Theodore M. Helms - Director of IR Almir Guilherme Barbassa - CFO and IRO Eduardo Molinari - E&P coordinator

Robert Kessler - Simmons & Company Paula Kovarsky - Itaú Securities Arjun Murti - Goldman Sachs Frank McGann - Merrill Lynch Ricardo Cavanagh - Raymond James Paul Cheng - Barclays Capital Sergio Torres - JPMorgan Katherine Lucas - Collins Stewart, LLC

Ladies and gentlemen, thank you for standing by and welcome to the Petrobras Conference Call to discuss the Second Quarter 2009 Results. At this time all lines are in a listen-only mode. Later there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded. Today with us we have Mr. Almir Guilherme Barbassa, CFO and IR Officer and his staff. At this time I would like to turn the conference over to Mr. Theodore Helms, Investor Relations Executive Manager of Petrobras, who has some additional comments. Please go ahead Mr. Helms.

Good morning ladies and gentlemen. Welcome to our conference call to discuss second quarter 2009 results. We have a simultaneous webcast on the Internet that could be accessed at the site www.petrobras.com.br/ri/english. Before proceeding I would like to draw your attention to slide two. We make forward-looking statements which are identified by the use of the word, will, expect, and similar that are based on the beliefs and assumptions of Petrobras' management and on information currently available to the company. Finally let me mention that this conference call will discuss Petrobras results prepared in accordance with Brazilian GAAP. At this moment we are unable to discuss any issues related to U.S. GAAP result. A conference call will be conducted by our CFO and Investor Relations Officer, Mr. Almir Guilherme Barbassa. He will comment on the company's operating and financial highlights and the main events during this quarter, and he will available to answer any questions you may have. Mr. Barbassa, you may begin.

Good afternoon ladies and gentlemen. Thank you for joining our conference call to discuss second quarter results. This quarter is notable for the absence of extraordinary items and for the reduction in costs, particularly from inventories, which were formed during when prices were lower. The quarter also demonstrate a stability of our operating earnings as a result of our domestic pricing policy. Let's go to slide three please. During the second quarter, oil and gas production in Brazil was up 6% year-over-year and 1% sequentially. Year-over-year gross would have been higher except that we have had a shutting 40,000 barrel of oil equivalent of gas capacity because of limited domestic demand. We continue to maintain our target for average daily production in Brazil of 2 million 50,000 barrels per day in 2009, but note that this includes a range of plus or minus 2.5%. This year we had experienced a number of minor operational issues and delay that reduced our expected average for the first seven months of the year. Such issues are to be expected giving the complexity of our operations. We set our target to reflect our production challenge, but even planning for contingencies, a target range is a more appropriate reflection of the reality of our business. Next slide please. In the pre-salt, we continue to accelerate our activities particularly in the BMS-9 and BMS-11. We now have six rigs on location in the Santos Basin cluster. Three are drilling new wells in IRACEMA, TUPI NORDESTE and ABARÉ. Two are performing drill steam test to GUARÁ and IARA E. The purpose of these tests is to provide additional information about the productivity of wells and the quality of the oil. Finally, we have a rig work on the replacement of the Christmas tree of the expanded well tests. By the end of this year, we expect the arrival of PetroRig 2 and the SSV Victoria. In 2010, five new built rigs that were contracting 2005 should abide. These will be supplemented by the arrival of the Transoceans Cajun Express, which we recently contracted. For the remainder of the year, we expect to perform additional drilling tests as well as new appraisals wells that form part of our evaluation plans for the pre-salt cluster. We continue to move forward on the bid for the eight standard FPSO hulls to keep building Brazil, and hope to have a contract for this whole signs by year-end. Additionally, we are nearing the end of the bidding process for two new pilots that are scheduled to begin production 12/13 and 12/14, and possibly earlier. It’s all worth noting that we processed the first cargo from Tupi. We found the quality of oil excellent with low sulfur and high yield of middle distillates. Next slide, please, we turn now to some key operating data that determine our quarterly results. In this slide, you will see the average price of Brent increased from $44 to $59 per barrel. The light-heavy differential decreased during this period, which is reflected in the differential between our crude oil and Brent. Together, these factors contribute to a substantial improvement in our upstream segments margin and the income. Next please, the increase in the price of oil and the strengthening up their Real caused a small increase in lifting costs. Lifting cost expressed in the U.S. dollars and without government take increased by almost $1 per barrel, reflecting the interest of the exchange rate on lifting cost. Lifting cost is where it’s slightly lower when expressed in reais. Production taxes increased during the period giving their linkage to international oil price. Production taxes increased by nearly $4 per barrel, while Brent increased some $15 per barrel, the net result was an improvement in our margin. We continue our policy of adjusting gasoline, diesel, and LPG only in the long-term, when we believe a new International price level has been established. The four segments are the smoothening of our operating income as well as price stability to see their markets consumers. From the fourth quarter of last year until June, we were recovering the difference between international market price and domestic price. We still [reduce off] gasoline and diesel prices in Brazil in June down combined with a higher International price, we are now close to priority between the two markets. The market for derivatives and natural gas we founded in the second quarter versus the first quarter, although it is still down year-over-year. To highlight some of the principal movements of our main product diesel recovered in line GDP growth. The first half of last year also saw considerable consumption of diesel for thermal electric generation. Gasoline consumption was lower as a result of increasing competition with ethanol. Fuel oil continue to decline as industrial consumers reached to natural gas, which is now abundant and are cheaply less expensive. Natural gas sales increased, but are still weak because of the lack of the month for thermal electric power. Next, we continue to upgrade our refineries to improve our margin and our trade balance. Comparing the first six months of 2009 with 2008, we’ve reduced fuel oil production by 51,000 barrels per day while increasing the output of diesel by 33,000 barrels per day. This enable us to capture the margin between these two products. Additionally, while refinery throughput in Brazil was down 30,000 barrels per day due to programmed refinery maintenance. Two-thirds of the reduction in feedstock was imported light oil, we do represent our saving of approximately $13 per barrel more than the domestic goods we exported during the first half of the year. Higher oil production improvement in our refinery system and reduced demand are reflected in our trade balance. The difference between barrels of oil, and oil product exported and imported continues to improve with a surplus of 184,000 barrels per day in the first half of 2009 versus a surplus of only 27,000 barrels per day in the first half of 2008. The commercial trade balance declined to an average of $567 million in the first semester of last year, to a surplus of $1.3 billion in this semester. Let's turn now to financial results. Net revenue increased as a result of higher volume, and higher price for our export and for those products in Brazil that are just each two weeks to International price. Cost of goods sold decreased as a result of inventory average and because we were able to process more domestic oil and fuel oil into the middle distillates demanded by Brazilian markets. Operating expense were reduced from the prior quarter by a decline in freight costs. Lower operating expense classified as orders as well as reduced write-offs for dry holes. No inventory reductions and no order impairments. The net result was an increase in operating income by 31%. Similar to the first quarter, improving operating income was partially offset by larger financial expenses related to continued depreciation of the real against the dollar. The quarter-over-quarter net financial results increased from a negative R$849 million to a negative R$2.4 billion. The increase in minorities interest expense from R$342 million to R$1.9 billion is also largely a result of real appreciation. As is a portion of the 744 million increase in equity investment. The net debt effect for our financial results are factored by the appreciation of the real reduced the net income by R$2.4 billion during the period. This reduction largely offset the increase of net income from positive financial results due to depreciation of the real against the dollar during the second half of last year. Also, affecting the financial result was a quarter-over-quarter increase in financial expenses R$385 million, as a result of a commercial hedge in the second quarter of 2009. This loss was largely offset by the benefit of a reduction in cost of goods sold, which had the effect of increasing operating income. With the deduction for interest on capital in the second quarter of 2009, our tax expense decreased by R$645 million. Foreign tax benefit also reduced our tax due during the quarter. Despite a higher financial expense and minority interest expense, net income increased 33% over the period. Next please. Operating income for our Brazilian exploration production segment more than doubled from the prior quarter, led by higher price and volumes. As mentioned earlier, low demand for natural gas cost approximately 40,000 barrels of way equivalent of natural gas to be shut in reducing revenue potential and increasing their unit lifting costs. As we saw earlier, costs were higher as a result of higher production taxes. Next, operating income for our Brazilian downstream segment remained strong as revenues increased on higher volume and price. Like cost of good sold were favorably impacted by cost averaging. Refining throughput was down slightly due to programmed refinery maintenance. The percentage of the mass good processed decreased slightly from 80% to 79%. Next. Our gas and energy segments recorded operating income of R$576 million, despite limited thermo-electric generation of electricity. The gain was largely a result of growing capacity based on greater supply of natural gas and completed infrastructure. As capacity grows, the gas and energy segment has more opportunity for revenues from power purchase sales. The completion of the infrastructure also eliminated the contractual penalties, which adversely impacted earnings in the past. The positive income marks a turning point in the gas and energy segment, which now has the infrastructure and a supply of gas to give it the operational flexibility to generate income. This year will mark the peak of the investment cycle for the gas and energy. As a result, investment should fall by half next year. The improvement in the international segment was due largely to absence of extraordinary items that hurt the first quarter earnings. Growing production in Nigeria is offsetting declining production elsewhere. Our share of Agbami production is now 20,000 barrels per day. Akpo is producing since last March. We expect production from these two projects to contribute to 60,000 barrels of oil per day by year end to our production, and will contribute an average of 40,000 barrels per day to 2009 production. Next. Capital spending increased to R$32.5 billion during the first semester of 2009, a 56% for the first semester of 2008, approximately 50% of our spending was for domestic E&P and the remainder for our integrated operation. [Coolant] spending is roughly equal to our EBITDA of R$31 billion during the semester, although it is now below our free cash flow. Capital expenditure during the first half of the year were based largely on existing projects and contracts and we have not seen substantial cost reduction for expenditure related to these contracts. For new projects, we are seeing some reduction in price but still too early to quantify. What is more apparent in the greater is the availability of equipment and the supplies at price below those of last year. Ultra deep water rigs are a good example of this. This increase in availability has led to some increase in CapEx above what was planned. We are closely monitoring investment spending and if necessary we will rise our CapEx budget accordingly. Next please. During the quarter, we were active in various market to finance the project gap between cash generation CapEx. Since our conference call announcing for this quarter results, we have announced a $10 billion loan from the Chinese Development Bank for 10 years. We recently concluded our loan with BNDES, which was fully disbursed on July 31. Finally, in July we reopened, in June we reopened our Global Notes due in 2019 to capture another $1.25 billion. In the reopening, we lowered our cost of borrowing from 8 and 18% rate to what we receive in February to 6 and 7, 8%. Proceed will be used to reduce commercial bank bridge loans. We have now topped the capital market for 2.5 billion of the planned 6 billion that we intend to issue during 2009 and 2010. Although we have contracted or obtained commitment for more than $31 billion, since the beginning of the year. And after fund a difference between our project cash flow in each branch were to average $66 per barrel during the next five years and our planned CapEx of $474 billion for the period of 2009 and 2013 business plan. Next please, total debt expressed in reais declined slightly during the quarter but net debt increased as we drew down cash balance to fund CapEx and dividends payment. Our debt when expressed in dollar, increased partially as a result of additional borrowings and partially because of from converting our reais denominated debt into US dollars. Our net debt to net [bulk] capital ended the quarter at 28%, still comfortably between our target range of 25% to 35%. Thank you. With that let me stop and answer any question you may have.

Thank you. (Operator Instructions) Our first question comes from Robert Kessler from Simmons & Company. Robert Kessler - Simmons & Company: I wanted to see if you could provide some commentary around the pre-salt framework I guess, where we stand now in the next steps from here. As I understand it, the committee has now put forward before the President some three proposals and the next step is for him to then in turn propose one of those to Congress. Is that correct, and if so could you give your indication on timing for when that proposal with Congress will take place. And any additional commentary you might have around your preference among the three proposals?

These are proposals that are under the responsibility of the government and that established a committee to suggest alternatives. We are although the President of Petrobras is part of this committee, we as a company, we are not taking part on it, and we don't know more than it is in the newspaper. So I prefer not to comment on these issues. Robert Kessler - Simmons & Company.: Can I take a different line of questioning then on your pre-salt development plan or early stages thereof as look at the next two FPSOs going into sanction here with Iara and Guara at 120,000 barrels a day of capacity. which you envision that increased capacity from I think the earlier number was 100. Is the 120 now indicative of what you expect for the next eight or what are your thoughts more broadly about the optimum size of these units as you sanction them, going forward?

We’re going to ask Molinari, our colleague from E&P, if you can add some information there.

IARA E GUARÁ is just a formation test, we are doing a test with drilling rigs, it's a very short period. Robert Kessler - Simmons & Company.: As a you fully develop the pre-salt what is the optimum size that your FPSO, is it 100,000 barrels a day right number? Or is a 120 a good number in your thinking today?

I was taking about these two formation tests, and then we will have IARA E GUARÁ net pilot system with 120,000 barrels per day and starting production in 2013. And then we will have eight FPSOs led due from 2015 and 2016 to start production in this period. And these FPSOs will have a capacity of 150,000 barrels per day. Robert Kessler - Simmons & Company.: Can you expect those to be relatively fully utilized? I guess I'm thinking of he examples in the Campos space and we’ve had a number of modules to a given field or area and then the utilization of that top side facilities is something less than 100%, thinking for example, let's say Marlim Sul, where you've got modules one, two and three with capacity now 430,000 barrels a day with another modules in 2011. But I think your target there for Marlim Sul in terms of total output is around 288 for 2013, which in fact is really low utilization of the top side facilities, now recognized their spread fairly broadly geographically, but as you think about these eight new FPSOs with a capacity of 150 each, should we expect a fairly high utilization of that 150 or something lower?

Yes. The FPSOs will produce up to peak is 150,000 barrels per day, this is an expected production. But of course, we will have a plateau and then a decline as we have in any other fuel, so this full capacity will be for a certain period that we don't know yet. It will depend on the order of cash that we are going to do in a pilot system of TUPI that we are going to evaluate IARA E GUARÁ and have more date, but the peak production will be in this range other than [50] for a second period.

Thank you. Our next question comes from Paula Kovarsky from Itaú Securities. Paula Kovarsky - Itaú Securities: Hi, good morning every one. I actually have three questions. First question is on CapEx, and actually what I was trying to understand is the breakdown of CapEx spendings. I mean, in the strategic plan E&P attached for roughly 60% of the spendings and it was around 45% this quarter. So I’d like to understand if this CapEx is supposed to increase in the second half of the year? And most importantly, if you could give us a little bit of color on how is it being spend between expiration and development production, since what we hear is that some of the suppliers saying that the contracting process is kind of slow and there is not being so much CapEx into production and development. So I’d like to understand a little bit how those things are working. Second question relates to expenses, indeed the company posted a significant improvement in operating expenses and I would like to get to understand how recurring those improvements are and what shall we expect for the second half of the year? And then third question relates to the gas and energy units. I was just trying to understand, in a quarter where gas sales are still kind of low given the installment of industrial production here in Brazil and where sales into thermal plants electricity are also low, the company post it's best results, so I would like to understand how is the profitability of those both gas and energy sales, and how should we look at this going forward.

Lets start by the last one. Let me have some help on this question Paula. Good afternoon. Basically our gross profit that brings out the results on the quarter and we have about R$2 million in the gas segment of growing profits and 300 million in the energy sector. And what happened basically is that exchange rate effect impacting both segments in gas and in energy and also in energy sectors, what happens that our energy cost to purchase energy was very low because of the spot price that we buy to sell our power purchase agreements. Also in natural gas, we have a growing volume that also happens to bring more profits in relations with the last quarter. We see month by month, basically growing volume in the diesel sector. And to the end of the year, we hope to be on the same level of profitability. We don’t see any more trouble ahead. The only point is that the operators said that, we not really order thermal generator in the year, and that’s just is our problem, but we already knew of all that. And what we are trying to develop is to optimize our revenues from power purchase agreements. And taking the opportunity of the low cost of energy and also we hope that with the growing volume of the industrial market in the gas segment, we believe we are going to be in the quite best position in the latter of the year than we had in the last year. Paula Kovarsky - Itaú Securities: What do you do with the gas that is not being burned into the thermal plants, does that go as a loss to the E&P division? How does that work?

What we’re trying to do is to make some auctions of short selling gas, like one month agreement of contracts, and with a discount price. But, we’re not burning gas because of the market. That’s a important thing to say. I think that E&P could say a little bit about this point. What we made is that we management our supply and our logistics trying to cope with demand, like we purchase less gas from Bolivia; our oil camps -- our gas camps that are not associated with shutdown, and bring less NGL [ph]. So, we are very flexible from the supply side, and we don’t shrink with the low demand. But I think the first quarter was really bad about demand, and now we see a growing demand in natural gas business.

Okay, regarding the CapEx, and percentage of the different segments, I guess the best way to view this is to look at our five year business plan. We have from $174 billion of the total adjustment in, have 104 for the E&P, and if you take one year or one quarter or six months, sometime you’ll have different composition on the distribution of this CapEx, but on the long run, their planned five year business plan shall prevail. Paula Kovarsky - Itaú Securities: Yes. You don't see any particular trend in the quarter, for instance, when talking about investing in exploration development and production. They're kind of following the originally planned plans, is that correct?

Sometimes they can speed up and sometimes it depends on the moment. Now for example, we are planning to receive six, we have six rigs in the Santos Basin pre-salt, and we are going to receive another two and another six next year, so you see the this denture in this area is going to increase. I don't know if I fully answered you. Paula Kovarsky - Itaú Securities: Yes. Just could you comment on the four billion investment in the International area of the quarter?

R$4 billion in the International? Paula Kovarsky - Itaú Securities: In the semester, sorry.

That's right we disbursed the acquisition of the distribution in Chile, we bought from Exxon. In this semester as well as the second half of Pasadena refinery. Only these two items comprises for nearly $1 billion, in that they have asked the normal activity, okay?

(Operator Instructions). Our next question comes from Arjun Murti from Goldman Sachs. Arjun Murti - Goldman Sachs: Thanks for the update on the drilling plans. I was wondering if you could provide an update on when you may give more information on the various reserves on the block. You’ve given an initial estimate for Tupi and Iara, after you’re drilling the additional wells on the Tupi block and after you are done drilling these additional wells on BMS-9 might you give a further update on the reserves then. And I guess, if you don’t do it, then when might you be providing additional details on that?

Arjun, I’m sorry to say, but told you, we are not much help to you in this case. I don’t know if (inaudible) can give us more information, but we can not anticipate this kind of news. (inaudible) is saying that he cannot add as well. Arjun Murti - Goldman Sachs: Can you comment on whether Iracema is viewed as being an extension of Iara or if that is a distinct structure or if it is part of Tupi that well?

Which one you meant? Arjun Murti - Goldman Sachs: The Iracema well, the northern portion of BMS-11.

(inaudible) please.

Iara, we are testing there. Right now, we’re beginning there for the formation test and it will take more 20 days now to finish this test, but we have already announced the volume there, Iara which is three to four billion barrels of oil equivalent, so it's just a continuation of work in there to know better behavior. Arjun Murti - Goldman Sachs: Do you see Iracema as a separate structure or a part of either Tupi or Iara or the entire thing?

That’s same as BMS-11. Yes. I don’t know it would be the same structure, probably a lot. Arjun Murti - Goldman Sachs: Did Tupi extended well test or any additional information you've gotten give you any encouragement in terms of what type of floor rate you can expect from individual wells in the pre-salt as well as what kind of reserve recoveries you might have. I think an earlier question was noticing that the FPSOs actually seem like they’re going to be a little larger than originally thought. Is that a function because you think the wells can slow at higher rates or can you provide any comments along those lines?

Well, they extended well test of Tupi before it stopped production, was producing 14,000 barrels per day as planned. You know that we are limited to amount of gas we can clear, which is 500,000 cubic meters a day. To know the productivity of wells in the pre-salt, we need to evaluate further to study with the data from the pilot system of the peak because in that pilot system we’ll not have constraints regarding production. In the Espirito Santo, we have one pre-salt well, we reduced some production from other cross-salt wells in wells in the P-34 platform, so we could increase the production from a speed 738 to 18000 barrels per day, that adds the production today. And so we will need the preferred rate further there we today pilot system to see the productivity of the well for the permanent systems.

Thank you. Our next question comes from Frank McGann from Merrill Lynch. Frank McGann - Merrill Lynch: Hi, good afternoon, just a little bit more information may be on the refining side in terms of the upgrading project. These are the long series of projects that you have been doing for a number and I believe you have couple more years of the key part of that upgrading process. But, how much more diesel do you think you will be able to produce say in 2010 than this year and again in 2011. How much more capacity we will have on the diesel side.

Thank you. I guess you are asking too difficult question. Our colleagues from refining they don't have this answers.

Frank, we will try to get that and send it to you and so we will work on that.

Thank you. Our next question comes from the Ricardo Cavanagh from Raymond James. Ricardo Cavanagh - Raymond James: My question is regarding lifting cost, how do you see them evolving in the coming few quarters, if possible?

The lifting cost, now we have the reductions reais and lifting cost in reais from the first quarter to the second quarter of 2009. And with the platforms that came on stream this year that five platforms we expect that lift in cost will reduce in the near future, as production increase in those platforms.

Our next question comes from Paul Cheng from Barclays Capital. Please go ahead. Paul Cheng - Barclays Capital: Two quick questions. First looking at 2009 capital spending trend, I think your budget is $28.6 billion with the exchange rates changing and also I think that the unique cost in some of surface also changing. Any update in terms of how that number is going to look for this year, and also any updates for the 2010 number?

Paul, we did not change our expected CapEx for the remaining of the year except by the exchange rate because if you divide a R$60.5 or R$60.4 billion by 1.85 that is the current exchange rate. You will get more than $30 billion. Paul Cheng - Barclays Capital: Out of the R$60 billion or $28.6 billion that your originally had, how much of them is US dollar denominating and how much is reais denominate?

It's about 60-40 Paul Cheng - Barclays Capital: R$60-40 or $60?

R$60, and $40. As you know, we are increasing our national content and many of these investment that is not in the E&P, we can do it with a larger national content. So, 60-40 I believe is certainly number. Paul Cheng - Barclays Capital: And second question is on, in the second quarter 2009, do you have a under lift or a over lift in the quarter? And also I think in the first quarter you have a pre-launch under lift by the end of the second quarter do you know from a inventory standpoint abundance or that you are still under lift?

Under lift, I don’t think we’re are familiar with the term. Paul Cheng - Barclays Capital: Means that, your sales volume is lower than your actual production. Because sometime due to the timing of the loading into the FPSO or into BOCC to sales. Sometime that sales volume maybe lower than your production and maybe sometimes is higher. It look like that in the first quarter that you may have a under lift and that wondering second quarter do you have a under lift or a over lift? And by the end of the second quarter are you balanced in your inventory level or that you have some catch up to do?

I think you asked a very technical question that we have to go back and try to find the answer for that. I don’t think any body in this room know the answer to the question I know. Is that right?

Maybe I can provide some clue on this because our total inventory at the beginning of the year were lower than at the end of the semester, so we grew our inventories during this 2009. Paul Cheng - Barclays Capital: You increased your inventory or you just.

Yes. Paul Cheng - Barclays Capital: You increased?

We increased, right. Paul Cheng - Barclays Capital: That means that you probably have a under lift. Ted, if you don’t mind, if you can send me an e-mail back or give me a call and let me know then how much is this still under lift, and that if I could have a sneaking announcement. Do you have any inventory gain or trading gain in the supply we saw for the second quarter? You’re actually referring to actual, where we would recognize a gain. Yes, I don’t think, no?

There were no gain on the second quarter or loss. This was only in the first quarter.

(Operator Instructions). Our next question comes from Sergio Torres from JPMorgan. Sergio Torres - JPMorgan: One question, regarding your export crude oil, I wonder if you have started shipping oil to China already, and you could share with us how does that commitment is working for the first year, is it take or pay arrangement or is it right of first refusal?

We did not start, we have in place some contract that was signed before we were in China last May, and trying for the new supply agreement. But the new supply agreement is a kind of -- is a market terms agreement, we -- is the right kind of right of first refusal. We offer them a volume of OIU at market price; if they agree, okay, they will take; if not, we’d sell for anybody else that will pay the price we are asking. And this is the basic rule of this supply contract. Sergio Torres - JPMorgan: A follow-up if I may is, if you could share with us the average for your international refining operations in the U.S., Argentina, and Japan?

Let me ask for the help of the International colleagues.

Good afternoon, Mr. Torres. In Argentina, we have some guidelines to attend the new environmental regulation in our refineries. In United States, we are working to Pasadena refinery and process more heavy oil and in Japan, we are working to increase the Tonen-General unit, and that’s all.

Our next question will come from Kate Lucas from Collins Stewart. Please go ahead. Katherine Lucas - Collins Stewart, LLC: I have a question on your downstream segment. In the slide 14, you show a favorable price effect on revenues between the first quarter and the second quarter, and yet between the two quarters, your average oil product realization prices actually came down slightly, so can you comment on some of the non-oil products related revenues in the quarter maybe be petrochemicals or other related revenues that would be driving that favorable price effect. How we'd think about those types of revenues and that impact going forward?

Just to clarify, Kate, I think you're looking at the price effect on revenues, which is the positive number in the segment, and then you're looking at the PMR and the realization, which actually looks like it’s come down during the period. Is that what you're talking about? Katherine Lucas - Collins Stewart, LLC: Right, your average domestic market oil price products came in a little bit, and so there seems to be something unrelated to the oil products, petrochemicals or some other revenues?

Remember also could be exports because this only refers to domestic pricing. Ask our [a bunch of] guys, if you can think of any other reason why the downstream of maybe our counting would have an explanation. I think it probably relates to the fact that the PMR only includes domestic sales whereas they does include International sales particularly of the products that they export. Katherine Lucas - Collins Stewart, LLC: So the slide 14 refers to global downstream, not just --

Yes. Slide 14 as well as the downstream segment of Petrobras, however, that includes export revenues.

Next question comes as a follow-up from Paul Cheng from Barclays Capital. Please go ahead.

Two question actually. One, I was wondering can you give us an update about the unification of the government on the company on the tax where we are in the process, if you just give an update on that? Secondly, what is your July and August Brazilian oil production so far, even at the low end of your target for 2009 you would suggest second half 2009 your Brazilian oil production were need to be close to of about 2 million and 40,000 barrel per day versus the second quarter of 1964 or June of 1927 and doesn’t seems like that you have any really major new quarter, maybe just one more that will come on stream for the remaining of the year. Is that still maybe stretching here?

Two question actually. One, I was wondering can you give us an update about the unification of the government on the company on the tax where we are in the process, if you just give an update on that? Secondly, what is your July and August Brazilian oil production so far, even at the low end of your target for 2009 you would suggest second half 2009 your Brazilian oil production were need to be close to of about 2 million and 40,000 barrel per day versus the second quarter of 1964 or June of 1927 and doesn’t seems like that you have any really major new quarter, maybe just one more that will come on stream for the remaining of the year. Is that still maybe stretching here?

Okay Paul I have Molinari to comment the second question to you.

Okay. We have July a production of 1 million 938,000 barrels per day. We have started production of five platforms this year. So all of them is in the process of increasing production. We have P-51, P-51 that started production 24 of January. The first semester have a average production of 45,000 barrels per day. Now in the first days of August until 12, we have a production of 78,000 barrels per day. Then we have Cidade de Sao Mateus that started production in 26 of February. It has produced 30,000 barrels per day in the first half of 2009. The production now is 45,000 barrels per day. We have P-53 that started production November last year and in the first half contributed with 63,000 barrels per day of production, and now it's producing 94,000 barrels per day. So we will not have a new platforms, now all of them are installed in the period of hump up of production. And besides that we have the two FPSOs that are not operated by Petrobras which is FPSO Frade, it is operated by Chevron, started production 20th of June and the production and the production is very low at the moment but will hump up towards the end of the and also Parque das Conchas, Petrobras has 30% in Frade, and Parque das Conchas operated by Shell, Petrobras has 35% working interest and started production recently, July 12 and it’s the very reasonable production at the moment, but will kick up, hump up the production towards the end of the year. So, the second half of the production will grow basically with this platform is solid in the first half.

Okay Paul. Regarding the congressional investigation commission regarding the tax process, last week there were the hearing of the head of the Brazilian IRS, and the Congress and he said that really the law was not clear enough regarding the procedure that Petrobras admitted. And so and there were no problem. The ideal of no problem that it was not so clear because the intention of the law was to hedge the companies. The Brazilian corporates that owns assets denominated in dollars and with the exchange rate variation they can have a gain or loss depending on this variation and did law came to protect this company, I guess payments of taxes any moment that they were not realizing the income, they were earnings or losing on the violation of the exchange rate, so the procedure that Petrobras adopted was in line with the intention of the law and so the head of this commission accepted that the answer was enough and conceded as a normal procedure, the procedure that Petrobras has adopted. We don't expect to have any other investigation or further demands on this subject. The other subject we’re not yet tested, and will not have to exempt in the Congress, but the tax procedure we are considering us solved and with no problems for Petrobras

Right. Almir, how about the other corruption investigation, I mean, when that going to be have the hearing in the Congress or how that procedure is going to be all that, how that being foresee?

Right. Almir, how about the other corruption investigation, I mean, when that going to be have the hearing in the Congress or how that procedure is going to be all that, how that being foresee?

Regarding the other subject?

Yes.

Yes.

Yes. I guess, today or tomorrow there will be, anyway. Today this afternoon, yes, the Congress is working and they are hearing ANP Brazilian National Petroleum Agency people and next week on they will be inviting Petrobras employees to tell about the other subject.

That means that the investigation is going to be continuing for a while maybe not tax but on different subjects?

That means that the investigation is going to be continuing for a while maybe not tax but on different subjects?

Yes, yes. The commission will be working for maybe three, four, six months, maybe depending on the complexity of what they are finding or what they are willing to get.

Thank you. Ladies and gentlemen, this concludes the question-and-answer session for today's conference. At this time, I'd like Mr. Barbassa, to proceed with closing remarks.

Thank you all for being here. I hope that next quarter we can have as good results that we had this time.

Thank you. Ladies and gentlemen, your host is making today's conference available for replay starting one hour from now. You may access this replay at the IR website or by dialing +1-412-317-0088. The code is 432073 and the pound sign. Enter one to start the playback. This will last through August 26. This concludes Petrobras’s conference call for today. Thank you very much for your participation. You may now disconnect your lines.