Annual Report on Form 20-F 2008 - Petrobras

We continue to evaluate and develop
initiatives to address HSE concerns and to reduce
ourexposuretoHSErisks.
Insurance
Our insurance programs focus principally
on the evaluation of risks and the replacement of
value of assets, which we believe is customary for
our industry.Under our risk management policy,
risks associated with our principal assets, such as
refineries, tankers, our fleet and offshore
production and drilling platforms, are insured for
their replacement value with thirdparty Brazilian
insurers.AlthoughthepoliciesareissuedinBrazil,
most of our policies are reinsured abroad with
reinsurersrated Aor higher by Standard& Poor's
ratingagencyorB+orhigherbyA.M.Best.Partof
our international operations are insured or
reinsured by our Bermudian subsidiary Bear
Insurance Company Limited following exactly the
sameratingcriteria.
Lessvaluableassets,suchassmallauxiliary
boats, certain storage facilities, and some
administrativeinstallations,areselfinsured.Wedo
not maintain coverage for business interruption,
Item4A. UnresolvedStaffComments
Notapplicable.
exceptforaminorityofourinternationaloperations
andafewspecificassetsinBrazil.Wealsodonot
maintaincoverageforourwellsforsubstantiallyall
of our Brazilian operations.We maintaincoverage
for operational thirdparty liability with respect to
our onshore and offshore activities, including
environmentalrisks such as oil spills.Although we
do not insure most of our pipelines, we have
insurance against damage or loss to third parties
resulting from specific incidents, as well as oil
pollution. We also maintain coverage for risks
associatedwith cargo,hull andmachineryrisk.All
projects and installations under construction that
have an estimated maximum loss above U.S.$50
millionarecoveredbyaconstructionpolicy.
The premium for renewing our domestic
propertyriskinsurancepolicyfora12monthperiod
commencingJune2008wasU.S.$27.9million.This
represented an increase of 7% over the preceding
12month period.The increase was primarily due
the increase in the insured value of our assets,
which in the same period, increased by 28%, from
U.S.$48 billion to U.S$61 billion.Since 2001, our
risk retention has increased and our deductibles
mayreachU.S.$50millionincertaincases.
Item5. OperatingandFinancialReviewandProspects
Management's Discussion and Analysis of
Petrobras' Financial Condition and Results of
Operations
Youshouldreadthefollowingdiscussionof
our financial condition and results of operations
together with our audited consolidated financial
statements and theaccompanying notes beginning
onpageF2ofthisannualreport.
exportsales,whichconsistprimarilyof
salesofcrudeoilandoilproducts;
international sales (excluding export
sales), which consist of sales of crude
oil, natural gas and oil products that
are purchased, produced and refined
abroad;and
Overview
Weearnincomefrom:
other sources, including services,
investment income and foreign
exchangegains.
domestic sales, which consist of sales
of oil products (such as diesel oil,
gasoline,jetfuel,naphtha,fueloiland
liquefied petroleum gas), natural gas,
ethanol, electricity and petrochemical
products;
Ourexpensesinclude:
costsofsales(whicharecomposedof
labor expenses, operating costs and
purchases of crude oil and oil
products); maintaining and repairing
property, plant and equipment;
66