The Petrobras Ethics Committee, which took up its duties in 2008, was appointed by the Executive Board for the purpose of handling the question of ethics within the company and serving as a forum for discussion

CREDIBILITY AND TRANSPARENCY

Petrobras adopts the best corporate governance practices and has all the skills to make full use of the most advanced business management tools. As a publicly listed company, it is subject to the regulations of the CVM (Brazilian Securities Commission) and the Bovespa (São Paulo Stock Exchange).

Internationally, Petrobras complies with the regulations of the Securities & Exchange Commission (SEC) and the New York Stock Exchange (NYSE), in the U.S.A.; of the Madrid Stock Exchange’s Latin America Securities Market (Latibex), in Spain; and of the Buenos Aires Stock Exchange and the CNV (Argentinean Securities Commission), in Argentina.

In addition to continually refining its corporate governance practices, the company adopts management procedures that are compatible with the rules of the markets in which it operates, thereby ensuring that international standards of transparency are met. This reinforces its credibility in the market and enhances the relationship with its stakeholders: the shareholders, investors, customers, suppliers, employees and society in general.

Principal among the instruments that are in place to ensure good corporate governance are the company’s Code of Practice and Code of Ethics. The Code of Practice has been adopted by Petrobras in order to avoid conflicts of interest, and it addresses internal policies such as the Policy for Disclosure of Material Information and the Policy on Securities Trading. These policies relate to the use of confidential information and the conduct of Petrobras’ senior management.

The Code of Ethics, meanwhile, clearly defines the ethical principles that govern the actions of the Petrobras system, which are: respect for life, integrity, truth, honesty, justice, fairness, institutional loyalty, responsibility, merit, transparency, legality and impersonality. It represents, therefore, a public commitment by the company to put these principles into practice.

The Petrobras Ethics Committee, appointed by the Executive Board, took up its duties in 2008. The committee is directly linked to the CEO and was set up for the purpose of handling the question of ethics within the company and serving as a forum for discussion, while enhancing the formal, official nature of Petrobras’ Ethics Management System.

In 2008, the Corporate Governance Committee continued its activities of examining and monitoring the legislation and other pertinent regulations and analyzing the appropriateness and application of the instruments of governance adopted at the company.

In compliance with the requirements of the Sarbanes- Oxley Act (SOX), Petrobras has disclosed on the SEC’s Form 20-F that one of the nine members of the Board of Directors, elected at the AGM held on April 4, 2008, is a financial specialist.

INTERNAL CONTROLS

Petrobras completed the 2007 Certification of its Internal Controls, in response to SOX Section 404. The consolidated financial reports of Petrobras and PIFCo for the 2007 financial year were certified and filed in 2008, without any reservations on the part of the independent auditors, as was also the case for 2006.

With an eye on the preparations for the 2008 certification process, which will be finalized in 2009, the Internal Control area continued to advise the managements of the companies within the scope of the certification, who successfully completed the self-evaluation of their internal controls. The tests that are being carried out by the Internal Auditors, who are linked to the Board of Directors, are in their final phase.

The company endeavors to adopt the world’s best internal control practices, including the integrated management of controls at the entity and process level; constant analysis and revision of the mapping of process risks; the gradual extension of essential controls to all the company’s units; and the development of ongoing management training programs on the concepts and standard tools for mapping processes and evaluating the risks and controls.

CORPORATE GOVERNANCE STRUCTURE

Petrobras’ Corporate Governance structure comprises the Board of Directors and its advisory committees, the Executive Board, the Fiscal Council, Internal Auditing, the Ombudsman, the Business Committee and the Management Committees.

BOARD OF DIRECTORS

An independent collegial body with powers and responsibilities laid down in the law and in the company’s by-laws, whose main duties are to define the company’s strategic guidelines and supervise the actions of the Executive Board. The board has nine members, elected at an Ordinary General Meeting of the shareholders for a term of one year, with the possibility of reelection. Seven of the board members represent the controlling shareholder; one represents the minority shareholders of common stock; and one represents the holders of preferred stock.

EXECUTIVE BOARD

This is the body that runs the business, in line with the mission, objectives, strategies and guidelines defined by the Board of Directors. The Executive Board comprises a CEO and six directors chosen by the Board of Directors to serve a term of three years, with the possibility of reelection. They may be removed from their posts at any time. Only the CEO is also a member of the Board of Directors, but he or she may not preside over that body.

FISCAL COUNCIL

A permanent body, independent of the company’s management, as laid down in Brazilian Corporate Law, the Fiscal Council comprises five members, serving a term of one year, with the possibility of reelection. One of the members represents the minority shareholders; another represents the holders of preferred stock; and three act in the name of the federal government – one of them being appointed by the Finance Minister, as the representative of the National Treasury. It is incumbent on the Fiscal Council to represent the shareholders in a supervisory capacity, monitoring the actions of the company’s management and verifying the compliance with their legal and statutory obligations, as well as defending the interests of the company and its shareholders.

AUDITING

The Internal Auditors plan, perform and evaluate the internal auditing procedures and assist the senior management and bodies responsible for exercising external control. The company also has outside auditors, appointed by the Board of Directors, who act under restrictions as to the consulting services they may provide. It is mandatory that the outside auditors be changed every five years, on a rotation basis.

OMBUDSMAN

The office of the Ombudsman, which is directly linked to the Board of Directors, plans, guides, coordinates and evaluates activities aimed at gathering the opinions, suggestions, criticism, complaints and accusations of stakeholders, and arranges for investigations to be carried out and appropriate steps to be taken. In compliance with the requirements of the Sarbanes-Oxley Law, this office also serves as a channel for receiving and dealing with accusations regarding accounting, internal control and auditing issues, including confidential and anonymous tip-offs from employees.

BOARD ADVISORY COMMITTEES

There are three advisory committees: for Auditing; Environment; and Remuneration and Succession. Their members are also members of the Board of Directors and they assist that body in fulfilling its responsibilities in regard to the guidance and directing of the company.

AUDIT COMMITTEE

In full compliance with the requirements of the Sarbanes-Oxley Act, this committee comprises three independent members of the Board of Directors and its chairperson has to be a financial specialist – as defined by the SEC . The committee’s function is to analyze questions regarding the integrity of the company’s US GAAP financial reports and the effectiveness of its internal controls, as well as supervising Petrobras’ outside and internal auditors.

BUSINESS COMMITTEE

This committee is a forum for integration, seeking to promote the alignment of business development, management of the company and the guidelines of the Strategic Plan, in support of the senior management’s decision making process.

MANAGEMENT COMMITTEES

These are forums for delving deeper into issues that are to be presented to the Business Committee, with which they liaise. Such integration also exists between the management committees themselves and in their relations with the Board Advisory Committees.

The company currently has the following management committees: Exploration & Production; Downstream; Gas & Energy; Human Resources; Health, Safety & Environment; Organization and Management Analysis; Information Technology; Internal Controls; Risk; Petrobras Technology; Social and Environmental Responsibility; and Marketing & Brands.

PETROBRAS ORGANIZATIONAL STRUCTURE

The Petrobras organization model, approved by the Board of Directors in October 2000, is being fine tuned in alignment with the Strategic Plan. Changes in the company’s organizational structure in 2008 led to the implementation of a new organizational and administrative model at certain units and the creation of the Pre-salt executive management section, under the aegis of the Exploration & Production Business Area.

In the Financial Area, the Petrobras Financial Operations Center was set up, to centralize the execution of financial, accounting and taxation transactions. All biofuel activities have been transferred to a new fully-owned subsidiary, Petrobras Biocombustível S.A. In addition, telecommunications activities continued to be transferred to the Services Area, with the creation of the Information & Communications Technology executive management section. Furthermore, restructuring projects were approved for units abroad that are linked to the International Business Area.