Petrobras (PBR)

SETTLEMENT OF A NATURAL GAS DERIVATIVE CONTRACT

On August 12, 2006, we and Empresa Petrolera Andina (Andina), a gas producer in Bolivia, settled a natural gas derivative contract that was executed with the purpose of reducing the effects of price volatility under long-term contract to buy gas to supply the Brazilian market.

Since the regulatory changes in Bolivia (see Notes 9(b) and 21 to our consolidated financial statements for the year ended December 31, 2006), we and Andina have disagreed on the application of certain provisions of the contract. Following negotiations, we and Andina have decided to terminate the contract. Consequently on August 14, 2006, we received U.S. $ 41 million in payment from Andina and wrote-off some account receivable in the amount of U.S.$ 77 million.

We also recorded a financial expense related to fair value asset adjustments in the amount of U.S.$ 328 million, during the first quarter of 2006, due to the effect of recent tax increases in Bolivia and, U.S.$ 94 million during the second quarter of 2006 as a consequence of the settlement of the contract.

SETTLEMENT OF A NATURAL GAS DERIVATIVE CONTRACT

On August 12, 2006, we and Empresa Petrolera Andina (Andina), a gas producer in Bolivia, settled a natural gas derivative contract that was executed with the purpose of reducing the effects of price volatility under long-term contract to buy gas to supply the Brazilian market.

Since the regulatory changes in Bolivia (see Notes 3(d) and 15 of our unaudited consolidated financial statements for the nine-month period ended September 30, 2006), we and Andina have disagreed on the application of certain provisions of the contract. Following negotiations, we and Andina have decided to terminate the contract. Consequently on August 14, 2006, we received U.S. $ 41 million in payment from Andina and wrote-off some account receivable in the amount of U.S.$ 77 million.

We also recorded a financial expense related to fair value asset adjustments in the amount of U.S.$328 million, during the first quarter of 2006, due to the effect of recent tax increases in Bolivia and, U.S.$94 million during the second quarter of 2006 as a consequence of the settlement of the contract.

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b) Settlement of a Natural gas derivative contract

On August 12, 2006, the Company and Empresa Petrolera ANDINA, a gas producer in Bolivia, settled a Natural gas derivative contract that was executed with the purpose of reducing the effects of price volatility under long-term contract to buy gas to supply the Brazilian market (See Note 3(c)).

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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually oc cur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

SETTLEMENT OF A NATURAL GAS DERIVATIVE CONTRACT

On August 12, 2006, we and Empresa Petrolera ANDINA, a gas producer in Bolivia, settled a Natural gas derivative contract that was executed with the purpose of reducing the effects of price volatility under long-term contract to buy gas to supply the Brazilian market.

Since the regulatory changes in Bolivia (see Notes 3(c) and 15 of our unaudited consolidated financial statements for the six-month period ended June 30, 2006), we and Empresa Petrolera Andina (Andina) have disagreed on the application of certain provisions of the contract. Following negotiations, we and Andina have decided to terminate the contract. Consequently on August 14, 2006, we received U.S. $ 41 million in payment from Andina and wrote-off some account receivable in the amount of U.S.$ 77 million.

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We also recorded a financial expense related to fair value asset adjustments in the amount of U.S.$328 million, during the first quarter of 2006, due to the effect of recent tax increases in Bolivia and, U.S.$94 million during the second quarter of 2006 as a consequence of the settlement of the contract.