% in the first quarter of 2008 as compared to the first quarter of 2007, as a result of higher operational expenses in order to upgrade our refineries to meet new product quality demands and meet higher standards of health, safety and environment (HSE), as well as salary adjustments and increases in our workforce, and to a lesser degree, increases in the electricity tariff.

International refining costs increased 154.5% to U.S.$6.16 per barrel of oil equivalent for the first quarter of 2008, as compared to U.S.$2.42 per barrel of oil equivalent for the first quarter of 2007, due to the programmed maintenance stoppage in the Pasadena refinery associated with the first quarter decrease in processed crude.

Refining Costs

Domestic refining costs increased 24.5% to U.S.$2.85 per barrel of oil equivalent for 2007, as compared to U.S.$2.29 per barrel of oil equivalent for 2006. This increase is due to: (1) increased expenses for materials and services, reflecting investments made to process heavier crude oil, meet new product quality demands and meet higher standards of health, safety and environment (HSE); and (2) the increase in the number and scope of scheduled stoppages.

International refining costs increased 71.1% to U.S.$2.96 per barrel of oil equivalent for 2007, as compared to U.S.$1.73 per barrel of oil equivalent for 2006, due to the inclusion of the Pasadena refinery (USA).

Refining Costs

Domestic refining costs increased 20.5% to U.S.$ 2.59 per barrel of oil equivalent for the nine-month period ended September 30, 2007, as compared to U.S.$ 2.15 per barrel of oil equivalent for the nine-month period ended September 30, 2006. This increase is due to: (1) increased operating expenses from materials and services, reflecting the investments we made to adapt the refineries to new product quality demands; and (2) the increase in the number and scope of scheduled stoppages. Excluding the impact of the 8.3% appreciation of the Real on Real-denominated refining costs, these costs would have climbed by 12.0% .

International refining costs increased 89.9% to U.S.$ 2.83 per barrel of oil equivalent for the nine-month period ended September 30, 2007, as compared to U.S.$ 1.49 per barrel of oil equivalent for the nine-month period ended September 30, 2006 due to the inclusion of the Pasadena refinery (USA) as of October 2006.

Refining Costs

Domestic refining costs increased 31.7% to U.S.$ 2.62 per barrel of oil equivalent for the first half of 2007, as compared to U.S.$ 1.99 per barrel of oil equivalent for the first half of 2006. This increase is due to: (1) increased operating expenses from materials and services, reflecting the investments we made to adapt the refineries to new product quality demands; and (2) the increase in the number and scope of scheduled stoppages. Excluding the impact of the 6.6% appreciation of the Real on Real-denominated refining costs, these costs would have climbed by 25.0% .

International refining costs increased 84.9% to U.S.$ 2.70 per barrel of oil equivalent for the first half of 2007, as compared to U.S.$ 1.46 per barrel of oil equivalent for the first half of 2006 due to the inclusion of the Pasadena refinery (USA) as of October 2006.

Refining Costs

Domestic refining costs increased 33.7% to U.S.$ 2.54 per barrel of oil equivalent for the first quarter of 2007, as compared to U.S.$ 1.90 per barrel of oil equivalent for the first quarter of 2006. This increase is due to: (1) increased operating expenses reflecting the investments to adapt the refineries for heavy oil processing as well as improve the fuel quality to meet more stringent environmental requirements; and (2) the larger number of scheduled maintenance stoppages.

International refining costs increased 72.6% to U.S.$ 2.71 per barrel of oil equivalent for the first quarter of 2007, as compared to U.S.$ 1.57 per barrel of oil equivalent for the first quarter of 2006 due to the inclusion of the Pasadena Refinery (USA). Excluding this impact, refining costs would have fallen by 8%, due to the 9% increase in production.

Refining Costs

Domestic refining costs increased 20.5% to U.S.$ 2.29 per barrel of oil equivalent for 2006, as compared to U.S.$ 1.90 per barrel of oil equivalent for 2005. This increase is due to higher operating expenses, reflecting investments aimed at adapting the refineries to process heavy oil and to improve the quality of fuels to meet environmental requirements. This increase was partially offset by the effects of a 10.7% appreciation of the Real in 2006, which caused the local currency component of refining costs to increase when expressed in U.S dollars.

International refining costs increased 33.1% to U.S.$ 1.73 per barrel of oil equivalent for 2006, as compared to U.S.$ 1.30 per barrel of oil equivalent for 2005. This increase was primarily due to the inclusion of the Pasadena (U.S.) refinery. Discounting the effect of the Pasadena refinery, the cost increase was 16.0% and reflects salary increases as well as the tariff increases for services contracted in Argentina.

Refining costs

Domestic refining costs increased 16.2% to U.S.$ 2.15 per barrel of oil equivalent for the nine-month period ended September 30, 2006, as compared to U.S.$ 1.85 per barrel of oil equivalent for the nine-month period ended September 30, 2005. This increase is due to higher operating expenses, reflecting investments aimed at adapting the refineries to process heavy oil and to improve the quality of fuels to meet environmental requirements. Discounting the effects of a 12.6% appreciation of the Brazilian Real, which caused the local currency component of refining costs to increase when expressed in U.S dollars, refining costs increased 1.4% .

International refining costs increased 15.5% to U.S.$ 1.49 per barrel of oil equivalent for the nine-month period ended September 30, 2006, as compared to U.S.$ 1.29 per barrel of oil equivalent for the nine-month period ended September 30, 2005. This increase was primarily due to higher material and third party expenses in Argentina and in the refineries in Bolivia, caused by emergency maintenance stoppages which occurred in January, May, and June of 2006.

Refining costs

Domestic refining costs increased 7.6% to U.S.$ 1.99 per barrel of oil equivalent for the first half of 2006, as compared to U.S.$ 1.85 per barrel of oil equivalent for the first half of 2005. Discounting the effects of a 15.0% appreciation of the Brazilian Real, which caused the local currency component of refining costs to increase when expressed in U.S dollars, refining costs declined 6.0%, primarily due to a greater number of scheduled stoppages in the first half of 2005.

International refining costs increased 18.7% to U.S.$ 1.46 per barrel of oil equivalent for the first half of 2006, as compared to U.S.$ 1.23 per barrel of oil equivalent for the first half of 2005. This increase was primarily due to greater material costs, equipment maintenance, and personnel in refineries in Bolivia and Argentina.

Refining costs

Domestic unit refining costs increased 9.2% to U.S.$ 1.90 per barrel of oil equivalent for the first quarter of 2006, as compared to U.S.$ 1.74 per barrel of oil equivalent for the first quarter of 2005. Discounting the effects of a 17.7% appreciation of the Brazilian Real, which caused the local currency component of refining costs to increase when expressed in U.S dollars, refining costs declined 10.0%, primarily due to a greater number of scheduled stoppages in the first quarter of-2005.

International unit refining costs increased 38.9% to U.S.$ 1.57 per barrel of oil equivalent for the first quarter of 2006, as compared to U.S.$ 1.13 per barrel of oil equivalent for the first quarter of 2005. This increase was primarily due to greater material costs, equipment maintenance, and personnel in refineries in Bolivia and Argentina.

Refining costs

Domestic unit refining costs increased 49.6% to U.S.$ 1.93 per barrel of oil equivalent for the nine-month period ended September 30, 2005, as compared to U.S.$ 1.29 per barrel of oil equivalent for the nine-month period ended September 30, 2004. This increase was primarily due to: (1) increased personnel expenses primarily related to: (a) overtime payments and increased salaries and benefits as set forth in our collective bargaining agreement; (b) an increase in our workforce; and (c) a revision in the actuarial calculations relating to future health care and pension benefits; (2) costs associated with planned stoppages at certain refineries; (3) third-party services, mainly for corrective maintenance at certain refineries; and (4) the 16.0% decrease in the average Real/U.S. dollar exchange rate for the nine-month period ended September 30, 2005 as compared to the average Real/U.S. dollar exchange rate for the nine-month period ended September 30, 2004.

International unit refining costs increased 19.4% to U.S.$ 1.29 per barrel of oil equivalent for the nine-month period ended September 30, 2005, as compared to U.S.$ 1.08 per barrel of oil equivalent for the nine-month period ended September 30, 2004. This increase was primarily due to increased expenses for personnel, electricity and contracted services at the refineries in Argentina and Bolívia.

Refining costs

Domestic unit refining costs increased 50.4% to U.S.$ 1.91 per barrel of oil equivalent for the first half of 2005, as compared to U.S.$ 1.27 per barrel of oil equivalent for the first half of 2004. This increase was primarily due to: (1) increased personnel expenses primarily related to: (a) overtime payments and increased salaries and benefits as set forth in our collective bargaining agreement, (b) an increase in our workforce; and (c) a revision in the actuarial calculations relating to future health care and pension benefits; (2) costs associated with planned stoppages at certain refineries; (3) third-party services, mainly for corrective maintenance at certain refineries; and (4) the 13.4% decrease in the average Real/U.S. dollar exchange rate for the first half of 2005 as compared to the average Real/U.S. dollar exchange rate for the first half of 2004.

International unit refining costs increased 13.9% to U.S.$ 1.23 per barrel of oil equivalent for the first half of 2005, as compared to U.S.$ 1.08 per barrel of oil equivalent for the first half of 2004. This increase was primarily due to: (1) increased expenses for personnel, electricity and contracted services at the refineries in Argentina; and (2) increased expenses for equipment maintenance, electricity and personnel in Bolivia.

Refining costs

Domestic unit refining costs increased 49.2% to U.S.$ 1.82 per barrel of oil equivalent for the first quarter of 2005, as compared to U.S.$ 1.22 per barrel of oil equivalent for the first quarter of 2004. This increase was primarily due to: (1) increased personnel expenses primarily related to: (a) overtime payments as set forth in our collective bargaining agreement, (b) an increase in our workforce; and (c) a revision in the actuarial calculations relating to future health care and pension benefits; (2) costs associated with planned stoppages at certain refineries; and (3) third-party services, mainly for corrective maintenance.

International unit refining costs increased 10.5% to U.S.$1.26 per barrel of oil equivalent for the first quarter of 2005, as compared to U.S.$ 1.14 per barrel of oil equivalent for the first quarter of 2004. This increase was primarily due to increased personnel expenses, increases in the refineries’ gas and electricity consumption, and contracted services for facility maintenance in Argentina.

Refining costs

Domestic unit refining costs increased 16.2% to U.S.$ 1.36 per barrel of oil equivalent for 2004, as compared to U.S.$ 1.17 per barrel of oil equivalent for 2003. This increase was primarily due to: (1) higher personnel expenses primarily related to: (a) overtime payments as set forth in our collective bargaining agreement; (b) an increase in our workforce; and (c) a revision in the actuarial calculations relating to future health care and pension benefits; (2) an increase in costs related to planned stoppages at certain refineries; and (3) third-party services, mainly for corrective maintenance.

International unit refining costs increased 3.4% to U.S.$1.21 per barrel of oil equivalent for 2004, as compared to U.S.$ 1.17 per barrel of oil equivalent for 2003. This increase was primarily due to increased expenses for personnel, materials, maintenance and contracted services – which primarily consisted of environmental and quality control consulting in Argentina.