1

PETROBRAS

7th Annual ConferenceSantander Banespa Brazil

Campos do Jordão – São PauloAugust 2006

Petrobras Overview and 2Q Results

Almir BarbassaCFO

2 2

The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments.

Cautionary Statement for US investors

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC.

Disclosure

3 3

Drivers Business StrategiesE&P• Focus on light oil and natural gas

production and reserve growthDownstream• Expand conversion capacity and improve

quality of refined products• Increase bio-refining capacity, biomass,

petrochemical and fertilizers businesses• Promote Brazilian biodiesel production and

export ethanolDistribution• Increase market-share in Brazil for oil

products and biofuelsGas & Energy• Develop and establish a profitable and

reliable natural gas market including LNGInternational• Expand E&P in Gulf of Mexico and Africa• Undertake investments in refining

conversion capacity and quality

Develop market and monetize natural gas reserves in Brazil

Reduce dependence on light oil and oil product imports

Improve oil product quality in Brazil and abroad

Reduce carbon intensity of operations and products

Drivers & Strategies

Exploit competitive advantage from deep water exploration technology abroad

Assure future demand and add value to heavy oil exports

4 4

At current levelsCosts

2006 – 62.002007 – 55.002008 – 40.00

2009-2011 – 35.00

Brent for funding (US$/bbl)

Linked to international market

pricesDomestic sales prices

23.00Robustness Brent (US$/bbl)

4.2GDP – World (% p.a.) –PPP*

3.7GDP – Latin America (% p.a.) – PPP

2.50FX rate (R$/US$)4.0GDP – Brazil (% p.a.)

2007-2011Assumptions

* PPP – purchase power parity

FundamentalsMacroeconomic assumptions

• Market developments indicate an appreciation of the FX rate (R$/US$).

• Petrobras robustness Brent price below the low end of market’s forecast band.

• Costs are projected at current levels, with no adjustment for future price reductions.

• Petrobras products prices follow international prices in the medium term.

• Natural gas prices to accompany international differentials to oil products.

5 5

315 368237 282

777935

128

211

201 224

10897

0

500

1000

1500

2000

2500

2005 2011

LPG Gasoline A NaphtaDiesel* + Jet Fuel Fuel Oil Coke + Others

Thou

sand

bpd 1,766

2,1173.1% p.a.

*Includes Biodiesel (2%)

Fundamentals Domestic oil products market

Oil products demand

• Increasing demand for middle distillates.

8,7% p.a.

-1,8% p.a.

3,1% p.a.

2,9% p.a.

2,6% p.a.

1,8% p.a.

6 6

Fundamentals Domestic natural gas market

Mill

ion

m3 /d

ay

48.4

7.124.8

38.6

13.5

34.0

up to 71.0

up to 30.0

up to 20.0

0

20

40

60

80

100

120

140

Consumed in 2005 Maximum Demand2011(*)

Potential Supply 2011

Thermoplants Industry OtherNational Production Bolivian Imports LNG

* Considers maximal dispatch for every thermoelectric power plant

121.0

17.7% p.a.

121.0

45.4

Natural gas market

7 7

Note: Includes International

31.0

12.41.0

1.0

49.3

23.07.5

3.32.31.8

E&P Downstream G&EPetrochemical Distribution Corporate

9%4%

3% 26%

56%

3%

Business Plan 2007-2011US$ 87.1 billion

86%

14%

Brazil International

US$ 12.1 bi

US$ 75.0 bi

Investment Plan

49,3

23,0

7,53,32,21,8

8 8

Sources

(*)86.7

12.6

2004-2010Financing

Cash Flow

(US$ 99.3 billion)

87.1

12.2

2004-2010Debt Amortization

Capex

(US$ 99.3 billion)

• Accrued Economic Profit (2006-2015): US$ 83.4 billion (US$ 53.9 until 2011).

Uses

Financial TargetsSources & Uses

PETROBRAS

999

Sensitivity to Brent in 2007-2011(annual average)Every US$ 5.00 Brent price change will result in:

• 3 pp change in ROCE;

• US$ 3.5 billion change in the operational cash generation;

• 10 pp change in leverage.

1.5

8.6x

28

4.4

2.9

15

2006-2010Average

1.5

13.7x

25

3.5

3.1

16

2007-2011 Average

Oper. Cash Flow before interest and taxes / interest

Free Operating Cash Flow (US$ billion)

Cash Balance (end of the year) (US$ billion)

Net Debt/ Net Debt + Shareholders’ Equity (Leverage) (%)

Long Term Funding (US$ billion per year)

Return on Capital Employed (ROCE) (%)

Indicators

Financial TargetsMain Financial Indicators

PETROBRAS

101010

2 , 3 7 42 , 8 1 2

5 5 1

7 2 4

7 4 2

1 8 5

2 7 8

3 8 3

2 0 1 5

F o r e c a s t

1 , 6 8 4 1 , 8 8 01 , 5 4 0 1 , 4 9 3

2 5 0 2 6 5 2 7 4

2 8 9

1 3 3

1 6 1 1 6 81 6 3

8 5

1 0 1

9 49 6

2 0 0 3 2 0 0 4 2 0 0 5 T a r g e t 2 0 0 6

O i l a n d N G L - B r a z i l N a t u r a l G a s - B r a z i l

O i l a n d N G L - I n t e r n a c i o n a l N a t u r a l G a s - I n t e r n a c i o n a l

2,036 2,020 2,217 2,403

3,493

4,556Thousand boed

7.8% p.a.

7.5% p.a.

T a r g e t 2 0 1 1

E&PProduction targets – Oil & NGL and Natural Gas

PETROBRAS

111111

1,880

1,684

2005A 2006E

Crude oil in Brazil∆ 11.6%

P - 50Albacora Leste

Capacity 180,000 bpdApril 2006

P - 50Albacora Leste

Capacity 180,000 bpdApril 2006

P - 34 Jubarte Phase 1

Capacity 60,000 bpdOctober 2006

P - 34 Jubarte Phase 1

Capacity 60,000 bpdOctober 2006

FPSO CapixabaGolfinho Mod. 1

Capactiy 100,000 bpdMay 2006

FPSO CapixabaGolfinho Mod. 1

Capactiy 100,000 bpdMay 2006

PiranemaCapacity 20.000 bpd

October 2006

PiranemaCapacity 20.000 bpd

October 2006

• P-50 is currently producing 75.000 bpd and should reach its production peak by the end of the year.• FPSO Capixaba is producing 50.000 bpd (half of its capacity) and should also reach its peak by the end of the year.• P-34 is being adapted in the Vitória shipyard and should start-up operation late September.• Piranema was constructed in China (Yantai Raffles shipyard) and is currently in the Netherlands (Keppel Verolme shipyard) concluding its conversion. Production should begin in October.

E&P Main projects that will contribute to the production growth in 2006

PETROBRAS

121212

2,374

2,195

2,0611,979

1,880

1,684

2,368

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2005 2006 2007 2008 2009 2010 2011

Parque dasConchas*** 100.000 bpd

2011

Parque dasConchas*** 100.000 bpd

2011

Albacora LesteP-50

180,000 bpdApril/2006

Albacora LesteP-50

180,000 bpdApril/2006

JubarteFase 1P-34

60,000 bpdOct/2006

JubarteFase 1P-34

60,000 bpdOct/2006

Marlim LesteP-53*

180,000 bpd2009

Marlim LesteP-53*

180,000 bpd2009

FPSO CapixabaGolfinho Mod. 1

100,000 bpdMay 2006

FPSO CapixabaGolfinho Mod. 1

100,000 bpdMay 2006

Frade100,000 bpd

2009

Frade100,000 bpd

2009

RoncadorP-52

180,000 bpd2007

RoncadorP-52

180,000 bpd2007

RoncadorP-54

180,000 bpd2007

RoncadorP-54

180,000 bpd2007

Marlim SulModule 2

P-51180,000 bpd

2008

Marlim SulModule 2

P-51180,000 bpd

2008

Piranema20.000 bpdOct 2006

Piranema20.000 bpdOct 2006

JubartePhase 2

P-57180,000 bpd

2010

JubartePhase 2

P-57180,000 bpd

2010

Rio de JaneiroEspadarte Mod II

100,000 bpd2007

Rio de JaneiroEspadarte Mod II

100,000 bpd2007

ESS-130Golfinho Mod III ****

(FPSO)100,000 bpd

2008

ESS-130Golfinho Mod III ****

(FPSO)100,000 bpd

2008

PostponedCidade de VitóriaGolfinho Mod. 2

100,000 bpd2007

Cidade de VitóriaGolfinho Mod. 2

100,000 bpd2007

New

* In the previous plan, P-53 was scheduled to 2008** In the previous plan, P-55 was scheduled to 2010*** Abalone, Ostra, Argonauta and Nautilus (former BC10): Petrobras share 35%**** In the previous plan, Golfinho Mod. 3 was scheduled to 2010

RoncadorP-55**

180.000 bpd2011

RoncadorP-55**

180.000 bpd2011

Thous. bpd

Antecipated

E&P Main Brazilian Oil & NGL production projects

PETROBRAS

131313

4 new platforms will provide additional production capacity of 560,000 bpdFPSO Cidade VitóriaThis leased FPSO with capacity of 100,000 bpd is currently being constructed by Saipem in Dubai. It is scheduled to start operation May/2007 in the Golfinho Field.

FPSO Cidade Rio de JaneiroWith a capacity of 100,000 bpd, this leased unit is being converted by Modec in Singapore. Production will begin May/2007in the Espadarte field.

P-54Petrobras constructed this platform in the Jurong shipyard, in Singapore, and is currently transporting it to the Mauá-Jurongshipyard, in Niterói (RJ). It should be operating by October/2007 in the Roncador field with a capacity of 180,000 bpd.

P-52This platform was constructed by Petrobras, in Singapore (KeppelFels shipyard) and will have the capacity to produce 180,000 bpd. Currently it is in Angra dos Reis (RJ) concluding its construction to operate in the Roncador field (December/2007).

P-52

Cidade Rio de Janeiro

E&P Projects for 2007

PETROBRAS

141414

• To sustain production growth, 15 large projects will be implemented between 2011 to 2015. The highlights are:

2,812

2,374

2100

2200

2300

2400

2500

2600

2700

2800

2900

2011 2015

• Marlim Sul P-56• Roncador P-55• Papa-Terra Mód. 1 e 2• Marlim Sul Mód. 4• Roncador Mód. 4• Cachalote and Baleia Franca• Baleia Azul

E&P 2011-2015 main Brazilian projects

Oil Production in Brazil (Thous. bbl)

PETROBRAS

151515

(154) (326) (508) (697)(154)

(172)(181)

(189)(201)

(217)

(897)

(1.400)

(900)

(400)

100

600

1.100

1.600

2.100

2.600

2005 2006 2007 2008 2009 2010 2011

Total Production Accumulated Decline Annual Decline

2,0612,195

2,368 2,374

1,6841,880

1,979

E&P InvestmentsBrazilian production curve

1,114Accumulated

Natural Decline

690

Net Increase

+

1,804

Gross Increase

Thou

s. b

pd

16 16

54,3% 53,1% 51,5% 50,5%

43,8%40,5% 39,7%

34,3%30,0% 29,7%

25,0%20,3%

12,9%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

Petr

obras

She

ll

T

otal

CNOOC

Stat

oil

BP

Exx

onMob

il

L

ukoil

Chev

ron

Conoco

Phillips

Reps

ol-YPF

Petr

oChina

Sinop

ec

Undeveloped Reserves / Total Reserves* (2005)

• Strong investments in production will optimize the development of Petrobras’ proven reserves, aiming light oil production and a minimum reserve/production ratio of 15 years.

• Petrobras had a 55% success ratio for our exploration wells during 2005, with 38 wells classified as discovery or producing wells.

* Source: Evaluate Energy

E&P Investments

17

17 17

E&P InvestmentsPetrobras CAPEX vs. Peers CAPEX

Mur

phy

Oil:

27,

75

Shel

l Can

ada:

26,

86

Sunc

or: 2

1,65 Pe

tro-

Can

ada:

14,

17

Con

ocoP

hilli

ps: 1

2,5

Mar

atho

n O

il: 1

2,31

Che

vron

: 11,

32

Impe

rial

Oil:

10,

2 1

Petr

ochi

na: 1

0,2

Sino

pec:

10,

02

Stat

oil:

9,89

Exxo

n M

obil:

9,5

4

Tota

l: 9,

41

Petr

obra

s*: 8

,56

BP:

7,0

3CN

OO

C: 1

3,19

0

5

10

15

20

25

30

Global Oils E&P CAPEX to production 2005-2008E AverageSource: Merrill Lynch estimates based on available data for the companies.

* CAPEX and production over 2006-2011

• Per barrel CAPEX* for Petrobras (2006-2011) of US$ 8.56 vs. Global Oils average (2005-08) of US$ 13.74 (ex-PBR).

E&P CAPEX to production 2005-2008E Average (US$/bbl)

PETROBRAS

181818

61%

13%

12%

14%

RefiningPipelines & Terminals TransportShip TransportPetrochemical

US$ 14.2

US$ 3.2

US$ 3.0

US$ 2.8

19%

12%

8%

19%

6%

26%

5%

5%

Gasoline Quality Diesel QualityInfraestructure Maintenance ExpansionHSE ConversionOthers Special

US$ 2.7

US$

0.9

US$ 3.7

US$ 1.1

US$ 1.7US$ 2.7

US$ 0.7US$ 0.7

US$ 23.1 billion in the downstream segment… ...of which US$ 14.2 billion in refining

• Aggregating value to our heavy oil and producing diesel and gasoline according to international standards.

Downstream Investments

PETROBRAS

191919

New Refinery in Pernambuco• Investment: US$ 2,5 billion;

• Throughput capacity: 200 thousand heavy oil barrels (50% Petrobras oil / 50% PDVSA oil);

• Focusing diesel and LPG production maximization, the new refinery will aim the growth of oil products demand in the Northeast.

• The Northeast Region, which responds for 19% of oil products demand and holds only one refinery in Bahia, will no longer be a fuel importer (either from refineries in Brazil or abroad);

• Costs reduction: oil products transportation are more expensive than for crude oil.

New Refinery in the USA• Petrobras has acquired 50% of the Passadena Refinery System Inc. (PRSI), located in Texas, USA;

• Total Investment: US$ 370 million;

• The refinery, which already has a capacity of 100,000 bbl/day, will be upgraded to handle 70,000 bbl/day of heavy oil and feedstock (including Marlim field’s production);

• The upgraded refinery will be ready in four years. After the revamp project all products will match USA highest standards.

Business Strategies - Downstream

PETROBRAS

202020

Nitrogenated Fertilizers Unit III

PTA Pernambuco

Fafen BA

Acrylic Complex /SAP

Rio de Janeiro Petrochemical Complex

Main ProjectsAdvantages: • Proximity to Petrobras’ installations in Rio de Janeiro; • Availability of labor for both the construction and operational phase; • Proximity to port installations.• Products: Diesel, LPG, Ethylene, Propylene, PX, Benzene and Coke.

•The Complex will add value to 150,000 barrels/day of heavy oil form the Campos Basin.

Downstream InvestmentsPetrochemical investments

• Investments of US$ 3.3 billion in Petrochemicals;

• Reducing the Brazilian deficit and adding value to Downstream production.

São GonçaloLiquids

Outflow Unit

Petrochemical Complex –

Itaboraí

PETROBRAS

212121

Majors Average *

2,735

3,176

4,793

4,329

1,630

1,579

National Oil Companies Average **

Petrobras2,296

2,114

Product Sales (thous. bpd)

Refining (thous. bpd)Production (thous. boed)

* Majors: BP, Exxon, Total, Royal Dutch Shell, Chevron, Conoco and Repsol-YPF ** NOIC: PEMEX, PDVSA, Saudi Amraco, KPC, Pertamina and Sonatrach

*** 2004 figures, except for Petrobras (2005)Source: PIW Intelligence and Petrobras

2,217

3,400Year 2011

2011: New Refinery will add 200

thous. bpd capacity2010:

Pasadena Refinery revamp concluded – processing 70

thous. bpd of heavy oil

Vertical Integration Comparison

PETROBRAS

222222

In Thous. bpd(*) National imports and private refineries(**) Biodiesel portion not included

International Production383

Brazilian Production2,374

383 584+

1,710

Imports309

584

Throughput inBrazil 1,877

Oil products consumptionin Brazil (**) 2,099

Oil 167

Oil Products (*)142

International oil sales967

80

• In 2011 international sales will amount to 967 Thous. bpd.

Downstream InvestmentsLiquid products flow

PETROBRAS

232323

Natural Gas Investments

Over 75% of Petrobras’ current natural gas production is associated gas

Investments to develop production of non-associated gas

Lack of infrastructure to develop Brazilian market

Risk of gas supply failure due to abnormalities

Total investment (Petrobras and partners) in Brazilian natural gas chain

adds up to US$ 22.1 billion

LNG to provide flexibility to mitigate such risk

Challenges Business Plan 2007-2011 Targets

PETROBRAS

242424

• Production will raise from the current 15.8 million to 40 million m3 per day in 2008 in the Southeast.

• Development of two new oil and gas fields in Espírito Santo;

• Increase of natural gas supply from the Marlim field (Campos Basin);

• Expansion of gas production in the Merluza field (Santos Basin).

• Demand Flexibilization

• Refineries, Distributors and flex-fuel thermoelectric plants ( LNG, diesel and alcohol)

New investments will reduce the country’s dependence on imported gas.

Natural Gas Investments

Espírito Santo

Campos

Santos

TOTAL INVESTMENTS OF US$ 22,1 BIILION IN THE BRAZILIAN NATURAL GAS CHAIN FROM 2007 – 2011 (Petrobras and Partners)

•Investments of US$ 6.5 billion in infrastructure from 2007 – 2011 to integrated and develop the natural gas market

PETROBRAS

252525

7070.6

65.2

49.4

34.1

27.5

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011

AlbacoraLeste(P-50)2006 Golfinho Mod 1

2006

Jubarte(P-34)2006

Manati2006

Piranema2006

UrucuNatural gas

sales2007

GolfinhoMod 22007

Roncador(P-54)2007

Peroá-CangoaPhase 2

2007Roncador

(P-52)2007

CavaloMarinho

2010

Marlim Leste(P-53)2009

Mexilhão2009

Marlim SulMod 2(P-51)2008

Frade2009

Roncador(P-55)2011

Jubarte Fase 2(P-57)2010

SPS252009

AlbacoraComplemental

2007

NG

associated

NG

non associated

Peroá-CangoaPhase 1

2006

EspadarteMod. 22007

ESS1642008

Canapu2008

ESS1302008

Tambaú/Uruguá2010

RJS6332010

Parque dasConchas

2011

Million m3/day

Natural Gas InvestmentsDelivery Curve

PETROBRAS

262626

Facilitates the adjustment of the offer to the market’s characteristic:Flexible Offer (with guarantee) to the thermoelectric plants.

More efficient than Diesel in the thermo plants;

Mitigates the risk of failing to supply the gas due to abnormalities;

Diversifies the sources of imported gas;

Projects under evaluation:Purchase or freight of floating storage and regasification units (FSRU);Maritime terminal in Pecém (Ceará) - 6 MM m³/day (estimate Jul/2008 ± 3 months)Maritime terminal in the Guanabara Bay (Rio de Janeiro)– 12/14 MM m³/day (estimate

Jul/2008 ± 3 months)

FSRUFSRUFloating Storage and Floating Storage and RegasificationRegasification UnitUnit

Flexible LNG Project

PETROBRAS

272727

34%

17%13%

7%

8%

21%

BR Ipiranga Shell

Esso Texaco Outras

Market Share of Fuel Distribution Companies in Brazil (%)

• Lead the Brazilian market for oil products and bio-fuels;

• Expand domestic market-share and client portfolio;

• Internationalize and add value to Petrobras’ brand.

US$ 2.2 billion to be invested between 2007-2011

Distribution Investments

PETROBRAS

282828

Core Areas:

• Refining

• Add value to Brazilian heavy oil exports

• E&P: West Africa (Nigeria and Angola) & Gulf of Mexico:

• Apply deep water and deep well drilling technology.

• Latin America:

• Leadership as an integrated energy company

70,2%

24,8%

1,7%0,8%

1,7%

0,8%

E&P

Refining andMarketing Petrochemical

Gas & Energy

Distribution

Corporate

Total CAPEX: US$ 12.1 billion

168 163

38396

185

94

2004 2005 2011 Target

Oil and NGL Natural Gas

568

262 259

Thous. boed

Targets

International Investments

PETROBRAS

292929

• As a consequence to the measures adopted by the Bolivian Government, Petrobras will act to:

• Protect its interests through negotiations by all legal means;

• Suspend all new investments in Bolivia as well as those related to the Bolivia-Brazil Gas Pipeline (GASBOL);

• Immediately initiate studies to diversify supply sources, including LNG regasefication project(s);

26.5 31.4 43.0 54.3 61.5 69.630.0 30.030.0

30.030.0

30.0

11.011.04.0

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010

Domestic Production Imports from Bolivia as of existing GSA

National Production Increase or LNG

Natural Gas Offer - Million m3/day Substitution of additional imports from Bolivia

Situation in Bolivia

PETROBRAS

303030

-

50.000

100.000

150.000

200.000

250.000

300.000

jan/06 Feb/06 mar/06 Apr/06

ANGOLA ARGENTINA BOLIVIA COLOMBIA ECUADOR PERU USA VENEZUELA

Nationalization Decree Effect

Oil,

NG

L an

d G

as (b

oed)

3%

40%

21%

6%

4%

6%

2%

18%ANGOLA

ARGENTINA

BOLIVIA

COLOMBIA

ECUADOR

PERU

USA

VENEZUELA

• Venezuela was responsible for 18% (47,632 boed) of 2005 Petrobras international production – this amount has decreased to 8.4% (18,629 boed) in April/06;

• Negotiations about the compensation are still running;

• Possible outcome: extension of the current exploration agreements.

International Production 2006

2005 Production (%)

Fall in production as a result of the decrease of Petrobras EnergiaVenezuela participation;

Situation in Venezuela

PETROBRAS

313131

Agribusiness

Farming

Seeds

or

or

or

Ethanol

Methanol

Glycerin + Others

Biodiesel

B2 or B5mixture

orDiesel

Distributors

DieselRefinery

Hydrogen Diesel Fractions

Stations

ProcessedOil

Crushing

Transerestification

Complementary and not competitive processes

• H-Bio: refining process that utilizes vegetable oils as an input, in order to obtain diesel oil

• Hydrogenation of a blend of diesel and vegetable oils

Biofuel Production

PETROBRAS

3232

2005to

2007(2% allowable)

2008to

2012(2% demanding)

(5% allowable)

From 2012on

(5% demanding)

Brazilian market0 – 5.2 million barrels

Petrobras market share0 – 1.3 million barrels

Brazilian market5.2 – 15.7 million barrels

Petrobras market share1.3 -3.8 million barrels

Brazilian market15.7 million barrels

Petrobras market share3.8 million barrels

Law 11.097/2005 – established minimal percentage for biodiesel mix in diesel

• Petrobras target for 2010: Production of 8,200 bpd of Biodiesel• Two new experimental units of biodiesel (Guamaré – Rio Grande do Norte), which have received investments of R$ 19 million in research & development until now, will produce up to 300 bpd of biodiesel.

Future Markets for biodiesel

PETROBRAS

333333

• Ethanol global market is 46.5 Billion Liters (2005)

• Ethanol as a Fuel is 30.6 Billion Liters (67% of total ethanol production)

• Today the ethanol consumption is 2.6% of gasoline MKT

• 10% of ethanol in gasoline will represent 118 Billion Lt

• Recently, Petrobras incorporated Brazil-Japan Ethanol Inc.

• The company will import and distribute Brazilian-produced ethanol in Japan;

• Development of technical and commercial solutions for the reliable and long term supply of alcohol in the Japanese market;

• Petrobras will break into one of the most complex and important energy markets in the World:

• ethanol logistics distribution

• fuel distribution sector in Japan.

Brazil-Japan Ethanol Inc.

Ethanol Market

PETROBRAS

343434

• Consumer wants to decide the fuel at the gas station

• Fuel price is one the most important factor

• Consumer is aware of pollution and renewable fuels

• Today cars manufacturer is producing 80% of FFV in Brazil

010,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

units

Jan-

03

Feb-

03

Mar

-03

Apr

-03

May

-03

Jun-

03

Jul-0

3

Aug

-03

Sep-

03

Oct

-03

Nov

-03

Dec

-03

Jan-

04

Feb-

04

Mar

-04

Apr

-04

May

-04

Jun-

04

Jul-0

4

Aug

-04

Sep-

04

Oct

-04

Nov

-04

Dec

-04

Jan-

05

Feb-

05

Mar

-05

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep-

05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb-

06

Mar

-06

LIGHT VEHICLES TOTAL SALES

Ethanol Gasoline FFV

Flex-Fuel Vehicles

35

2nd Quarter 2006 Results(Brazilian Corporate Law)

PETROBRAS

363636

6.675

12.010

14.113

19.644

6.958

11.267

13.614

21.260

35.88637.948

Net Income

Operating Profit

EBITDA

COGS

Net Revenues

1Q06 2Q06

Income Statement 2Q06 vs 1Q06R

$ M

illio

n

8.2%

4.2%

-3.5%

-6.2%

5.7%

• Reduced operating profit due to higher oil price and COGS including government participation;

• Lower operating profit reflects mainly increases in general and administrative expenses and others, as described in the next slide;

• Increase in Net Income due to Real depreciation (0.5%) over equity income of investments abroad.

PETROBRAS

373737

56.90

53.69

61.53

47.8351.59

35.38

44.0041.59

61.7569.62

37.4843.04

36.14 35.1132.88

54.24

46.05

58.20

49.3344.19

39.7038.98

34.38

56.39

52.70

57.59 64.74

2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06

US$

/bbl

Brent (average) Average Sales Price OPEC Basket

US$

11.

42 b

bl

E&P – Oil Prices

• The spread between Brazilian oil average price and Brent increased from US$ 8.07/bbl to US$ 11.42/bbl, due to reduced oil products inventory in the international market, which resulted in a higher value of light oil compared to heavy oil.

PETROBRAS

383838

5.995.45 5.44

6.07 6.32 6.12

1Q 05 2Q 05 3Q 05 4Q 05 1Q06 2Q06

∆ = -3% or US$ 0.20

Domestic Lifting Costs w/o Gov. Part.

-US$ 0,12/boe: higher expenditures with turbine maintenance, gas pipelines repair and P-32 collection and flowage line substitution, all in the 1Q06;

• -US$ 0,07/boe: higher oil and gas production • In reais, extraction cost decreased from R$ 13,84 in the 1Q06 to R$ 13,16

in the 2Q06.

PETROBRAS

393939

3.0 3.4 4.3 6.0 5.5 5.4 6.1 6.34.0 5.1

6.47.6 7.8 9.6 9.9 11.0

6.1

11.4

69.6

24.828.8

38.2

47.551.6

61.5 56.961.8

-4

1

6

11

16

21

26

2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06

US$

/boe

-20

-10

0

10

20

30

40

50

60

70

Lifting Cost Gov. Participation Brent

7,08,5

10,7

13,6 13,315,0 16,0 17,3 17,5

57%

63%

62% 65

%

Lifting Costs including Gov. Participation

• Government Participation per barrel increased 4%, reflecting larger share in total production of fields that are currently in a highly productive phase (Barracuda and Caratinga) and a 9% increase in the reference price in reais for Brazilian oil.

59%

% 2002 – 2Q06Brent = 181%Lifting Cost = 103%Gov. Participation = 185%

PETROBRAS

404040

• Monthly payment due from concessionaires for the exploration and production of oil and natural gas;

• Rates vary, according to the area, from 5% to 10% (per producing field) and are established in each concession contract;

• Production Volume x Reference Price (to be published by the regulator, the National Petroleum Agency - ANP), in relation to each field

3.739

6.366

5.0204.372

3.509

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

2002 2003 2004 2005 1H2006

R$

Mill

ion

E&PRoyalties

PETROBRAS

414141

10% 20%30% 35%

First Year of

Production

Second Year of

Production

Third Year of

Production

After the ThirdYear of

Production

40%

20 25 30 35

16.7 21.7 26.7 31.7

13.3 18.3 23.3 28.3

10 15 20 25Dai

ly p

rodu

ctio

n (th

ousa

nd m

3 /day

)

15

11.7

8.3

5

• Special Participation is the progressive tax applied over the net income from production.

• Tax depends on the year of production, daily production and location (Land, Offshore Shallow Water or Offshore Deep Water)

• Bellow, the characteristics of the special participation for deep water shelves:

Tax Rates

E&PSpecial Participation – Progressive Tax

PETROBRAS

424242

Refining and Sales in the Domestic Market

• Brazilian oil products production slightly lower than in the previous quarter dueto more frequent scheduled stoppages in refineries;

• Higher nominal capacity utilization.

1,7951,8121,708 1,668 1,804 1,7611,589 1,665 1,731 1,647 1,649 1,684

919183

87 91 91

817979 8081 80

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

1Q05 2Q05 3Q05 4Q05 1Q06 2Q0650

55

60

65

70

75

80

85

90

95

Domestic oil products production Oil products sales volume

Primary processed installed capacity - Brazil (%) Domestic crude as % of total

PETROBRAS

434343

20

40

60

80

100

Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06

ARP Brazil (US$/bbl) Brent Average Price ARP USA (w/ volumes sold in Brazil)

70.2

71.0

61.8

4Q05Average

70.769,6

80.0

1Q06Average

Average Realization Price - ARP

• Unraveling from US ARP due to the beginning of US summer, reduced gasoline inventories and Middle East conflicts that threaten supply;

• Higher quality requirements in the American market (MTBE).

55.3

51.6

60.7

2Q05Average

PETROBRAS

444444

1,741,96 1,86

2,03 1,902,07

1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06

Domestic Refining Costs (US$/bbl)

• 9% increase with respect to previous quarter due to:• +US$ 0,12/bbl: scheduled stoppages;• + US$ 0,04/bbl: Materials;• + US$ 0,04/bbl: FX Rate effect;• - US$ 0,04/bbl: Increase in the throughput.

• Refining cost raised from R$ 4.19 in the 1Q06, to R$ 4.55 in the 2Q06

PETROBRAS

454545

181263 262

257

267233

269213

241228

2003 2004 2005 1Q06 2Q06

Oil Oil Products

446536504 519

409

450352 344

115

354233

88

109

94105

2003 2004 2005 1Q06 2Q06

Oil Oil Products

338 446 442459

559

Imports (thousand bpd)Exports (thousand bpd)

Net exports of oil and oil products

• Net exports growth limited by:• Production stability due to scheduled stoppages;• Domestic gasoline consumption increase due to ethanol reduction (mix reduced

from 25% to 20%);• Oil inventories stored in new production units.

2006 includes ongoing exports

92 thous. bpd volume superavit in the 2Q06

PETROBRAS

464646

Leverage

Petrobras’ Leverage Ratio

(1)Includes debt contracted through leasing contracts of R$ 3.300 million on December 31, 2005, and R$ 4.021 million on December 31, 2004.(2)Total debt - cash and cash equivalents

18%

26%

32%

24%

20%

28%

19%19% 23%

26%

6/30/2005 9/30/2005 12/31/2005 3/31/2006 6/30/2006

Net Debt/Net CapitalizationShort-Term Debt/Total Debt

• R$ 710 million decrease in net debt due to financing amortization, resulting in a 2 b.p. reduction of the leverage.

R$ million 06/30/2006 03/31/2006

Short Term debt (1) 12.213 11.399

Long Term Debt (1) 31.306 33.100

Total Debt 43.519 44.499

Cash and Cash Equivalents 22.713 22.983

Net debt (2) 20.806 21.516

PETROBRAS

474747

2Q06 1Q06(=) Net Cash from Operating Activities 11.366 10.144 (-) Cash used in Cap. Expend. (6.641) (6.020) (=) Free Cash Flow 4.725 4.124 (-) Cash used in Financing and Dividends (4.995) (4.558) Financing (1.472) (499) Dividends (3.523) (4.059) (=) Net Cash Generated in the Period (270) (434) Cash at the Beginning of Period 22.983 23.417 Cash at the End of Period 22.713 22.983

R$ million

Consolidated Cash Flow Statement

As of January 1, 2005, the Special Purpose Companies whose activities are directly or indirectly controlled by Petrobras were included in the Consolidated Financial Statements, as per CVM Instruction No. 408/2004.

• R$ 600 million increase in Free Cash Flow.

PETROBRAS

484848

Investments

1H06 % 1H05 % %• Direct investments 12.345 91 9.790 89 26 Exploration & Production 7.195 53 5.786 53 24 Supply 1.538 11 1.350 12 14 Gas and Energy 1.041 8 940 9 11 International 1.889 14 1.231 11 53 Distribution 333 2 242 2 38 Corporate 349 3 241 2 45 • Special Purpose Companies 1.156 8 1.008 9 15 • Ventures under Negotiation 142 1 111 1 28 • Project Finance 1 - 81 1 - Exploration & Production 1 - 81 1 -

Espadarte/Marimbá/Voador 1 - 52 - - Others - - 29 - - Total Investments 13.644 100 10.990 100 24

PETROBRAS

494949

Visit our website: www.petrobras.com.br/ri/english

For further information please contact:

Petróleo Brasileiro S.A – PETROBRAS

Investor Relations Department

Raul Adalberto de Campos– Executive Manager

E-mail: petroinvest@petrobras.com.br

Av. República do Chile, 65 - 22nd floor

20031-912 – Rio de Janeiro, RJ

(55-21) 3224-1510 / 3224-9947

Contacts