Expansion of the fleet and of the pip eline network

Petrobras’ involvement in the transportation and storage of oil, oil products, ethanol and natural gas is conducted through its subsidiary Petrobras Transporte S.A. (Transpetro), which operates 7,033 km of oil pipelines, 4,410 km of gas pipelines and 46 terminals – 20 inland and 26 waterway, as well as 54 ships.

During 2008, the company transported by ship a total of 59 million tons of oil and oil products, 4.8% less than in 2007. In addition, Transpetro carried through its pipeline network a total 670 million m3 of liquids, similar to the volume in 2007, and an average of 46 million m3/day of natural gas, up 31% on the figure for the previous year.

NEW VESSELS

The company proceeded with its program for the Modernization and Expansion of the Transpetro Fleet, under which it plans to build 49 oil tankers. With its demand for a minimum 65% local content in all construction, the program is helping to consolidate the Brazilian shipbuilding industry.

The first phase of the program is already under way, with the construction of ten Suezmax type vessels at the Atlântico Sul shipyard, in the state of Pernambuco. Next in line will be four oil product vessels, assembly of which will begin in 2009 at the Mauá shipyard, in Niteroi, Rio de Janeiro. The first delivery is expected to be made in 2010.

Another important step was taken in December 2008, when the first public tendering process was held for the second phase of the program. Four shipyards presented technical and commercial proposals for the construction of four Suezmax type and three Aframax type vessels, as well as three ships with a gross cargo capacity of 45 thousand tons and five ships with a gross cargo capacity of 30 thousand tons, for the transportation of oil products. The result of the tender will be disclosed in 2009.

THE ETHANOL EXPORT CORRIDOR

In 2008, Petrobras proceeded with the ethanol export corridor, an exclusive pipeline transportation system for channeling exports of this biofuel. The total investment is estimated to exceed US $ 1 billion and the project is expected to be completed in 2015, raising the country’s export capacity to 13 million m3/year and allowing the company to meet the growing demand from abroad for Brazilian ethanol.

In addition to adapting and improving existing installations, new pipelines, terminals, collection centers and intermediary pumping stations will be built and integrated with the road, rail and waterway transportation modes, including the Tietê waterway, in São Paulo.

Petrobras intends to double, by 2010, its ethanol export capacity from the Guanabara Bay waterway terminal, in Rio de Janeiro, by enlarging its Ilha D’água installations. The work should commence in the first half of 2009.

TERMINALS AND PIPELINES

As part of the initiatives under the Plan to Accelerate Gas Production (Plangás), the natural gas processing capacity of the Cabiúnas unit, in Rio de Janeiro, and of the Cacimbas unit, in Espírito Santo, will be augmented. To guarantee the distribution of its LPG production, Petrobras is building and expanding its installations at Ilha Comprida and Ilha Redonda, at the Guanabara Bay waterway terminal, in Rio de Janeiro.

The maritime and onshore infrastructure at the Guamaré terminal, in Rio Grande do Norte, will be expanded to allow the handling of oil products from the Potiguar refinery, where assembly will begin in 2009. This unit will produce diesel and gasoline from a mixture of naphtha and other intermediate products. A total of R$ 340 million is to be invested in the project, which is expected to come on-line in 2010.

During 2008, almost 800 km was added to the gas pipeline network operated by Transpetro, with around 600 km laid in the southeast and 200 km in the northeast. Notable among the new gas pipelines are the 302 km long Gascav (Cabiúnas-Vitória), in Espírito Santo, the 254.5 km second stretch of the Campinas-Rio pipeline, the 196 km second stretch of the Catu-Carmópolis pipeline, and the 33 km of the Açu-Serra do Mel pipeline, in Rio Grande do Norte.

Furthermore, the new pumping station for the Osório- Canoas oil pipeline, no Rio Grande do Sul, also came on-line, thereby increasing the distribution capacity of the Alberto Pasqualini refinery (Refap). A total of around R$ 250 million has been invested in this oil pipeline.