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COMPARISON OF NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE RULES AND PETROBRAS CORPORATE GOVERNANCE PRACTICE

On November 4, 2003, the New York Stock Exchange (''NYSE'') established new corporate governance rules. Under the rules, foreign private issuers are subject to a more limited set of corporate governance requirements than U.S. domestic issuers. As a foreign private issuer, Petrobras must comply with four NYSE rules: 1) Petrobras must satisfy the audit committee requirements of Rule 10A-3 under the Securities Exchange Act of 1934 (the "Exchange Act"); 2) its Chief Executive Officer must promptly notify NYSE in writing after an executive officer becomes aware of any material non-compliance with the applicable NYSE corporate governance rules; 3) Petrobras must provide the NYSE with annual and interim written affirmations as required under the NYSE corporate governance rules; and 4) Petrobras must provide a brief description of any significant differences between its corporate governance practices and those followed by U.S. companies under NYSE listing standards. The table below discloses the significant differences between Petrobras' domestic practices and the NYSE rules.

Section New York Stock Exchange Corporate Governance Rules for U.S. Domestic Issuers Petrobras' Practices
Director Independence
303A.01 Listed companies must have a majority of independent directors.

“Controlled companies” are not required to comply with this requirement.		 Petrobras is a controlled company because more than a majority of its voting power is controlled by the Brazilian Federal Government.  As a controlled company, Petrobras would not be required to comply with the majority of independent directors requirement if it were a U.S. domestic issuer.  There is no legal provision or policy that requires us to have independent directors.
303A.03 The non-management directors of each listed company must meet at regularly scheduled executive sessions without management.

 With the exception of the CEO of the company (who is also a director), all of Petrobras' directors are non-management directors. These non-management directors do not meet at regularly scheduled executive sessions without the presence of the CEO.
Nominating/Corporate Governance Committee
303A.04

Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties.

“Controlled companies” are not required to comply with this requirement.

Petrobras does not have a nominating committee.
Petrobras also does not have a corporate governance committee composed of directors.

Instead, the entire board of directors develops, evaluates and approves corporate governance principles with the assistance of an advisory corporate governance commission not composed of directors.  As a controlled company, Petrobras would not be required to comply with the nominating/corporate governance committee requirement if it were a U.S. domestic issuer.
Compensation Committee
303A.05 Listed companies must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. “Controlled companies” are not required to comply with this requirement Petrobras has a committee that advises the board of directors with respect to compensation and management succession.  There is no legal provision or policy that requires the members of this committee to be independent.
 
As a controlled company, Petrobras would not be required to comply with the compensation committee requirement if it were a U.S. domestic issuer.
Audit Committee
303A.06
303A.07		 Listed companies must have an audit committee with a minimum of three independent directors that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that covers certain minimum specified duties. Petrobras' audit committee is an advisory committee to the board of directors. It is currently composed of two independent members according to Rule 10A-3 under the Exchange Act, and both members of the audit committee are also members of Petrobras’ board of directors. The audit committee has a written charter that sets forth its responsibilities that include, among other things: (i) strengthening ties with the external auditors, permitting closer supervision of their work and of issues regarding their competency and independence, (ii) assuring legal and regulatory compliance, including with regard to certification, internal controls, compliance procedures and ethics, and (iii) monitoring the financial position of the company, especially as to risks, internal auditing work and financial disclosure.
Equity Compensation Plans
303A.08 Shareholders must have the opportunity to vote for compensation plans through shares and material reviews, with limited exceptions as set forth by the NYSE's rules.

 Under the Brazilian Corporate Law, shareholder approval is required for the adoption and revision of any equity compensation plans. Petrobras does not currently have any equity compensation plans.
Corporate Governance Guidelines
303A.09 Listed companies must adopt and disclose corporate governance guidelines. Petrobras has a set of Diretrizes de Governança Corporativa (Corporate Governance Guidelines) that address director qualification standards, responsibilities, compensation, orientation, self-appraisals and access to management. The guidelines do not reflect the independence requirements set forth in Section 303A.01 and .02. Certain portions of the guidelines, including the responsibilities and compensation sections, are not discussed with the same level of detail set forth in the commentaries to the NYSE rules. The guidelines are available on Petrobras' website.
Code of Ethics for Directors, Officers and Employees
303A.10 Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.

 Petrobras has adopted a Code of Ethics (Código de Ética) applicable to its employees and a Code of Good Practices (Código de Boas Práticas) applicable to directors and executive officers. No waivers of the provisions of the Code of Ethics or Code of Good Practices are permitted. Both documents are available on Petrobras' website.
Certification Requirements
303A.12 Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.

 Our CEO will promptly notify the NYSE in writing if any executive officer becomes aware of any material noncompliance with any applicable provisions of the NYSE corporate governance rules.






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