Property, Plant, and Equipment By Type of Asset

Consolidated

2008 2007

Estimated Useful Life in Years Cost Accumulated Depreciation Net Net

Buildings and improvements 25 to 40 9,382,619 (3,115,564) 6,267,055 3,800,350

Equipment and other assets 3 to 30 119,999,208 (55,854,051) 64,145,157 49,414,524

Land 1,138,720 1,138,720 854,848

Material 6,034,143 6,034,143 4,247,098

Advances to suppliers 5,189,735 5,189,735 2,624,093

Expansion projects 59,238,898 59,238,898 39,964,366

Oil and gas exploration and production 83,883,258 (35,142,799) 48,740,459 39,035,447

development costs (E&P) -----------------------------------------------------------------------------------------------------------------------------

284,866,581 (94,112,414) 190,754,167 139,940,726

b. How many years are left in the lives of Petrobras' "Equipment and other assets," on average? State clearly any assumptions that you make in arriving at your estimate.

c. Suppose that Petrobras assumes a zero salvage value for their "Equipment and other assets." For each $100 in new asset investments, what is the annual amount of depreciation expense charged to the income statement?

d. Suppose that other leading energy companies charge $12 in depreciation expense for each $100 invested in new equipment. Are Petrobras' depreciation policy assumptions materially different from those of their competitors? Support your answer.

e. What line item on Petrobras' income statement is most affected by their depreciation policy? Explain why.

f. Aside from comparing Petrobras' depreciation policy assumptions to those of their competitors, what other "red flags" might one look for in order to assess whether Petrobras is overly conservative or overly aggressive in taking depreciation expenses? Is there any evidence of these issues on Petrobras' financial statements?