The Company has several competitive advantages compared with its current and future competitors, the principal being:

dominant market position in the production, refining and transportation of oil and oil products in Brazil;
significant and growing reserve base;
advanced technological know-how for deepwater exploration;
reduced costs due to its operations being executed on a large scale and to the integrated nature of its operating segments;
solid position in the growing Brazilian natural gas markets; and
proven success in attracting international partners to all areas of the Company’s activities.

Dominant market position in the production, refining and transportation of oil and oil products in Brazil.
The Company’s experience as the sole oil and oil products producer has allowed the creation of an extensive network of operations and a large oil reserve base. During its entire existence, resources and the establishment of bases in Brazil have guaranteed the Company competitive advantages over current and future participants in the indigenous oil and natural gas sectors. We are active in all the principal development fields in Brazil and are responsible for almost all the country’s refining capacity. The Company’s average daily domestic production of oil and natural gas grew 0.5% in 2007, 5% in 2006 and 12.8% in 2005.

Significant reserve base.
As of December 31 2006, the Company had Proved Reserves estimated at 13.92 billion boe in Brazil and a grand total of 15.01 billion boe, if overseas reserves are included. In addition, the Company has a substantial base of exploratory areas both in Brazil as well as overseas. These are continually being assessed by the Company  and by its partners in the industry with a view to further increasing reserves.

On December 31 2007, the Company had a Reserve Replacement Index of 18.9 years.
The Company believes that its Proved Reserves will provide opportunities for:

long lasting and sustainable production;
substituting imported light crude for production from domestic lighter crude reserves, recently discovered; and
controling its expenses and permitting economies of scale going forward.

Advanced technological know-how  for deepwater exploration.
In developing its offshore operations over the past 36 years, the Company has acquired recognized know-how in drilling techniques and technology, developing deepwater production. In addition, the Company has been developing the technology, which will allow exploration of wells more than 3,000 meters deep.
The Company’s know-how in drilling, exploration, development and production in deep waters has been instrumental in achieving high rates of success and production and, at the same time, a reduction in lifting costs.
Reduced costs due to operations being executed on a large scale and to the integrated nature of its operating segments
As a dominant company in the oil and natural gas segments, Petrobras has achieved a significant reduction in its costs by virtue of:

location of approximately 80% of Proved Reserves in the Campos Basin fields, permitting the concentration of the necessary infrastructure for supporting the Company’s activities, thereby reducing the costs of exploration, development and production;
location of the larger part of the Company’s refineries in the Southeast region close to the Campos Basin and of the most densely industrialized and populated markets in the country; and
the relative equilibrium between our current production, refining efficiency and the Brazilian market’s total demand for hydrocarbon products.

The Company believes that these cost efficiencies arising from its integrated nature, existing infrastructure and equilibrium allow it to compete effectively with other sector companies and imported products.

Strategic position in the Brazilian natural gas market.
The Company operates in the majority of the segments of the Brazilian natural gas market. By virtue of its broad range of operations in the natural gas market, the Company believes it is well positioned to benefit from the potential growth in demand in Brazil for this product. It further intends to meet this demand through the following initiatives:

development of Proved Reserves of natural gas in Bolivia and the gas pipeline that stretches 1,969 miles (3,150 kilometers) from Bolivia to Brazil;
growing production of non-associated natural gas  and natural gas associated with our indigenous production of crude oil combined with the necessary investments for processing this gas from the recently discoveries of non-associated gas, principally in the Santos Basin in Brazil;

 planned investments for expanding a natural gas transportation network in Brazil; and

increase in the participation in the natural gas distributor market through investments. Petrobras has a stake in 20 of the 27 natural gas distribution companies in Brazil; and
investments in thermoelectric power plants, which  are a source of demand for our natural gas.

Proven success in attracting international partners to all areas of the Company’s activities.

Thanks to its significant experience, know-how and extensive infrastructure in Brazil, the Company has attracted key partners such as Repsol – YPF, ExxonMobil, Shell, British Petroleum, Chevron – Texaco and Total to the activities of exploration, development, refining and energy. The partnerships with other companies enable Petrobras to share the risks, capital requirements and technology, at the same time promoting its own development and expansion.

Annual Updated
Extracted from the IAN for 2007.