Clarification about Refap acquisition

Rio de Janeiro, December 21st, 2010, Petróleo Brasileiro S.A. – Petrobras whishes to clarify the news issued by the Brazilian press regarding the acquisition of 30% of the capital stock of Refinaria Alberto Pasqualini S.A. – Refap and considers it is relevant to explain to its shareholders and investors the following details regarding the transaction:

(a)   The amount of acquisition of the capital stock of US$ 350 million includes the Repsol´s 30% stake in the refinery’s stock, equivalent to US$ 130 million, as the date of the execution of the contract;

(b)   The contract also considers that the Repsol´s shares in the 2010 results will be completely retained by Petrobras. Up to the third quarter of 2010, Repsol’s share in the profit represented US$ 40 million;

(c)   Repsol’s portion of US$ 500 million in the current Refap´s debt had already been consolidated in Petrobras’s Balance Sheet.  Therefore it does not increase the Company’s overall indebtedness, although the financial obligation is being transferring to Petrobras;

(d)   It is also necessary to consider that the current scenario of the oil industry is completely different to the one in effect when the assets were exchanged. The sale of the interest to Repsol was made for the amount of US$ 500 million (2001 value), which also included a 10% interest in the Albacora Leste block and gas stations. The oil price increased from US$ 19 per barrel in 2001 to US$ 92 per barrel at the end of 2010; and the refining margin, measured by Crack spread 321 in the U.S. Gulf, increased from 2.9 to 10.8 during the same period.

(e)   After the exchange of assets, US$ 1.4 billion was invested at the refinery. These investments resulted in the increase of the production capacity from 130 thousand bpd to 190 thousand bpd (an increase of 46%) and in the refinery’s complexity from 2.0 to 6.9, according to the Nelson Index. The main projects that were developed included the construction of a Residue Catalytic Cracking Unit (RFCC), Retarded Coking Unit (UCR), Hydrotreatment Unit (HDT) and Hydrogen Generating Unit (UGH).

(f)    The market that is being supplied by the refinery is growing, as well as the entire Brazilian market, which creates a different expectation of return of this refinery if compared to other ones located in shrinking or stagnated markets.

The Company also clarifies the strategic reasons that were contemplated in this transaction. The acquisition adds synergies to Petrobras refining operations, as well as to the allocation of the oil produced in Brazil. For example, it is expected an increase in the processing of domestic oil from 43% to 93% in this refinery, as well as a gain in logistics and in the production of oil products to supply the market, integrating Refap into the Petrobras refining park.

In addition, aimed at full compliance with the current diesel and gasoline quality legislation, investments in hydrotreatment units are planned.  These investments will allow Petrobras to supply the market in southern Brazil, capturing the margins that could be lost if the Company would need to import oil products with better quality.

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