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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
 ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2006
 Commission file number 333-11130
 PETROBRAS ENERGÍA PARTICIPACIONES S.A.
  N/A
    
    REPUBLIC OF ARGENTINA(Translation of Registrants name into English)
    
    (Jurisdiction of incorporation of organization)
 Maipú 1, 22 nd Floor
(C1084ABA) Buenos Aires
Argentina
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Name of Each ExchangeTitle of each Class
    
    On Which RegisteredAmerican Depositary Shares, each representing 10 Class B shares
    
    New York Stock Exchange
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
  Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
  The number of outstanding shares of each of the issuers classes of capital or common stock as of
December 31, 2006 was:
  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of
the Securities Act.
 Yes o No þ
 If this report is an annual or transitional report, indicate by check mark if the registrant is not
required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.
 Yes o No þ
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days:
 Yes þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange
Act. (Check one):
 Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o
 Indicate by check mark which financial statement item the Registrant has elected to follow:
 Item 17 o Item 18 þ
 If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
 Yes o No þ




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##### 



TABLE OF CONTENTS
  
 PageItems 1 - 2. Not Applicable
    
    
    2Item 3. Key Information
    
    
    2Selected Financial Data
    
    
    2Exchange Rates
    
    
    6Risk Factors
    
    
    7Item 4. Information About the Company
    
    
    16Oil and Gas Exploration and Production
    
    
    21Refining and Distribution
    
    
    38Petrochemicals
    
    
    44Gas and Energy
    
    
    48Regulation of Our Businesses
    
    
    64Organization Structure
    
    
    86Item 5. Operating and Financial Review and Prospects
    
    
    89Factors Affecting our Consolidated Results of Operations
    
    
    92Discussion of Results
    
    
    103Item 6. Directors, Senior Management and Employees
    
    
    145Item 7. Major Shareholders and Related Party Transactions
    
    
    155Item 8. Financial Information
    
    
    158Item 9. Offer and Listing
    
    
    159Item 10. Additional Information
    
    
    160Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    176Items 12-14. Not Applicable
    
    
    180Item 15. Controls and Procedures
    
    
    180Item 16A. Audit Committee Financial Expert
    
    
    182Item 16B. Code of Ethics
    
    
    182Item 16C. Principal Accountant Fees and Services
    
    
    182Item 16D. Not Applicable
    
    
    183Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    183Item 17. Not Applicable
    
    
    183Item 18. Financial Statements
    
    
    183Item 19. Exhibits
    
    
    184Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1
  i




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INTRODUCTION
       FORWARD-LOOKING STATEMENTS
   
    
    Changes in general economic, business, political or other conditions in Argentina or
changes in general economic or business conditions in other Latin America countries;
    
    The availability of financing at reasonable terms to Argentine companies, such as
us;
    
    The failure of governmental authorities to approve proposed measures or transactions
described in this Annual Report;
    
    Changes in the price of hydrocarbons and oil products;
    
    Changes to our capital expenditure plans;
    
    Changes in laws or regulations affecting our operations;
    
    Increased costs; and
    
    Other factors discussed under Risk Factors in Item 3 of this Annual Report.
   1




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Items 1-2. NOT APPLICABLE
 
 Item 3. KEY INFORMATION
 
 SELECTED FINANCIAL DATA
  Comisión Nacional de Valores
 Proportional consolidation of companies under which we exercise joint control
  Changes in professional accounting standards
    2




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Gain (loss)
    
    Increase (decrease)Shareholders equity as ofIncome for
    
    December 31,2005
    
    2004
    
    2005
    
    2004Comparison with recoverable values (i)
    
    
    (120
    )
    
    
    10
    
    
    
    (190
    )
    
    
    (70
    )Deferred tax (ii)
    
    
    272
    
    
    
    118
    
    
    
    (1,060
    )
    
    
    (1,332
    )Minority interest
    
    
    (36
    )
    
    
    (31
    )
    
    
    303
    
    
    
    339Total effect on unappropriated retained earnings
    
    
    
    
    
    
    
    
    
    
    (947
    )
    
    
    (1,063
    )Deferred loss (iii)
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (49
    )Total effect on Shareholders equity
    
    
    116
    
    
    
    97
    
    
    
    (969
    )
    
    
    (1,112
    )
 (i)
    
    In calculating the recoverability of Property, plant and equipment and certain intangible
assets, the recoverable value is considered to be the higher of the net realizable value and
the discounted value of the expected cash flows. Before the changes in the standards, the book
value was adjusted to its recoverable value if its carrying amount exceeded the undiscounted
value in use. This first comparison has now been eliminated.(ii)
    
    The difference between the inflation-adjusted book value of Property, Plant and Equipment and
other non-monetary assets and their tax basis is considered to be a temporary difference that
gives rise to the recognition of a deferred liability, which  as provided by CNV General
Resolution No. 487  can either be booked or disclosed in notes to financial statements. The
Company Management opted to book this effect.(iii)
    
    The effects of the translation of foreign operations net of the foreign-exchange differences
generated by the debt denominated in foreign currency designated as hedge of net investment
abroad no longer classified between liabilities and shareholders equity, and instead, are
classified in shareholders equity.
 Presentation of information related to income (loss) per share
   U.S. GAAP Information
      3




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Income Statement Data
 Year Ended December 31,2006
    
    2005
    
    2004(in millions of pesos, except for per shareamounts and share capital or as otherwise indicated)Income Statement DataArgentine GAAP:Net sales
    
    
    11,745
    
    
    
    10,655
    
    
    
    8,763Cost of sales
    
    
    (8,251
    )
    
    
    (7,046
    )
    
    
    (5,781
    )Gross profit
    
    
    3,494
    
    
    
    3,609
    
    
    
    2,982Administrative and selling expenses
    
    
    (1,094
    )
    
    
    (941
    )
    
    
    (847
    )Exploration expenses
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )Other operating expense, net
    
    
    (135
    )
    
    
    (329
    )
    
    
    (324
    )Operating income
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,678Equity in earnings of affiliates
    
    
    219
    
    
    
    281
    
    
    
    102Financial income (expense) and holding gains
(losses)
    
    
    (506
    )
    
    
    (899
    )
    
    
    (1,265
    )Other (expense) income, net
    
    
    93
    
    
    
    (459
    )
    
    
    (40
    )Income before income tax and minority
interest in subsidiaries
    
    
    1,954
    
    
    
    1,228
    
    
    
    475Income tax provision
    
    
    (465
    )
    
    
    (211
    )
    
    
    317Minority interest in subsidiaries
    
    
    (425
    )
    
    
    (288
    )
    
    
    (17
    )Net income
    
    
    1,064
    
    
    
    729
    
    
    
    775Basic/diluted Earning per Share Class A (1)
    
    
    
    
    
    
    
    
    
    
    Basic/diluted Earning per Share Class B
    
    
    0.501
    
    
    
    0.343
    
    
    
    0.365Number of shares outstanding (in millions):Class B
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132U.S. GAAP:Net sales
    
    
    11,085
    
    
    
    10,129
    
    
    
    8,232Operating income
    
    
    1,934
    
    
    
    613
    
    
    
    1,348Net income (loss)
    
    
    972
    
    
    
    (77
    )
    
    
    760Basic/ diluted net income (loss)per share
Class B:
    
    
    0.458
    
    
    
    (0.036
    )
    
    
    0.356
 (1)
    
    As from October 2002, there were no Class A Shares outstanding.
  4




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Balance Sheet Data Year Ended December 31,2006
    
    2005
    
    2004(in millions of pesos, except for per shareamounts and share capital or as otherwise indicated)Argentine GAAP:Consolidated Balance SheetAssetsCurrent assetsCash
    
    
    86
    
    
    
    104
    
    
    
    139Investments
    
    
    1,479
    
    
    
    857
    
    
    
    934Trade receivables
    
    
    1,416
    
    
    
    1,596
    
    
    
    1,181Other receivables
    
    
    1,182
    
    
    
    627
    
    
    
    756Inventories
    
    
    888
    
    
    
    782
    
    
    
    627Other assets
    
    
    1
    
    
    
    
    
    
    
    1Total current assets
    
    
    5,052
    
    
    
    3,966
    
    
    
    3,638Non-current assetsTrade receivables
    
    
    124
    
    
    
    78
    
    
    
    47Other receivables
    
    
    691
    
    
    
    672
    
    
    
    943Inventories
    
    
    81
    
    
    
    79
    
    
    
    71Investments
    
    
    3,630
    
    
    
    1,072
    
    
    
    1,107Property, plant and equipment
    
    
    10,838
    
    
    
    12,657
    
    
    
    12,277Other assets
    
    
    41
    
    
    
    47
    
    
    
    65Total non-current assets
    
    
    15,405
    
    
    
    14,605
    
    
    
    14,510Total assets
    
    
    20,457
    
    
    
    18,571
    
    
    
    18,148LiabilitiesCurrent liabilitiesAccounts payable
    
    
    1,603
    
    
    
    1,483
    
    
    
    1,181Short-term debt
    
    
    2,646
    
    
    
    1,805
    
    
    
    1,709Payroll and social security taxes
    
    
    276
    
    
    
    177
    
    
    
    98Taxes payable
    
    
    331
    
    
    
    228
    
    
    
    215Reserves
    
    
    95
    
    
    
    48
    
    
    
    31Other current liabilities
    
    
    192
    
    
    
    168
    
    
    
    657Total current liabilities
    
    
    5,143
    
    
    
    3,909
    
    
    
    3,891Non-current liabilitiesAccounts payable
    
    
    49
    
    
    
    14
    
    
    
    26Long-term debt
    
    
    4,716
    
    
    
    5,708
    
    
    
    6,248Other liabilities
    
    
    1,492
    
    
    
    1,404
    
    
    
    1,692Taxes payable
    
    
    402
    
    
    
    356
    
    
    
    190Reserves
    
    
    85
    
    
    
    103
    
    
    
    76Total non-current liabilities
    
    
    6,744
    
    
    
    7,585
    
    
    
    8,232Total liabilities
    
    
    11,887
    
    
    
    11,494
    
    
    
    12,123Minority interest in subsidiaries
    
    
    2,350
    
    
    
    1,922
    
    
    
    1,626Total Shareholders Equity
    
    
    6,220
    
    
    
    5,155
    
    
    
    4,399Total liabilities and shareholders equity
    
    
    20,457
    
    
    
    18,571
    
    
    
    18,148Capital Stock
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132U.S. GAAP:Total assets
    
    
    18,017
    
    
    
    16,158
    
    
    
    16,751Shareholders equity
    
    
    6,195
    
    
    
    5,233
    
    
    
    5,286
  5




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EXCHANGE RATES
   Argentine peso per U.S. dollar (1)High
    
    Low
    
    Average
    
    Period-end2007April
    
    
    3.10
    
    
    
    3.06
    
    
    
    3.09
    
    
    
    3.09March
    
    
    3.11
    
    
    
    3.10
    
    
    
    3.11
    
    
    
    3.10February
    
    
    3.11
    
    
    
    3.10
    
    
    
    3.11
    
    
    
    3.10January
    
    
    3.11
    
    
    
    3.06
    
    
    
    3.09
    
    
    
    3.11For the year ended December 31,2006
    
    
    3.08
    
    
    
    3.05
    
    
    
    3.06
    
    
    
    3.072005
    
    
    3.03
    
    
    
    2.86
    
    
    
    2.92
    
    
    
    3.032004
    
    
    2.99
    
    
    
    2.94
    
    
    
    2.97
    
    
    
    2.982003
    
    
    3.37
    
    
    
    2.73
    
    
    
    2.95
    
    
    
    2.942002
    
    
    3.90
    
    
    
    1.60
    
    
    
    3.14
    
    
    
    3.382001
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.00
    
    
    
    1.00
  Exchange controls
    6




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RISK FACTORS
 Factors Relating to Argentina
 Political and economic instability in Argentina has affected and may continue to adversely affect
our financial condition and results of operations.
 sociedad anónima
    The lack of financing alternatives may impact on the execution of our strategic business plan.
   7




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Fluctuations in the value of the peso may adversely affect the Argentine economy, our financial
condition and the result of operations.
     Inflation may escalate and undermine economic growth in Argentina and adversely affect our
financial condition and results of operations.
   Argentina has imposed exchange controls in recent periods that may impair our ability to service
our foreign currency-denominated debt obligations and pay dividends.
   8




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Limits on exports of hydrocarbons and related oil products have affected and may continue to affect
our results of operations.
       9




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Export taxes on our products have negatively affected, and may continue to negatively affect, the
profitability of our operations.
    Price controls have affected, and may continue to affect, our results of operations and capital
expenditures.
  Gas and electricity
    10




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Downstream margins
   , ,
    11




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The Argentine government and our affiliated utility companies are in the process of renegotiating
utility contracts, and the recovery of these affiliates depends on the successful completion of
these negotiations.
   Factors Relating to the Company
 Substantial or extended declines in the prices of crude oil and related oil products may have an
adverse effect on our results of operations and financial condition.
    Our crude oil and natural gas reserve estimates involve some degree of uncertainty and may prove to
be incorrect over time.
   12




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
    
    new production or drilling activities;
    
    field reviews;
    
    the addition of new reserves from discoveries or extensions of existing fields;
    
    changes in the international prices of oil and gas;
    
    the application of improved recovery techniques; and
    
    new economic conditions.
  We may not be able to replace our oil and gas reserves and this may have an adverse impact on our
future results of operations and financial position.
      Production of oil in Block 31 in Ecuador may be delayed significantly.
    13




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Our operations could be adversely affected by events beyond our control
  Our activities may be adversely affected by events in countries in which we do business.
   Venezuela
     14




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Bolivia
     Ecuador
       15




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Our operations run the risk of causing environmental damage, and any changes in environmental laws
may increase our operational costs.
  
 
 Item. 4 INFORMATION ABOUT THE COMPANY
 OUR HISTORY AND DEVELOPMENT
 Our History
        16




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History of Petrobras Energía
     Petrobras Energía Merger
     17




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Capital Expenditures and Divestitures
  BUSINESS OVERVIEW
 Our Strategy
   
    
    Increasing oil and gas reserves and production in Argentina and Latin America, to
secure sustainable growth.
    
    Growing downstream in Argentina, while balancing the crude production  refining 
logistics  distribution chain and differentiating ourselves through the quality of our
products and services.
    
    Developing businesses in the gas and energy areas that will allow for the best
overall use of our gas reserves.
    
    Consolidating our leading position in the regional petrochemicals market, by
maximizing the use of our raw materials.
    
    Using capital in a disciplined manner, with a view to optimizing our debt to capital
ratio and maintaining our financial solvency.
  
    
    A commitment to protect the quality of our goods and services, the environment and
the health and safety of our employees, contractors and neighboring communities.
    
    Adoption of, and compliance with, corporate governance practices in line with
recognized best practices.
    
    Maintenance of a management style that favors communication and teamwork, fostered
by the value of the people that work in our organization.
    
    Developing new business opportunities by maximizing potential synergies and
capitalizing on complementary business opportunities with Petrobras.
   18




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Our Principal Market
        
    
    Pesification of certain assets and liabilities denominated in foreign currency and held in the country;
    
    Amendment of the charter of the Central Bank authorizing it to issue money in excess
of the foreign currency reserves, grant short-term loans to the federal government and
provide financial assistance to financial institutions with liquidity or solvency
problems;
  19




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
    
    Pesification and elimination of indexing clauses on utility rates, fixing those
rates in pesos at the P$1=U.S.$1 exchange rate; and
    
    Implementation of taxes on hydrocarbon exports and certain oil products, among
others.
       20




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OIL AND GAS EXPLORATION AND PRODUCTION
 Overview
  
    
    Increasing oil and gas production and reserves by capitalizing on our experience and
presence in nearly all Latin American oil producing countries;
    
    Optimizing our investment portfolio by balancing exploration projects with
development projects; and
    
    Performing efficient operations under high safety and environmental care standards.
     Our Oil and Gas Exploration and Production Interests
   21




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Oil
    
    Gas
    
    TotalGross productive wells(1)
    
    
    5,585
    
    
    
    323
    
    
    
    5,908Net productive wells (2)
    
    
    3,913
    
    
    
    213
    
    
    
    4,126
 (1)
    
    Refers to number of wells completed.(2)
    
    Refers to fractional ownership working interest in gross wells.
  AverageProducing(1)
    
    Exploration(2)Gross
    
    Net(3)
    
    Gross
    
    Net(3)(in thousands of acres)Argentina
    
    
    4,807
    
    
    
    3,233
    
    
    
    18,274
    (4)
    
    
    6,639
    (5)Peru
    
    
    116
    
    
    
    116
    
    
    
    14,219
    
    
    
    11,734Venezuela
    
    
    485
    
    
    
    126
    
    
    
    157
    
    
    
    79Ecuador
    
    
    62
    
    
    
    54
    
    
    
    714
    
    
    
    637Bolivia
    
    
    56
    
    
    
    56
    
    
    
    
    
    
    
    Total
    
    
    5,526
    
    
    
    3,585
    
    
    
    33,364
    
    
    
    19,089
 (1)
    
    Includes all areas in which we produce commercial quantities of oil and gas or areas in the
development stage.(2)
    
    Includes all areas in which we are allowed to perform exploration activities but where
commercial quantities of oil and gas are not produced or areas that are not in the development
stage.(3)
    
    Represents our fractional ownership working interest in the gross acreage.(4)
    
    Includes 14,300 thousand exploration acres in off-shore areas.(5)
    
    Includes 4,138 thousand exploration acres in off-shore areas.
   22




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Year ended December 31,2006
    
    
    2005
    
    
    2004Outside of
    
    
    
    
    
    
    Outside of
    
    
    
    
    
    
    Outside ofArgentina
    
    
    Argentina
    
    
    Argentina
    
    
    Argentina
    
    
    Argentina
    
    
    ArgentinaGross wells drilled:Production:Productive wells:Oil
    
    
    218
    
    
    
    60
    
    
    
    256
    
    
    
    85
    
    
    
    275
    
    
    
    45Gas
    
    
    3
    
    
    
    2
    
    
    
    7
    
    
    
    2
    
    
    
    5
    
    
    
    Dry wells
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1Total
    
    
    224
    
    
    
    62
    
    
    
    265
    
    
    
    87
    
    
    
    282
    
    
    
    46Exploration:Discovery wells:Oil
    
    
    5
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    1Gas
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dry wells
    
    
    4
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Total
    
    
    15
    
    
    
    1
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    2Net wells drilled:Production:Productive wells:Oil
    
    
    100.4
    
    
    
    57.4
    
    
    
    110.7
    
    
    
    75.2
    
    
    
    131.1
    
    
    
    35.2Gas
    
    
    0.6
    
    
    
    1.0
    
    
    
    2.9
    
    
    
    1.0
    
    
    
    2.8
    
    
    
    Dry wells
    
    
    0.6
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.7
    
    
    
    0.9Total
    
    
    101.6
    
    
    
    58.4
    
    
    
    115.3
    
    
    
    76.2
    
    
    
    135.6
    
    
    
    36.1Exploration:Discovery wells:Oil
    
    
    1.7
    
    
    
    
    
    
    
    8.5
    
    
    
    
    
    
    
    2.0
    
    
    
    2.0Gas
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dry wells
    
    
    2
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Total
    
    
    6.7
    
    
    
    0.5
    
    
    
    8.5
    
    
    
    
    
    
    
    2.0
    
    
    
    2.7
 Production
 Argentine Production
       23




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Production outside of Argentina
  Venezuela
      24




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Peru
   Ley para la
Promoción de la Inversión en la Explotación de Recursos y Reservas Marginales de Hidrocarburos a
Nivel Nacional
  Ecuador
       26




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##### Table of Contents



27




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##### Table of Contents



Ship or Pay Obligations with Oleoducto de Crudos Pesados (OCP)
      Bolivia
     28




---



##### Table of Contents



Colombia
   Agencia
Nacional de Hidrocarburos
 Statistical Information Relating to Oil and Gas Production
   29




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##### Table of Contents



Oiland2006 Production
    
    GasProduction Areas
    
    Location
    
    Basin
    
    Oil(1)
    
    Gas(2)
    
    Wells
    
    Interest
    
    ExpirationArgentina:25 de Mayo  Medanito S.E.
    
    La Pampa and Río
Negro
    
    Neuquén
    
    
    5,447
    
    
    
    2,599
    
    
    
    555
    
    
    
    100.00
    %
    
    
    2016El Mangrullo
    
    Neuquén
    
    Neuquén
    
    
    
    
    
    
    579
    
    
    
    6
    
    
    
    100.00
    %
    
    
    2025Jagüel de los Machos
    
    Río Negro and La
Pampa
    
    Neuquén
    
    
    1,013
    
    
    
    3,023
    
    
    
    90
    
    
    
    100.00
    %
    
    
    2015Puesto Hernández
    
    Mendoza and Neuquén
    
    Neuquén
    
    
    4,082
    
    
    
    
    
    
    
    769
    
    
    
    38.45
    %
    
    
    2016Bajada de Palo
    
    Neuquén
    
    Neuquén
    
    
    69
    
    
    
    
    
    
    
    4
    
    
    
    80.00
    %
    
    
    2015Santa Cruz II
    
    Santa Cruz
    
    Austral
    
    
    2,126
    
    
    
    10,393
    
    
    
    74
    
    
    
    100.00
    %
    
    
    2017/2024Río Neuquén
    
    Neuquén and Río Negro
    
    Neuquén
    
    
    535
    
    
    
    6,844
    
    
    
    131
    
    
    
    100.00
    %
    
    
    2017Entre Lomas
    
    Neuquén and Río
Negro
    
    Neuquén
    
    
    855
    
    
    
    1,437
    
    
    
    396
    
    
    
    17.90
    %
    
    
    2016Veta Escondida and Rincón de
Aranda U.T.E.
    
    Neuquén
    
    Neuquén
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55.00
    %
    
    
    2016Aguada de la Arena
    
    Neuquén
    
    Neuquén
    
    
    69
    
    
    
    7,296
    
    
    
    10
    
    
    
    80.00
    %
    
    
    2022Santa Cruz I U.T.E.
    
    Santa Cruz
    
    Austral
    
    
    2,656
    
    
    
    44,074
    
    
    
    92
    
    
    
    71.00
    %
    
    
    2016/2023Sierra Chata
    
    Neuquén
    
    Neuquén
    
    
    157
    
    
    
    6,399
    
    
    
    38
    
    
    
    19.89
    %
    
    
    2022Atamisqui(5)
    
    Mendoza
    
    Cuyana
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refugio Tupungato (5)
    
    Mendoza
    
    Cuyana
    
    
    352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Atuel Norte
    
    Neuquén
    
    Neuquén
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    33.33
    %
    
    
    2016La Tapera  Puesto Quiroga
    
    Chubut
    
    San Jorge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21.95
    %
    
    
    2016El Tordillo
    
    Chubut
    
    San Jorge
    
    
    2,139
    
    
    
    46
    
    
    
    753
    
    
    
    21.95
    %
    
    
    2016Aguaragüe
    
    Salta
    
    Noroeste
    
    
    182
    
    
    
    8,571
    
    
    
    48
    
    
    
    15.00
    %
    
    
    2017/2021Total Argentina
    
    
    
    
    
    
    19,795
    
    
    
    91,261
    
    
    
    2,972Outside of Argentina:Colpa Caranda
    
    Bolivia
    
    Sub Andina
    
    
    509
    
    
    
    13.063
    
    
    
    49
    
    
    
    100.00
    %
    
    
    2029Oritupano Leona(3)
    
    Venezuela
    
    Oriental Maturín
    
    
    2,403
    
    
    
    
    
    
    
    
    
    
    

    
    
    Acema(3)
    
    Venezuela
    
    Oriental Maturín
    
    
    151
    
    
    
    
    
    
    
    
    
    
    

    
    
    La Concepción(3)
    
    Venezuela
    
    Lago Maracaibo
    
    
    1,070
    
    
    
    223
    
    
    
    
    
    


    
    
    Mata(3)
    
    Venezuela
    
    Oriental Maturín
    
    
    258
    
    
    
    26
    
    
    
    
    
    



    
    
    Oritupano Leona(4)
    
    Venezuela
    
    Oriental Maturín
    
    
    2,780
    
    
    
    
    
    
    
    231
    
    
    
    22.00
    %
    
    
    2025Acema(4)
    
    Venezuela
    
    Oriental Maturín
    
    
    182
    
    
    
    64
    
    
    
    27
    
    
    
    34.49
    %
    
    
    2025La Concepción(4)
    
    Venezuela
    
    Lago Maracaibo
    
    
    1,333
    
    
    
    2,411
    
    
    
    86
    
    
    
    36.00
    %
    
    
    2025Mata(4)
    
    Venezuela
    
    Oriental Maturín
    
    
    264
    
    
    
    476
    
    
    
    46
    
    
    
    34.49
    %
    
    
    2025Lote X
    
    Peru
    
    Talara
    
    
    4,680
    
    
    
    3,694
    
    
    
    2,472
    
    
    
    100.00
    %
    
    
    2024Bloque 31
    
    Ecuador
    
    Oriente
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100.00
    %
    
    
    2024Bloque 18
    
    Ecuador
    
    Oriente
    
    
    4,321
    
    
    
    
    
    
    
    25
    
    
    
    70.00
    %
    
    
    2022Total Outside of Argentina
    
    
    
    
    
    
    17,951
    
    
    
    19,957
    
    
    
    2,936Total
    
    
    
    
    
    
    37,746
    
    
    
    111,218
    
    
    
    5,908
 (1)
    
    In thousands of barrels.(2)
    
    In millions of cubic feet. Gas production figures represent actual sales gas.(3)
    
    Correspond to former operating agreements.(4)
    
    Indirect interests through mixed companies, accounted for as equity method investments.(5)
    
    Sold in October 2006.
 
  30




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##### Table of Contents



Year ended December 31,2006
    
    2005
    
    2004(average barrels per day)Argentina
    
    
    54,233
    
    
    
    54,516
    
    
    
    61,427Outside of Argentina
    
    
    49,181
    
    
    
    67,962
    
    
    
    66,973Total
    
    
    103,414
    
    
    
    122,478
    
    
    
    128,400
  Year ended December 31,2006
    
    2005
    
    2004(average thousand cubic feet per day)Argentina
    
    
    250,030
    
    
    
    231,830
    
    
    
    262,371Outside of Argentina
    
    
    54,677
    
    
    
    61,855
    
    
    
    64,657Total
    
    
    304,707
    
    
    
    293,685
    
    
    
    327,028
  Year ended December 312006
    
    2005
    
    2004Argentina:Oil (in pesos per barrel of oil
equivalent)
    
    
    124.4
    
    
    
    99.91
    
    
    
    86.72Gas (in pesos per million cubic feet)
    
    
    3.54
    
    
    
    2.74
    
    
    
    2.01Outside of Argentina:Oil (in pesos per barrel of oil
equivalent)
    
    
    144.3
    
    
    
    94.65
    
    
    
    61.91Gas (in pesos per million cubic feet)
    
    
    10.52
    
    
    
    5.21
    
    
    
    3.79
  Year ended December 31,2006
    
    2005
    
    2004(in pesos per barrel of oil equivalent)Argentina:Lifting Cost
    
    
    13.50
    
    
    
    11.05
    
    
    
    7.91Royalties
    
    
    9.42
    
    
    
    7.73
    
    
    
    6.35Depreciation
    
    
    13.91
    
    
    
    12.95
    
    
    
    11.28Total
    
    
    36.83
    
    
    
    31.73
    
    
    
    25.54Outside of Argentina:Lifting Cost
    
    
    12.10
    
    
    
    10.03
    
    
    
    8.92Royalties
    
    
    23.72
    
    
    
    8.08
    
    
    
    5.08Depreciation
    
    
    13.91
    
    
    
    13.97
    
    
    
    11.67Total
    
    
    49.73
    
    
    
    32.08
    
    
    
    25.67
  31




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Exploration
   Location
    
    Basin
    
    Interest
    
    ExpirationIn Argentina:Glencross
    
    Santa Cruz
    
    Austral
    
    
    87.00
    %
    
    
    
    (3)Estancia Chiripá
    
    Santa Cruz
    
    Austral
    
    
    87.00
    %
    
    
    
    (3)Cerro Manrique
    
    Rio Negro
    
    Neuquén
    
    
    50.00
    %
    
    
    
    (2)Parva Negra
    
    Neuquén
    
    Neuquén
    
    
    47.63
    %
    
    
    2001
    (1)Cerro Hamaca
    
    Mendoza
    
    Neuquén
    
    
    39.64
    %
    
    
    2004
    (1)Gobernador Ayala
    
    Mendoza
    
    Neuquén
    
    
    22.51
    %
    
    
    2004
    (1)Cañadón del Puma
    
    Neuquén
    
    Neuquén
    
    
    50.00
    %
    
    
    2008Estancia Agua Fresca
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    
    (1)Puesto Oliverio
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    
    (1)El Campamento
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    
    (1)El Cerrito Oeste
    
    Santa Cruz
    
    Austral
    
    
    50.00
    %
    
    
    
    (1)Chirete
    
    Salta
    
    Noroeste
    
    
    100.00
    %
    
    
    2010Hickman
    
    Salta
    
    Noroeste
    
    
    50.00
    %
    
    
    2011Enarsa 1 (E1)
    
    Continental Shelf
    
    Off-shore Argentina
    
    
    25.00
    %
    
    
    Enarsa 3 (E3)
    
    Continental Shelf
    
    Off-shore Argentina
    
    
    35.00
    %
    
    
    Outside of Argentina:Tinaco
    
    Venezuela
    
    Guarico
    
    
    50.00
    %
    
    
    2007Block 57
    
    Peru
    
    Madre de Dios
    
    
    35.15
    %
    
    
    2008Block 58
    
    Peru
    
    Madre de Dios
    
    
    100.00
    %
    
    
    2007Block 103
    
    Peru
    
    Marañon
    
    
    30.00
    %
    
    
    2008Block 110
    
    Peru
    
    Madre de Dios
    
    
    100.00
    %
    
    
    2007Block 112
    
    Peru
    
    Marañon
    
    
    100.00
    %
    
    
    2007Block 117
    
    Peru
    
    Marañon
    
    
    100.00
    %
    
    
    2008
 (1)
    
    We have requested an exploitation concession with respect to this field, which is still
pending.(2)
    
    The grant of an exploration permit is pending.(3)
    
    We signed two Master Agreements with the Province of Santa Cruz to continue demarcation and
production activities.
 Exploration in Argentina
  2
  32




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Exploration Outside of Argentina
 Peru
      Venezuela
  Colombia
 ,
  Ecuador
 force majeure
  33




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##### Table of Contents



Service Agreement in Mexico
  Reserves
       34




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##### Table of Contents




    
    A decrease of 181 million barrels of oil equivalent was recorded in connection with
the conversion of agreements in Venezuela.
    
    A reduction of 16 million barrels of oil equivalent in Peru.
    
    Through extensions of known accumulations 25 million barrels of oil equivalent were
added in Argentina and in Ecuador.
    Crude oil, condensate and naturalgas liquids
    
    Natural gasOutside of
    
    
    
    
    
    
    
    
    
    Outside ofArgentina
    
    Argentina
    
    Total
    
    Argentina
    
    Argentina
    
    Total
    
    Combined(in millionsof barrels of(in thousands of barrels)
    
    (in millions of cubic feet)
    
    oil equivalent)Total proved developed and
undeveloped reserves as of December
31, 2004
    
    
    176,290
    
    
    
    406,466
    
    
    
    582,756
    
    
    
    1,099,515
    
    
    
    365,987
    
    
    
    1,465,502
    
    
    
    827.0Proved developed reserves as of
December 31, 2004
    
    
    118,654
    
    
    
    168,119
    
    
    
    286,773
    
    
    
    554,138
    
    
    
    208,436
    
    
    
    762,574
    
    
    
    413.9Increase (decrease) originated in:Revisions of previous estimates
    
    
    (7,165
    )
    
    
    4,183
    
    
    
    (2,982
    )
    
    
    (87,864
    )
    
    
    22,612
    
    
    
    (65,252
    )
    
    
    (13.9
    )Improved recovery
    
    
    (9,485
    )
    
    
    
    
    
    
    (9,485
    )
    
    
    56
    
    
    
    
    
    
    
    56
    
    
    
    (9.5
    )Extensions and discoveries
    
    
    4,082
    
    
    
    8,762
    
    
    
    12,844
    
    
    
    23,774
    
    
    
    13,787
    
    
    
    37,561
    
    
    
    19.1Purchase of proved reserves in
place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years production
    
    
    (19,889
    )
    
    
    (24,814
    )
    
    
    (44,703
    )
    
    
    (84,618
    )
    
    
    (22,577
    )
    
    
    (107,195
    )
    
    
    (62.6
    )Total proved developed and
undeveloped reserves as of December
31, 2005
    
    
    143,833
    
    
    
    394,597
    
    
    
    538,430
    
    
    
    950,863
    
    
    
    379,809
    
    
    
    1,330,672
    
    
    
    760.2Proved developed reserves as of
December 31, 2005
    
    
    98,093
    
    
    
    176,227
    
    
    
    274,320
    
    
    
    457,378
    
    
    
    203,255
    
    
    
    660,633
    
    
    
    384.4Increase (decrease) originated in:Revisions of previous estimates
    
    
    (2,636
    )
    
    
    (186,724
    )
    
    
    (189,360
    )
    
    
    25,264
    
    
    
    (96,042
    )
    
    
    (70,778
    )
    
    
    (201.2
    )Improved recovery
    
    
    38
    
    
    
    4.705
    
    
    
    4,743
    
    
    
    724
    
    
    
    6,830
    
    
    
    7,554
    
    
    
    6.0Extensions and discoveries
    
    
    5,510
    
    
    
    6,900
    
    
    
    12,410
    
    
    
    63,595
    
    
    
    
    
    
    
    63,595
    
    
    
    23.0Purchase of proved reserves in
place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    (4,541
    )
    
    
    
    
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.5
    )Years production
    
    
    (19,795
    )
    
    
    (17,951
    )
    
    
    (37,746
    )
    
    
    (91,261
    )
    
    
    (19,957
    )
    
    
    (111,218
    )
    
    
    (56.3
    )Total proved developed and
undeveloped reserves as of December
31, 2006
    
    
    122,409
    
    
    
    201,527
    
    
    
    323,936
    
    
    
    949,185
    
    
    
    270,640
    
    
    
    1,219,825
    
    
    
    527.2Proved developed reserves as of
December 31, 2006
    
    
    81,845
    
    
    
    102,735
    
    
    
    184,580
    
    
    
    497,680
    
    
    
    179,884
    
    
    
    677,564
    
    
    
    297.5
  35




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##### Table of Contents



2006
    
    2005
    
    2004Millions of
    
    
    
    
    
    Millions ofbarrels of
    
    % of total
    
    barrels of
    
    % of total
    
    Millions of
    
    % of totaloil
    
    proved
    
    oil
    
    proved
    
    barrels of oil
    
    provedequivalent
    
    reserves
    
    equivalent
    
    reserves
    
    equivalent
    
    reservesProved developed reserves
    
    
    297.5
    
    
    
    56.4
    %
    
    
    384.4
    
    
    
    50.6
    %
    
    
    413.9
    
    
    
    50.0
    %Proved undeveloped
reserves
    
    
    229.7
    
    
    
    43.6
    %
    
    
    375.8
    
    
    
    49.4
    %
    
    
    413.1
    
    
    
    50.0
    %Total Proved Reserves
    
    
    527.2
    
    
    
    100
    %
    
    
    760.2
    
    
    
    100
    %
    
    
    827.0
    
    
    
    100
    %
       36




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##### Table of Contents



Transportation and Sales
   Oleoducto de Crudos Pesados (OCP)
      37




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##### Table of Contents



Oleoductos del Valle S.A.  Oldelval
     Competition
  
 REFINING AND DISTRIBUTION
    The refining and distribution business in Argentina
   38




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##### Table of Contents



Refining Division
  San Lorenzo Refinery
      39




---



##### Table of Contents



Refining Master Plan
    Distribution division
    As of December 31, 2006Owned (1)
    
    
    144Franchised (2)
    
    
    575Total
    
    
    719
 (1)
    
    Owned or controlled by Petrobras Energía under long-term commercial contracts or other types
of contractual relationships that secure a long-term direct influence over such points of
sale.(2)
    
    The term franchised is used to refer to gas stations owned by third parties with which
Petrobras Energía has signed a franchise agreement that provides Petrobras Energía with the
right (i) to become the gas stations exclusive supplier and (ii) to brand the gas station
with its corporate image. Current laws establish that the duration of contracts with gas
stations should be 5 years for existing stations, and 8 years for new constructions.
   40




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##### Table of Contents



Gas Stations
 Petrobras
    
    
    492Eg3
    
    
    190San Lorenzo
    
    
    37Total Gas Stations
    
    
    719
            41




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##### Table of Contents



Year Ended December 31,2006
    
    2005
    
    2004Production(thousands of tons):Virgin naphtha
    
    
    737
    
    
    
    810
    
    
    
    742Diesel oil
    
    
    1,282
    
    
    
    1,226
    
    
    
    1,220Other products
    
    
    1,229
    
    
    
    1,156
    
    
    
    1,203Sales:Aromatics (thousands of tons)
    
    
    30
    
    
    
    46
    
    
    
    37Benzene (thousands of tons)
    
    
    51
    
    
    
    58
    
    
    
    54Gasoline (thousands of m3)
    
    
    837
    
    
    
    715
    
    
    
    689Diesel oil (thousands of m3)
    
    
    1,767
    
    
    
    1,741
    
    
    
    1,787Other medium distillates (thousands of m3)
    
    
    15
    
    
    
    13
    
    
    
    15Asphalts (thousands of tons)
    
    
    184
    
    
    
    188
    
    
    
    153Reformer plant products (thousands of tons)
    
    
    118
    
    
    
    135
    
    
    
    93Other heavy products (thousands of tons)
    
    
    819
    
    
    
    686
    
    
    
    674Paraffins (thousands of tons)
    
    
    163
    
    
    
    163
    
    
    
    193Sales (in millions of pesos):Argentina
    
    
    3,361
    
    
    
    2,991
    
    
    
    2,594Outside of Argentina
    
    
    1,170
    
    
    
    865
    
    
    
    765Total
    
    
    4,531
    
    
    
    3,856
    
    
    
    3,359
  Refinor
        42




---



##### Table of Contents



Year ended December 31,2006
    
    2005
    
    2004Production:Gasoline (thousands of m3)
    
    
    93
    
    
    
    102
    
    
    
    101Virgin naphtha (thousands of m3)
    
    
    420
    
    
    
    441
    
    
    
    387Diesel oil (thousands of m3)
    
    
    331
    
    
    
    358
    
    
    
    354Natural gasoline (thousands of m3)
    
    
    130
    
    
    
    121
    
    
    
    132Propane/butane (thousands of tons)
    
    
    357
    
    
    
    357
    
    
    
    363Other products (thousands of m3)
    
    
    127
    
    
    
    138
    
    
    
    158Sales:Gasoline (thousands of m3)
    
    
    95
    
    
    
    106
    
    
    
    109Virgin naphtha (thousands of m3)
    
    
    573
    
    
    
    573
    
    
    
    529Diesel oil (thousands of m3)
    
    
    450
    
    
    
    505
    
    
    
    406Propane/butane (thousands of tons)
    
    
    354
    
    
    
    352
    
    
    
    354Other products (thousands of m3)
    
    
    101
    
    
    
    111
    
    
    
    81Sales(in millions of pesos):Argentina
    
    
    731
    
    
    
    696
    
    
    
    557Outside of Argentina
    
    
    785
    
    
    
    733
    
    
    
    533Total
    
    
    1,516
    
    
    
    1,429
    
    
    
    1,090
 Petrobras Bolivia Refinación (PBR)
     43




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Year ended December 31,2006
    
    2005
    
    2004Production:Gasoline (thousands of m3)
    
    
    612
    
    
    
    600
    
    
    
    618Diesel oil (thousands of m3)
    
    
    668
    
    
    
    669
    
    
    
    660Propane/butane (thousands of tons)
    
    
    76
    
    
    
    76
    
    
    
    69Reconstituted Oil (thousands of tons)
    
    
    574
    
    
    
    565
    
    
    
    467Other products (thousands of m3)
    
    
    216
    
    
    
    398
    
    
    
    360Sales:Gasoline (thousands of m3)
    
    
    601
    
    
    
    552
    
    
    
    606Diesel oil (thousands of m3)
    
    
    648
    
    
    
    655
    
    
    
    666Propane/butane (thousands of tons)
    
    
    76
    
    
    
    80
    
    
    
    71Reconstituted Oil (thousands of m3)
    
    
    616
    
    
    
    427
    
    
    
    379Other products (thousands of m3)
    
    
    272
    
    
    
    386
    
    
    
    280Sales(in millions of pesos):Bolivia
    
    
    1,974
    
    
    
    1,812
    
    
    
    1,886Outside of Bolivia
    
    
    705
    
    
    
    535
    
    
    
    674Total
    
    
    2,679
    
    
    
    2,347
    
    
    
    2,560
 Competition
  
 PETROCHEMICALS
        44




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Argentine operations
 Argentine styrenics division
        
    
    Styrene  100%
    
    Styrene butadiene rubber (SBR)  97%.
   Fertilizers division
     45




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##### Table of Contents



Year ended December 31,2006
    
    2005
    
    2004Production(thousands of tons):Styrene (1)
    
    
    95
    
    
    
    107
    
    
    
    111Synthetic rubber (2)
    
    
    53
    
    
    
    55
    
    
    
    58Urea
    
    
    54
    
    
    
    169
    
    
    
    188UAN and other liquid fertilizers
    
    
    492
    
    
    
    261
    
    
    
    248Polystyrene
    
    
    57
    
    
    
    58
    
    
    
    62Bops
    
    
    13
    
    
    
    13
    
    
    
    12Sales(thousand of tons):Styrene (1)
    
    
    100
    
    
    
    89
    
    
    
    52Synthetic rubber (2)
    
    
    56
    
    
    
    53
    
    
    
    60Fertilizers
    
    
    747
    
    
    
    676
    
    
    
    713Polystyrene and Bops
    
    
    72
    
    
    
    65
    
    
    
    63Propylene
    
    
    23
    
    
    
    23
    
    
    
    20Sales(in millons of pesos):Argentina Sales
    
    
    1,084
    
    
    
    963
    
    
    
    873Outside of Argentina
    
    
    500
    
    
    
    413
    
    
    
    270Total Argentina
    
    
    1,584
    
    
    
    1,376
    
    
    
    1,143
 (1)
    
    Including ethylbenzene.(2)
    
    Including SBR, NBR and butadiene.
 Petroquímica Cuyo (Cuyo)
     46




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##### Table of Contents



Year ended December 31,2006
    
    2005
    
    2004Production (thousands of tons)
    
    
    97.0
    
    
    
    85.6
    
    
    
    88.7Sales (in millions of pesos)
    
    
    470
    
    
    
    337
    
    
    
    293
 Brazilian Operations
       47




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##### Table of Contents



,
 2006
    
    2005
    
    2004Production (in thousands of tons):Styrene
    
    
    234
    
    
    
    205
    
    
    
    202Polystyrene
    
    
    113
    
    
    
    95
    
    
    
    105Sales(in thousands of tons):Styrene
    
    
    136
    
    
    
    118
    
    
    
    101Polystyrene
    
    
    114
    
    
    
    95
    
    
    
    103Other
    
    
    94
    
    
    
    53
    
    
    
    58Sales(in millions of pesos):Brazil
    
    
    1,007
    
    
    
    856
    
    
    
    720Outside of Brazil
    
    
    207
    
    
    
    116
    
    
    
    53Total sales
    
    
    1,214
    
    
    
    972
    
    
    
    773
 Competition
   
 GAS AND ENERGY
      Gas
 Marketing
   48




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Gas Transportation  TGS
 Our interest in TGS and Corporate Developments
        49




---



##### Table of Contents



Business
   2006
    
    2005
    
    2004Regulated Segment:Average firm committed capacity(1)
    
    
    71.6
    
    
    
    68.3
    
    
    
    63.6Average daily deliveries(1)
    
    
    61.2
    
    
    
    57.6
    
    
    
    55.6Annual load factor(2)
    
    
    86
    %
    
    
    84
    %
    
    
    87
    %Unregulated Segment:Liquids total production(3)
    
    
    1,036.4
    
    
    
    882.5
    
    
    
    969.0Processing capacity at year end(1)
    
    
    43.0
    
    
    
    43.0
    
    
    
    43.0
 (1)
    
    In millions of cubic meters per day.(2)
    
    Corresponds to the quotient of the average daily deliveries and the average firm contracted
capacity.(3)
    
    In thousands of tons.
 Regulated Energy Segment
     50




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Gas Trust
     Renegotiation process
    51




---



##### Table of Contents



Non-regulated Businesses
     Midstream services
  Competition
     52




---



##### Table of Contents



Electricity
     The Argentine Electricity Market
   Electricity Generation
  Fondo de Estabilización
  53




---



##### Table of Contents



Electricity Generation  Genelba and HPPL
    54




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##### Table of Contents



Year ended December 31,2006
    
    2005
    
    2004Power Generated (Gwh)
    
    
    6,434
    
    
    
    6,114
    
    
    
    5,689Power Sold (Gwh):Forward market
    
    
    2,300
    
    
    
    1,255
    
    
    
    1,437Spot market
    
    
    4,621
    
    
    
    5,486
    
    
    
    4,719Total sales
    
    
    6,921
    
    
    
    6,741
    
    
    
    6,156Sales(in millions of pesos)
    
    
    500
    
    
    
    355
    
    
    
    280
  55




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##### Table of Contents



Electricity Transmission: Transener, Yacylec and Enecor
 Transener
       Year ended December 31,2006
    
    2005
    
    2004Transener failure rate
    
    
    0.44
    
    
    
    0.33
    
    
    
    0.49
   56




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Yacylec S.A (Yacylec)
   57




---



##### Table of Contents



Enecor S.A.
  Electricity Distribution: Edesur
          58




---



##### Table of Contents



Annual sales in Gwh2006
    
    2005
    
    2004Type of user:Residential (in Gwh)
    
    
    5,638
    
    
    
    5,046
    
    
    
    4,796General (in Gwh)
    
    
    2,967
    
    
    
    2,948
    
    
    
    2,798Large users (in Gwh)
    
    
    6,232
    
    
    
    6,024
    
    
    
    5,729Total
    
    
    14,837
    
    
    
    14,018
    
    
    
    13,323Sales (in millions of pesos)
    
    
    1,412
    
    
    
    1,339
    
    
    
    1,104
  ,
 Competition
   59




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INSURANCE
            
    
    U.S.$10,000,000 for combined claims for property damage and business interruption
for all our businesses, except for the oil and gas exploration and production
businesses;
    
    U.S.$10,000,000 for claims for each property of our oil and gas exploration and
production business;
    
    U.S.$5,000,000 for control of wells;
    
    U.S.$5,000,000 in non-ocean marine third-party liability; and
    
    U.S.$5,000,000 in ocean-marine third-party liability.
   PATENTS AND TRADEMARKS
   60




---



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QUALITY, SAFETY, ENVIRONMENT AND HEALTH
    Excellence in Management
  New policy and guidelines, new management tools  Process Safety Program
  
    
    The Governance System structured in committees and subcommittees;
    
    The standardization of the Safety, Health and Environmental Management Manual and
its 15 guidelines ;
    
    The Plan of relationship with contractors, ; and
    
    The first Petrobras Energía SMS Best Practices Workshop that allowed to share
different works made by internal and external personnel.
   61




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Safety
   Environment
       Environmental Training
  Emergency Response
   62




---



##### Table of Contents



Prefectura Naval)
  Health
    63




---



##### Table of Contents



REGULATION OF OUR BUSINESSES
 Argentine Regulatory Framework
 Petroleum
   Exploration and Production
  2 2
    64




---



##### Table of Contents




    
    The quantity and the quality of extracted hydrocarbons, including (1) the computable
production levels of liquid hydrocarbons and (2) a break down of the crude oil
(specifying the type), condensate and total natural gas recovered (with a 0.1% maximum
error tolerance);
    
    Sales to domestic and foreign markets;
    
    Reference values for transfers made at no cost for purposes of further industrialization;
    
    Freight costs from location where marketable condition is acquired to location where
commercial transfer takes place; and
    
    Description of sales executed during the month.
       65




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Net Worth Requirements
   Short Law
        66




---



##### Table of Contents



Transportation
     
    
    Maximum amounts for tariffs on hydrocarbon transportation through oil pipelines and
multiple purpose pipelines, as well as for tariffs on storage, use of buoys and the
handling of liquid hydrocarbons; and
 
    
    Maximum amounts that may be deducted in connection with crude oil transportation by
producers that, as of the date of the regulation, transport their production through
their own unregulated pipelines, for the purpose of assessing royalties.
  Refining and Marketing
    67




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
    
    Resolution No. 1104/04 issued by the Secretary of Energy requires refineries and gas
station owners to submit monthly sales information; otherwise, they shall be subject to
monetary penalties.
 
    
    Resolution No. 1679/04 issued by the Secretary of Energy requires oil producers to
obtain governmental approval prior to exporting crude or diesel oil. In general,
producers must demonstrate that they have either satisfied local demand requirements or
granted the domestic market the opportunity to purchase oil on similar terms, in order
to obtain approval to export. In addition, this resolution requires companies that
wish to export diesel oil to register in order to obtain prior governmental approval to
guarantee a sufficient domestic supply of oil.This resolution is complemented by the Secretary of Energy Resolutions No.1834/05 and
1879/05 that create a mechanism to guarantee the supply of diesel oil by refiners to gas
stations and permit gas stations to acquire diesel oil from third parties if regular
suppliers fail to deliver it. In the latter case, refiners must bear any additional
costs borne by gas stations in procuring the diesel oil.In addition, under Resolution No. 25/06 issued by the Domestic Trade Secretary, refining
companies and/or wholesalers and/or retailers are obliged to reasonably cover total
diesel oil demand (according to volumes required under usual market practice) by
supplying on a regular and continuous basis every geographical area within the Republic
of Argentina with at least the same volumes supplied during the corresponding month of
the immediately preceding year, plus the existing positive correlation between the
increase in diesel oil demand and the increase in the gross domestic product,
accumulated from the reference month up to the relevant date.
 
    
    Resolution No. 1102/04 issued by the Secretary of Energy created a regulatory
framework for new gas stations, other fuel retail outlets and distribution channels
including the creation of a registry for the liquid fuel market. Severe sanctions are
imposed on the execution of commercial transactions with unauthorized parties, and
repetitive violations may result in suspension and withdrawal from the registry. The
resolution also establishes several requirements for all fuel market participants and
makes brand owners jointly and severally liable for breaches by companies operating
under their brands.
  68




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
    
    Resolution No.1103/04 issued by the Secretary of Energy provides, pursuant to
Executive Decree 1212/89, section 17, that in the case of gas stations operating under
a brand, the owner of the brand under which fuels are sold shall be responsible for the
specification, quality and quantity of products sold and for compliance thereof with
reported requirements, and in the case of gas stations operating under no brand, the
operator shall be the responsible party and fuel suppliers may also be jointly and
severally liable when duly identified.
 
    
    Law No. 26.022 exempts, for all the Argentine market imports of up to 500,000 cubic
meters of diesel oil for domestic consumption from the Fuel Liquids and Natural Gas
Tax, as well as from the Diesel Oil Tax. In addition, this law establishes severe
penalties applicable to the solid, liquid and gaseous hydrocarbons segment, for
breaches relating to health, safety, environmental, product quality and reporting
issues.
 
    
    Law No. 26.074 exempts, for all the Argentine market imports of up to 800,000 cubic
meters of diesel oil for domestic consumption from the Fuel Liquids and Natural Gas
Tax, as well as from the Diesel Oil Tax. The Secretary of Energy is entitled to
increase that amount by up to 20% for 2006 and to exempt an amount for 2007 that is up
to 20% higher than the amount exempted during 2006.
 
    
    Regarding fuel sales prices at gas stations, under Resolutions SE N° 938/06 and
959/06, the Secretary of Energy provides an obligatory schedule of differential prices
for fuel purchases by vehicles bearing foreign license plates at all gas stations
located in bordering areas.
 
    
    Resolution N° 1334/06 issued by the Secretary of Energy provides that marketing of
any new type of fuel within the Republic of Argentina, whether in compliance with
applicable quality standards, technological improvements, environmental standards or
business policies of the sectors companies, regardless of the brands or trade names
used, shall be previously authorized by the Fuels Under secretariat of the Republic of
Argentina.
 Market Regulation
    Taxation
   69




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Quarterly agreements for the supply of diesel oil to public transportation companies
    Stability of Fuel Prices
  Royalties  Exchange Rates
   Natural Gas
   70




---



##### Table of Contents



Regulatory framework
    ENARGAS
    Rate Regulation
   71




---



##### Table of Contents



UNIREN
  
    
    Impact of tariffs on economic competitiveness and on income distribution;
 
    
    Quality of services to be provided and/or the capital expenditure programs provided
for in the contracts;
 
    
    Interest of customers and accessibility to the services;
 
    
    The safety of the systems; and
 
    
    The companys profitability.
  Modifications to the regulatory framework
  
    
    The creation of a trust fund (to be funded by tariffs payable by users of the
service, special credit programs and contributions from direct beneficiaries) to
finance the expansion of the industry and the creation of an electronic market;
 
    
    The creation of an electronic wholesale market to coordinate spot transactions of
the sale of natural gas and secondary market transactions for transportation and
distribution of natural gas. This electronic market was in full operation as of the
date of this Annual Report; and
 
    
    A prohibition on distributors or their shareholders from having a controlling
participation in more than one gas dealer.
    72




---



##### Table of Contents




    
    Minimum volumes that natural gas producers must supply to the local market,
including specified amounts to: (1) distributors for the supply to industrial users,
(2) clients of distributors, or new direct consumers, who are required to buy directly
from producers and (3) power stations that generate electricity for the local market;
 
    
    Authorization for producers to increase the prices of natural gas for sales to
industrial users, electric generation companies and direct consumers according to a
price roadmap which differs for each basin and that culminates in complete deregulation
of the wellhead price of natural gas by January 1, 2007;
 
    
    Distribution and generation companies must renegotiate the price and volumes of
their supply contracts with producers in line with this agreement. If an agreement is
not reached after a 45-day period, producers are released from their obligation to
supply natural gas to these distribution and generation companies;
 
    
    Regulated prices through June 31, 2005 for new direct customers; and
 
    
    Notice of all new supply agreements must be given to the Secretary of Energy and
will be published in the electronic gas market once this market starts functioning.
   
    
    Term: 36 months;
 
    
    Price: export parity; and
 
    
    Volume: 1,000 cubic meters per day.
   Restrictions on Exports of Gas
   73




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Compressed Natural Gas for Vehicles
  Liquefied Petroleum Gas
  Regulatory framework
  
    
    Prices. The Secretary of Energy determines reference prices (which must be below
export parity prices) for the domestic market with the goal of guaranteeing regular
supply in that market and may establish price stabilization mechanisms in order to
avoid price fluctuations in the domestic market. The Secretary of Energy will
determine and disseminate a reference price for each region every six months.
  74




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
    
    Market limitations. The Secretary of Energy together with the Antitrust Commission,
or CNDC, are authorized to analyze the sector, for the purpose of fixing limits at each
stage of vertical integration of the industry.
 
    
    Open Access. An open access regime is established in connection with the storage of
liquefied petroleum and the Secretary of Energy establishes terms and conditions for
the determination of maximum tariffs for storage.
 
    
    Imports/Exports. No restrictions are imposed, and no prior authorization is
required, for the import of liquefied petroleum gas, and the Secretary of Energy may
authorize the export of liquefied petroleum gas without restriction, so long as the
domestic market is satisfied. No shortage of supply is currently experienced in the
domestic market.
 
    
    Trust Fund. A trust fund was established for the purpose of subsidizing the
consumption of liquefied petroleum gas by the low-income residential sector and
expanding the distribution network to areas without service. The trust is to be funded
from the sanctions collected under this law and contributions from the national budget.
 Electricity
    Fondo de Inversiones Necesarias que
permitan incrementar la oferta de energía eléctrica en el Mercado Eléctrico Mayorista
  75




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##### Table of Contents



cargos específicos
 Regulatory authorities
  (1)
    
    the Secretary of Energy of the Ministry of Federal Planning, Public Investment
and Services, and
 (2)
    
    the National Electricity Regulator (Ente Nacional Regulador de la Electricidad,
or ENRE).
   
    
    enforcement of compliance with the Regulatory Framework Law and related regulations;
 
    
    control of the delivery of electric services and enforcement of compliance with the
terms of concessions;
 
    
    adoption of rules applicable to generators, transmitters, distributors, electricity
users and other related parties concerning safety, technical procedures, measurement
and billing of electricity consumption, interruption and reconnection of supplies,
third-party access to real estate used in the electricity industry and quality of
services offered;
 
    
    prevention of anticompetitive, monopolistic and discriminatory conduct between
participants in the electricity industry;
 
    
    imposition of penalties for violations of concessions or other related regulations; and
 
    
    arbitration of conflicts between electricity sector participants.
 Consejo Federal de la Energía Eléctrica Fondo Subsidiario para Compensaciones Regionales de
Tarifas a Usuarios Finales
  76




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The Wholesale Electricity Market
 Overview
   
    
    a term market in which generators, distributors and large users enter into long-term
agreements on quantities, prices and conditions;
 
    
    a spot market, in which prices are established on an hourly basis as a function of
economic production costs, represented by the short-term marginal cost of production
measured at Ezeiza 500 kV substation, the systems load center; and
 
    
    a stabilization system for spot market prices applicable to purchases by
distributors, which operates on a quarterly basis.
 Operation of the wholesale electricity market
 Compañía Administradora del Mercado Mayorista Eléctrico S.A.,
  
    
    managing the national interconnection system pursuant to the Regulatory Framework
Law and related regulations, which includes:
 
    
    determining technical and economic dispatch of electricity in the national
interconnection system;
 
    
    maximizing the systems security and the quality of electricity supplied;
    
    minimizing wholesale prices in the spot market;
    
    planning energy capacity needs and optimizing energy use pursuant to the rules
set out from time to time by the Secretary of Energy; and
    
    monitoring the operation of the term market and administering the technical
dispatch of electricity pursuant to any agreements entered into in such market;
 
    

    acting as agent of the various wholesale electricity market participants;
 
    
    purchasing or selling electricity from or to other countries by performing the
relevant import/export operations; and
 
    
    providing consulting and other services related to these activities.
  77




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##### Table of Contents



Wholesale electricity market participants
  Generators
 Asociación de Generadores de Energía Eléctrica de la República
Argentina
 Transmitters
   Asociación de
Transportistas de Energía Eléctrica de la República Argentina
 Distributors
   Asociación de Distribuidoras de
Energía Eléctrica de la República Argentina,
  78




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Large users
    Traders
  Spot market
 Spot prices
     Seasonal Prices
   79




---



##### Table of Contents




    
    prices charged by CAMMESA to distributors and large users changed only twice per
year (in summer and winter), with interim quarterly revisions in case of significant
changes in the spot price of energy, despite prices charged by generators in the
wholesale electricity market fluctuating constantly;
 
    
    prices were determined by CAMMESA based on the average cost of providing one MW of
additional energy (its marginal cost), as well as the costs associated with the failure
of the system and several other factors; and
 
    
    CAMMESA would use seasonal database and optimization models in determining the
seasonal prices and would consider both anticipated energy supplies and demand as
follows:
 
    
    in determining supply, CAMMESA would consider energy supplies provided by
generators based on their expected availability, committed imports of electricity
and the availability declared by generators;
    
    in determining demand, CAMMESA included the requirements of distributors and
large users purchasing in the wholesale electricity market as well as committed
exports.
 Stabilization Fund
    Term market
   80




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Renegotiation of Utility Tariffs
  Concealment and Money Laundering
      Venezuelan Regulatory Framework
 Petroleum and Gas
      81




---



##### Table of Contents



The Performance of Hydrocarbon Related Activities
   empresa mixta
  Licenses and permits
   82




---



##### Table of Contents



Relevant Tax Features
 
    
    Income tax
    
    
    Value Added Tax
  
    
    Municipal taxes
   Additional Matters
 
    
    OPEC
   
    
    Royalties
  
    
    Exchange control system
   83




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Ecuadorian Regulatory Framework
 Petroleum and Gas
    Exploration and Exploitation of Hydrocarbons
       84




---



##### Table of Contents



Other Countries Regulatory Framework
       85




---



##### Table of Contents



ORGANIZATION STRUCTURE
  
  86




---



##### Table of Contents



87




---



##### Table of Contents



PROPERTY, PLANTS AND EQUIPMENT
   88




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##### Table of Contents



Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Analysis of Consolidated Results of Operations
 Petrobras Energías Corporate Reorganization
    PROPORTIONAL CONSOLIDATION AND PRESENTATION OF DISCUSSION
   
    
    Citelec, a company engaged in the electricity transmission business in Argentina
through its subsidiary, Transener.
 
    
    CIESA, a company mainly engaged in the gas transportation business in the south of
Argentina through its subsidiary, TGS.
 
    
    Distrilec, a company engaged in the electricity distribution business in the
southern area of the Federal Capital and 12 districts of the Province of Buenos Aires,
through its subsidiary, Edesur.
  89




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Without proportional consolidationWith proportional consolidation
    
    For the year ended December 31,For the year ended December 31,
    
    (Unaudited)2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Net sales
    
    
    11,745
    
    
    
    10,655
    
    
    
    8,763
    
    
    
    10,458
    
    
    
    9,512
    
    
    
    7,756Cost of sales
    
    
    (8,251
    )
    
    
    (7,046
    )
    
    
    (5,781
    )
    
    
    (7,377
    )
    
    
    (6,243
    )
    
    
    (5,113
    )Gross Profit
    
    
    3,494
    
    
    
    3,609
    
    
    
    2,982
    
    
    
    3,081
    
    
    
    3,269
    
    
    
    2,643Administrative and selling expenses
    
    
    (1,094
    )
    
    
    (941
    )
    
    
    (847
    )
    
    
    (977
    )
    
    
    (850
    )
    
    
    (765
    )Exploration expenses
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )Other operating expenses, net
    
    
    (135
    )
    
    
    (329
    )
    
    
    (324
    )
    
    
    (96
    )
    
    
    (321
    )
    
    
    (296
    )Operating income
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,678
    
    
    
    1,891
    
    
    
    2,064
    
    
    
    1,449Equity in earnings of affiliates
    
    
    219
    
    
    
    281
    
    
    
    102
    
    
    
    253
    
    
    
    315
    
    
    
    122Financial income (expense) and
holding gains (losses)
    
    
    (506
    )
    
    
    (899
    )
    
    
    (1,265
    )
    
    
    (363
    )
    
    
    (752
    )
    
    
    (1,101
    )Other income (loss), net
    
    
    93
    
    
    
    (459
    )
    
    
    (40
    )
    
    
    102
    
    
    
    (448
    )
    
    
    (33
    )Subtotal
    
    
    1,954
    
    
    
    1,228
    
    
    
    475
    
    
    
    1,883
    
    
    
    1,179
    
    
    
    437Income tax provision
    
    
    (465
    )
    
    
    (211
    )
    
    
    317
    
    
    
    (477
    )
    
    
    (218
    )
    
    
    310Minority interest in subsidiaries
    
    
    (425
    )
    
    
    (288
    )
    
    
    (17
    )
    
    
    (342
    )
    
    
    (232
    )
    
    
    28Net income
    
    
    1,064
    
    
    
    729
    
    
    
    775
    
    
    
    1,064
    
    
    
    729
    
    
    
    775
  90




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##### Table of Contents



OVERVIEW
  
    
    Exploration and production of oil and gas;
 
    
    Refining and distribution;
 
    
    Petrochemicals; and
 
    
    Gas and energy.
    
    
    The volume of crude oil, oil products and natural gas we produce and sell;
 
    
    Changes in international prices of crude oil and oil products, which are denominated in U.S. dollars;
 
    
    Fluctuations in the Argentine peso/U.S. dollar exchange rate;
 
    
    Interest rates;
 
    
    Changes to our capital expenditures plan;
 
    
    Price controls; and
 
    
    Changes in laws or regulations affecting our operations, including tax and environmental matters.
  91




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##### Table of Contents



FACTORS AFFECTING OUR CONSOLIDATED RESULTS OF OPERATIONS
 1) Argentine Economic Situation
  a) Peso Devaluation
    b) Inflation
       c) Investments in Utility Companies
   92




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##### Table of Contents



d) Price Stabilization and Supply
  Gas
 Mercado Electrónico del Gas
  93




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##### Table of Contents



Hydrocarbons
    Downstream margins
    94




---



##### Table of Contents



Electricity Generation
  Fondo de Estabilización
 Fondo para las Inversiones Necesarias que permitan
incrementar la oferta de energía eléctrica en el Mercado Eléctrico Mayorista
   95




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##### Table of Contents



e) Recoverability of Assets
 Tax loss
  Minimum presumed income tax credit
   96




---



##### Table of Contents



Gas areas in Argentina:
 2) Migration of Operating Agreements in Venezuela
        97




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##### Table of Contents



3) Commodity Prices
    4) Oil and gas production in Argentina
     98




---



##### Table of Contents



5) Operations in Ecuador
 Block 31
    Crude oil transportation agreement with Oleoductos de Crudos Pesados Ltd. (OCP)
    99




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##### Table of Contents



Tax credits derived from operations
    Law Amending the Hydrocarbon Law in Ecuador
    Preliminary Agreement with Teikoku Co. Ltd.  Teikoku
   100




---



##### Table of Contents



6) Operations in Bolivia
     7) Tax benefits regarding Innova operations  FUNDOPEM
     101




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##### Table of Contents



8) Derivative financial instruments
  9) Environmental matters
     102




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##### Table of Contents



DISCUSSION OF RESULTS
   With Proportional Consolidation
    
    For the year ended December 31,2006
    
    2005
    
    2004(in millions of pesos)Net sales (1)Oil and Gas Exploration and Production
    
    
    4,781
    
    
    
    4,657
    
    
    
    3,647Refining and Distribution
    
    
    4,531
    
    
    
    3,856
    
    
    
    3,359Petrochemicals
    
    
    2,490
    
    
    
    2,178
    
    
    
    1,877Gas and Energy
    
    
    2,593
    
    
    
    2,136
    
    
    
    1,804Corporate and Eliminations (2)
    
    
    (2,650
    )
    
    
    (2,172
    )
    
    
    (1,924
    )Total
    
    
    11,745
    
    
    
    10,655
    
    
    
    8,763Gross Profit (3)Oil and Gas Exploration and Production
    
    
    2,662
    
    
    
    2,635
    
    
    
    1,910Refining and Distribution
    
    
    (184
    )
    
    
    107
    
    
    
    257Petrochemicals
    
    
    307
    
    
    
    377
    
    
    
    374Gas and Energy
    
    
    680
    
    
    
    530
    
    
    
    465Corporate and Eliminations (2)
    
    
    29
    
    
    
    (40
    )
    
    
    (24
    )Total
    
    
    3,494
    
    
    
    3,609
    
    
    
    2,982Operating IncomeOil and Gas Exploration and Production
    
    
    2,179
    
    
    
    2,039
    
    
    
    1,270Refining and Distribution
    
    
    (468
    )
    
    
    (149
    )
    
    
    10Petrochemicals
    
    
    162
    
    
    
    267
    
    
    
    278Gas and Energy
    
    
    537
    
    
    
    450
    
    
    
    378Corporate and Eliminations (2)
    
    
    (262
    )
    
    
    (302
    )
    
    
    (258
    )Total
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,678
 (1)
    
    Royalties with respect to the oil and gas business in Argentina, Peru and Bolivia are
accounted for as a cost or production and are not deducted in determining net sales.(2)
    
    Eliminations correspond to sales between our business units and their associated costs.(3)
    
    Net sales less cost of sales.
  103




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##### Table of Contents



Without Proportional Consolidation (Unaudited)
    
    For the year ended December 31,2006
    
    2005
    
    2004(in millions of pesos)Net Sales (1)Oil and Gas Exploration and Production
    
    
    4,781
    
    
    
    4,657
    
    
    
    3,647Refining and Distribution
    
    
    4,531
    
    
    
    3,856
    
    
    
    3,359Petrochemicals
    
    
    2,490
    
    
    
    2,178
    
    
    
    1,877Gas and Energy
    
    
    1,306
    
    
    
    972
    
    
    
    784Corporate and Eliminations (2)
    
    
    (2,650
    )
    
    
    (2,151
    )
    
    
    (1,911
    )Total
    
    
    10,458
    
    
    
    9,512
    
    
    
    7,756Gross Profit (2)Oil and Gas Exploration and Production
    
    
    2,662
    
    
    
    2,635
    
    
    
    1,910Refining and Distribution
    
    
    (184
    )
    
    
    107
    
    
    
    257Petrochemicals
    
    
    307
    
    
    
    377
    
    
    
    374Gas and Energy
    
    
    267
    
    
    
    190
    
    
    
    129Corporate and Eliminations (2)
    
    
    29
    
    
    
    (40
    )
    
    
    (27
    )Total
    
    
    3,081
    
    
    
    3,269
    
    
    
    2,643Operating IncomeOil and Gas Exploration and Production
    
    
    2,179
    
    
    
    2,039
    
    
    
    1,270Refining and Distribution
    
    
    (468
    )
    
    
    (149
    )
    
    
    10Petrochemicals
    
    
    162
    
    
    
    267
    
    
    
    278Gas and Energy
    
    
    280
    
    
    
    209
    
    
    
    149Corporate and Eliminations (2)
    
    
    (262
    )
    
    
    (302
    )
    
    
    (258
    )Total
    
    
    1,891
    
    
    
    2,064
    
    
    
    1,449
 
 (1)
    
    Royalties with respect to the oil and gas business in Argentina, Peru and Bolivia are
accounted for as a cost or production and are not deducted in determining net sales.(2)
    
    Eliminations correspond to sales between our business units and their associated costs.(3)
    
    Net sales less cost of sales.
 Year ended December 31, 2006 compared to year ended December 31, 2005
 Net income
 Net sales
  Gross profit:
   104




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##### Table of Contents



Administrative and selling expenses :
  Exploration expenses :
 Other operating expense, net
  Operating income:
  Equity in earnings of affiliates:
 Financial (expense) income and holding (losses) gains:
   105




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##### Table of Contents



Other income (expenses), net
   
    
    P$85 million gain from the sale of oil areas in Argentina.
 
    
    P$23 million gain from the reversal of an allowance on the investment in Citelec S.A.
 
    
    P$10 million gain from the reversal of an allowance on the investment in Hidroneuquén S.A.
 
    
    P$18 million assessment by SENIAT  Venezuela.
 
    
    P$6 million impairment charge on assets in Venezuela.
Other income (expenses), net for 2005 mainly reflect:
 
    
    P$310 million impairment charge on assets in Venezuela.
 
    
    P$88 million impairment charge on areas in Argentina.
 
    
    P$54 million assessment by SENIAT  Venezuela.
 Income Tax:
     106




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##### Table of Contents



ANALYSIS OF OPERATING RESULTS BY BUSINESS SEGMENT
 Oil and Gas Exploration and Production
 Operating income:
 Net sales:
   Argentina
    Outside of Argentina
   107




---



##### Table of Contents



Ecuador
    Peru
    Bolivia
   Mexico
  Gross Profit:
  108




---



##### Table of Contents



Administrative and selling expenses:
 Exploration expenses:
 Other operating expense, net
 Refining and Distribution
 Operating expenses:
 Net sales:
       109




---



##### Table of Contents



Gross profit:
 Administrative and selling expenses:
 Other operating income (expense), net
 Petrochemicals
 Operating income
 Net sales
 
        110




---



##### Table of Contents




     Gross profit:
 
  
     111




---



##### Table of Contents



Administrative and selling expenses:
 Other operating income, net:
 Gas and Energy
 Marketing and Transportation of Gas
 Operating income:
 Net sales:
    Gross profit:
 Other operating income, net
 Electricity
 Operating income:
 Electricity Generation
 Net sales:
  112




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##### Table of Contents



Gross profit:
 Administrative and selling expenses:
 ANALYSIS OF EQUITY IN EARNINGS OF AFFILIATES
  Compañía de Inversiones de Energía S.A. (CIESA) / Transportadora de Gas del Sur S.A. (TGS):
   Distrilec Inversora S.A. (Distrilec)/Edesur S.A. (Edesur):
   113




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##### Table of Contents



Refinería del Norte S.A. (Refinor):
     Petroquímica Cuyo S.A. ( Cuyo ):
   Petrobras Bolivia Refinación (PBR):
  Oleoductos del Valle S.A. (Oldelval):
  114




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##### Table of Contents



Petrolera Entre Lomas S.A (PELSA):
  Year ended December 31, 2005 compared to year ended December 31, 2004
 Net income:
    Net sales
  Gross profit:
  Administrative and selling expenses
  115




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##### Table of Contents



Exploration expenses:
 Other operating income (expense), net
  Operating income:
  Equity in earnings of affiliates:
 Financial income (expense) and holding gains (losses):
   Other expenses, net
  116




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##### Table of Contents




    
    P$310 million impairment charge for assets in Venezuela.
 
    
    P$54 million assessment by SENIAT  Venezuela.
 
    
    P$88 million impairment charge on areas in Argentina.
  
    
    P$12 million impairment charge for the Acema area in Venezuela.
 
    
    P$15 million allowance on the book value of the loans granted to joint venture
partners in Venezuela.
 Income Tax:
   ANALYSIS OF OPERATING RESULTS BY BUSINESS SEGMENT
 Oil and Gas Exploration and Production
 Operating income:
 Net sales:
   117




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##### Table of Contents



Argentina
     Outside of Argentina
  Venezuela
    118




---



##### Table of Contents



Ecuador
   Peru
    Bolivia
   Mexico
  Gross Profit:
 Administrative and selling expenses:
  119




---



##### Table of Contents



Exploration expenses:
 Other operating income (expense), net
 Refining and Distribution
 Operating income:
   Net sales:
      120




---



##### Table of Contents



Gross profit:
 Administrative and selling expenses:
 Other operating income (expense), net:
 Petrochemicals
 Operating income:
 Net sales
  Styrenics  Argentina:
       121




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##### Table of Contents



 Styrenics  Brazil  Innova:
      Gross profit:
  Styrenics  Argentina:
   Styrenics  Brazil:
    Administrative and selling expenses:
  122




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##### Table of Contents



Other operating income (expense), net:
 Gas and Energy
 Marketing and Transportation of Gas
 Operating income:
 Net sales:
   Gross profit:
 Other operating income (expense), net
 Electricity
 Operating income:
 Electricity Generation
 Net sales:
  123




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##### Table of Contents



Gross profit:
 Administrative and selling expenses:
 Other operating income (expense), net:
 ANALYSIS OF EQUITY IN EARNINGS OF AFFILIATES
  Compañía de Inversiones de Energía S.A (CIESA) / Transportadora de Gas del Sur S.A (TGS) /:
    124




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##### Table of Contents



3 3 3
   Distrilec Inversora S.A. (Distrilec) /Edesur S.A (Edesur):
     Refinería del Norte S.A. (Refinor):
   Citelec S.A. (Citelec):
  125




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##### Table of Contents



Petroquímica Cuyo S.A. ( Cuyo ):
   Petrobras
Bolivia de Refinación (PBR):
   Oleoductos del Valle S.A. (Oldelval):
  Petrolera Entre Lomas S.A (PELSA):
   126




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Estimates of oil and gas reserves
       127




---



##### Table of Contents



Impact of oil and gas reserves on depreciation and depletion
  Impairment of long-lived assets
       Successful efforts method of accounting
     128




---



##### Table of Contents



Contingencies
   Income tax
     129




---



##### Table of Contents



130




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
    
    
    Gradually reduce our level of indebtedness, by designing a capital structure in line
with industry standards adaptable to the financial markets in which we operate and by
establishing a debt maturity profile consistent with cash generation.
 
    
    Gradually reduce indebtedness costs.
 
    
    Have adequate flexibility to overcome the volatility inherent to emerging capital
markets, by adhering to a conservative cash management policy that minimizes the risks
of financial distress.
   
    
    Over 54% growth in operating cash flow.
 
    
    Strict compliance with all financial obligations, with a 4% decline in our annual
average indebtedness, measured in U.S. dollars.
 
    
    A significant increase in capital expenditures, supporting our growth strategy.
 
    
    Reduction in indebtedness costs.
   Analysis of Liquidity and Capital Resources
   131




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##### Table of Contents



Without Proportional ConsolidationWith Proportional Consolidation
    
    
    (Unaudited)2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Cash and cash equivalent at the
beginning of the year
    
    
    790
    
    
    
    1,067
    
    
    
    1,091
    
    
    
    474
    
    
    
    846
    
    
    
    709Net cash provided by operations
    
    
    2,877
    
    
    
    1,998
    
    
    
    1,632
    
    
    
    2,506
    
    
    
    1,626
    
    
    
    1,438Net cash used in investing activities
    
    
    (2,022
    )
    
    
    (1,682
    )
    
    
    (1,199
    )
    
    
    (1,888
    )
    
    
    (1,544
    )
    
    
    (1,072
    )Net cash used in financing activities
    
    
    (295
    )
    
    
    (602
    )
    
    
    (451
    )
    
    
    (48
    )
    
    
    (463
    )
    
    
    (222
    )Effect of exchange rate change on
cash
    
    
    
    
    
    
    9
    
    
    
    (6
    )
    
    
    
    
    
    
    9
    
    
    
    (7
    )Cash and cash equivalent at the end
of the year
    
    
    1,350
    
    
    
    790
    
    
    
    1,067
    
    
    
    1,044
    
    
    
    474
    
    
    
    846
 Cash
   Operating activities
    Investing activities
    132




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##### Table of Contents



2006
    
    
    2005
    
    
    2004- Oil and Gas Exploration and Production
    
    
    1.544
    
    
    
    1.235
    
    
    
    872- Petrochemical
    
    
    195
    
    
    
    119
    
    
    
    96- Refining and Distribution
    
    
    249
    
    
    
    199
    
    
    
    81- Corporate
    
    
    76
    
    
    
    64
    
    
    
    11- Other
    
    
    4
    
    
    
    2
    
    
    
    7Total capital expenditures
    
    
    2.068
    
    
    
    1.619
    
    
    
    1.067- Divestments
    
    
    (124
    )
    
    
    
    
    
    
    Total net capital expenditures
    
    
    1.944
    
    
    
    1.619
    
    
    
    1.067
 Oil and Gas Exploration and Production
   Refining and Distribution
   Petrochemicals
   133




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##### Table of Contents



Financing activities
   
    
    In 2006, we paid at maturity Class B Notes under the U.S.$2.5 billon Corporate Notes
Program in an aggregate amount of P$15 million (U.S.$5 million). In addition, Petrobras
Energía S.A. and Petrobras Energía Perú S.A. repaid bank loans and long-term lines of
credit in an amount of P$129 million and P$128 million, respectively.
 
    
    In 2005, Classes C, M and K Notes under the U.S.$2.5 billon Global Corporate Notes
Program were fully prepaid, in the aggregate amount of P$1,251 million (U.S.$428
million). In addition, we paid at maturity Class F Notes under the Program for an
aggregate amount of P$184 (U.S.$64 million). Petrobras Energía Venezuela S.A. and
Innova S.A. paid debt owed to the International Finance Corporation (IFC) in the amount
of P$415 million (U.S.$137 million). In addition, we repaid bank loans in the amount of
P$117 million.
 
    
    In 2004, we made principal payments on Classes C, M and K Notes under the U.S.$2.5
billion Global Corporate Notes Program and paid in full at maturity Class O and P Notes
under that Program and the Fourth Series of the U.S.$1.2 billion Global Program, for a
total payment of P$881 million. In addition, we paid P$107 million mainly in debt,
principally bank loans.
  
    
    In 2006, Petrobras Energía S.A. received P$82 (U.S.$26 million) for foreign trade
financing. In addition, Petrobras Energía Perú S.A. received cash provided by other
bank financing in the amount of P$138 million (U.S.$45 million).
 
    
    In 2005, Petrobras Internacional Braspetro BV, a subsidiary of Petrobras, granted us
a P$582 million (U.S.$200 million) loan. The funds were used to prepay Class M and K
notes under the U.S.$2.5 billion Program. In addition, cash provided by other bank
financing totaled P$165 million (U.S.$56 million).
 
    
    In April 2004, we issued a second Tranche of the Series R Notes in an aggregate face
value of U.S.$100 million, or P$289 million, which represents a single class with the
Class R Notes issued in October 2003. In September 2004, Petrobras Internacional
Braspetro BV granted us a P$150 million (U.S.$50 million) loan, see Related Party
Transactions. The IFC completed the financing granted in 2003 to our subsidiary
Petrobras Energía Venezuela S.A. in the amount of P$85 million (U.S.$29 million) and
Petrobras Energía del Perú S.A. received financing in the amount of P$85 million
(U.S.$30 million), which partly completed the financing granted in 2003 by a syndicate
of banks. In addition, cash provided by foreign trade financing totaled P$60 million.
    134




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##### Table of Contents



DESCRIPTION OF INDEBTEDNESS
     6 or more1 year
    
    2 years
    
    3 years
    
    4 years
    
    5 years
    
    yearsMillions of pesos
    
    
    2,133
    
    
    
    238
    
    
    
    617
    
    
    
    1,132
    
    
    
    304
    
    
    
    1,255
   Cross Default Provisions
     135




---



##### Table of Contents



136




---



##### Table of Contents



FUTURE CAPITAL REQUIREMENTS
   Oil and Gas Exploration and Production
  Argentina
 Ecuador
 Peru
 Refining and Distribution
     137




---



##### Table of Contents



Petrochemicals
     OFF-BALANCE SHEET TRANSACTIONS
  OCP Investments Letters of Credit
   138




---



##### Table of Contents



CONTRACTUAL OBLIGATIONS
  Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1 - 3 years
    
    3 - 5 years
    
    years(in millions of pesos)Debt Obligations
    
    
    5,679
    
    
    
    2,133
    
    
    
    855
    
    
    
    1,436
    
    
    
    1,255Purchase ObligationsShip or pay agreement with OCP (1) (2) (6)
    
    
    2,692
    
    
    
    168
    
    
    
    389
    
    
    
    430
    
    
    
    1,705Long-term service agreement (6)
    
    
    159
    
    
    
    133
    
    
    
    26Bolivian gas and oil transportation agreement (6)
    
    
    133
    
    
    
    11
    
    
    
    11
    
    
    
    22
    
    
    
    89Petroleum services and materials (6)
    
    
    417
    
    
    
    236
    
    
    
    138
    
    
    
    21
    
    
    
    22Ethylene (4)(6)
    
    
    1,483
    
    
    
    203
    
    
    
    319
    
    
    
    261
    
    
    
    700Benzene (5)(6)
    
    
    3,357
    
    
    
    416
    
    
    
    755
    
    
    
    602
    
    
    
    1,584Oil Purchase agreements for Refinery (6)
    
    
    1,468
    
    
    
    1,468Gas transportation capacity with TGS (3)
    
    
    189
    
    
    
    27
    
    
    
    54
    
    
    
    54
    
    
    
    54Gas purchase agreements for Genelba (6)
    
    
    114
    
    
    
    84
    
    
    
    30
    
    
    
    
    
    
    
    Pension Plan
    
    
    113
    
    
    
    10
    
    
    
    22
    
    
    
    21
    
    
    
    60Total
    
    
    15,804
    
    
    
    4,889
    
    
    
    2,599
    
    
    
    2,847
    
    
    
    5,469Sales ObligationsNatural gas
    
    
    1,423
    
    
    
    247
    
    
    
    338
    
    
    
    329
    
    
    
    509Styrene
    
    
    744
    
    
    
    123
    
    
    
    621
    
    
    
    
    
    
    
    Electric power
    
    
    144
    
    
    
    100
    
    
    
    44
    
    
    
    
    
    
    
    LPG
    
    
    82
    
    
    
    82Oil sale agreement
    
    
    3,350
    
    
    
    1,579
    
    
    
    1,771
    
    
    
    
    
    
    
    Total
    
    
    5,743
    
    
    
    2,131
    
    
    
    2,774
    
    
    
    329
    
    
    
    509
 (1)
    
    Net of transportation capacity sold to third parties(2)
    
    Estimated price US$2.73 per barrel.(3)
    
    Estimated price P$7.9 million per millon of cubic meters.(4)
    
    Estimated price US$920 per ton. Contractual prices are in US Dollars. Peso amounts translated using exchange rate as of December 31, 2006.(5)
    
    Estimated price US$744 per ton. Contractual prices are in US Dollars. Peso amounts translated using exchange rate as of December 31, 2006.(6)
    
    Prices are generally determined by formulas based on future market prices Estimated prices used to calculate the monetary equivalent of these purchase obligations for purposes of the table are based on
current market prices as of December 31, 2006 and may not reflect actual future prices of these commodities. Accordingly, the peso amounts provided in the this table with respect to these obligations are
provided for illustrative purpose only.
  139




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Obligations by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1 - 3 years
    
    3 - 5 years
    
    yearsPurchase ObligationsShip or pay agreement with OCP (in million of barrels)
    
    
    321
    
    
    
    20
    
    
    
    47
    
    
    
    53
    
    
    
    201Bolivian gas and oil transportation agreement (in millions of cubic meters)
    
    
    6,490
    
    
    
    569
    
    
    
    1,139
    
    
    
    1,139
    
    
    
    3,643Ethylene (in thousands of tons)
    
    
    525
    
    
    
    56
    
    
    
    112
    
    
    
    102
    
    
    
    255Benzene (in thousands of tons)
    
    
    1,469
    
    
    
    155
    
    
    
    315
    
    
    
    286
    
    
    
    713Oil Purchase agreements for Refinery (in millon of barrels)
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Gas transportation capacity with TGS (in millon of cubic meters)
    
    
    24
    
    
    
    3
    
    
    
    7
    
    
    
    7
    
    
    
    7Gas purchase agreements for Genelba (in million of cubic meters)
    
    
    564
    
    
    
    367
    
    
    
    197
    
    
    
    
    
    
    
    Sales ObligationsNatural gas (in millions of cubic meters)
    
    
    7,806
    
    
    
    1,411
    
    
    
    1,801
    
    
    
    1,647
    
    
    
    2,947Styrene (in thousands of tons)
    
    
    165
    
    
    
    29
    
    
    
    136
    
    
    
    
    
    
    
    Electric power (in MWh)
    
    
    1,938
    
    
    
    1,299
    
    
    
    639
    
    
    
    
    
    
    
    LPG (in thousands of tons)
    
    
    58
    
    
    
    58Oil sale agreement (in millions of bbls)
    
    
    17
    
    
    
    9
    
    
    
    8
    
    
    
    
    
    
    
    
 Long Term Service Agreement
  140




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##### Table of Contents



OCP Oil Transportation Agreement
 Bolivian gas transportation agreement.
 Benzene and ethylene supply agreements
 Gas Transportation Agreements
 Gas Purchase Agreement for Genelba
 Oil purchase agreements for Refinery. .
 Styrene:
 Oil Sales:
 U.S. GAAP RECONCILIATION
   RECONCILIATION TABLES
   141




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##### Table of Contents



For the Year EndedDecember 31, 2006WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA(1)
    
    Distrilec(1)
    
    (Unaudited)(in millions of pesos)Net sales (2)
    
    
    11,745
    
    
    
    (592
    )
    
    
    (695
    )
    
    
    10,458Costs of sales
    
    
    (8,251
    )
    
    
    280
    
    
    
    594
    
    
    
    (7,377
    )Gross profit
    
    
    3,494
    
    
    
    (312
    )
    
    
    (101
    )
    
    
    3,081Administrative and selling expenses
    
    
    (1,094
    )
    
    
    23
    
    
    
    94
    
    
    
    (977
    )Exploration expenses
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    (117
    )Other operating expenses net
    
    
    (135
    )
    
    
    1
    
    
    
    38
    
    
    
    (96
    )Operating income
    
    
    2,148
    
    
    
    (288
    )
    
    
    31
    
    
    
    1,891Equity in earnings of affiliates
    
    
    219
    
    
    
    71
    
    
    
    (37
    )
    
    
    253Financial income (expense) and holding gains (losses)
    
    
    (506
    )
    
    
    132
    
    
    
    11
    
    
    
    (363
    )Other income, net
    
    
    93
    
    
    
    
    
    
    
    9
    
    
    
    102Income (loss) before income tax and minority interest in
subsidiaries
    
    
    1,954
    
    
    
    (85
    )
    
    
    14
    
    
    
    1,883Income tax provision
    
    
    (465
    )
    
    
    (6
    )
    
    
    (6
    )
    
    
    (477
    )Minority interest in subsidiaries
    
    
    (425
    )
    
    
    91
    
    
    
    (8
    )
    
    
    (342
    )Net income
    
    
    1,064
    
    
    
    
    
    
    
    
    
    
    
    1,064
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and Energy
segment.(2)
    
    Net of P$40 million in intercompany sales.
 For the Year EndedDecember 31, 2005WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA(1)
    
    Distrilec(1)
    
    (Unaudited)(in millions of pesos)Net sales (2)
    
    
    10,655
    
    
    
    (492
    )
    
    
    (651
    )
    
    
    9,512Costs of sales
    
    
    (7,046
    )
    
    
    249
    
    
    
    554
    
    
    
    (6,243
    )Gross profit
    
    
    3,609
    
    
    
    (243
    )
    
    
    (97
    )
    
    
    3,269Administrative and selling expenses
    
    
    (941
    )
    
    
    18
    
    
    
    73
    
    
    
    (850
    )Exploration expenses
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    (34
    )Other operating expenses net
    
    
    (329
    )
    
    
    3
    
    
    
    5
    
    
    
    (321
    )Operating income
    
    
    2,305
    
    
    
    (222
    )
    
    
    (19
    )
    
    
    2,064Equity in earnings of affiliates
    
    
    281
    
    
    
    42
    
    
    
    (8
    )
    
    
    315Financial income (expense) and holding gains (losses)
    
    
    (899
    )
    
    
    128
    
    
    
    19
    
    
    
    (752
    )Other expenses, net
    
    
    (459
    )
    
    
    
    
    
    
    11
    
    
    
    (448
    )Income (loss) before income tax and minority interest in
subsidiaries
    
    
    1,228
    
    
    
    (52
    )
    
    
    3
    
    
    
    1,179Income tax provision
    
    
    (211
    )
    
    
    (6
    )
    
    
    (1
    )
    
    
    (218
    )Minority interest in subsidiaries
    
    
    (288
    )
    
    
    58
    
    
    
    (2
    )
    
    
    (232
    )Net income
    
    
    729
    
    
    
    
    
    
    
    
    
    
    
    729
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and Energy
segment.(2)
    
    Net of P$21 million in intercompany sales.
  142




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For the Year EndedDecember 31, 2004WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA(1)
    
    Distrilec(1)
    
    (Unaudited)(in millions of pesos)Net sales (2)
    
    
    8,763
    
    
    
    (472
    )
    
    
    (535
    )
    
    
    7,756Costs of sales
    
    
    (5,781
    )
    
    
    219
    
    
    
    449
    
    
    
    (5,113
    )Gross profit
    
    
    2,982
    
    
    
    (253
    )
    
    
    (86
    )
    
    
    2,643Administrative and selling expenses
    
    
    (847
    )
    
    
    16
    
    
    
    66
    
    
    
    (765
    )Exploration expenses
    
    
    (133
    )
    
    
    
    
    
    
    
    
    
    
    (133
    )Other operating expense, net
    
    
    (324
    )
    
    
    22
    
    
    
    6
    
    
    
    (296
    )Operating income
    
    
    1,678
    
    
    
    (215
    )
    
    
    (14
    )
    
    
    1,449Equity in earnings of affiliates
    
    
    102
    
    
    
    24
    
    
    
    (4
    )
    
    
    122Financial income (expense) and holding gains (losses)
    
    
    (1,265
    )
    
    
    144
    
    
    
    20
    
    
    
    (1,101
    )Other expenses, net
    
    
    (40
    )
    
    
    14
    
    
    
    (7
    )
    
    
    (33
    )Income (loss) before income tax and minority interest in
subsidiaries
    
    
    475
    
    
    
    (33
    )
    
    
    (5
    )
    
    
    437Income tax provision
    
    
    317
    
    
    
    (11
    )
    
    
    4
    
    
    
    310Minority interest in subsidiaries
    
    
    (17
    )
    
    
    44
    
    
    
    1
    
    
    
    28Net income
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    775
 (1)
    
    Both the results of CIESA and Distrilec are proportionally consolidated in our Gas and
Energy segment.(2)
    
    Net of P$13 million in intercompany sales.
  143




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##### Table of Contents



For the Year EndedDecember 31, 2006WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA
    
    Distrilec
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of the year
    
    
    790
    
    
    
    257
    
    
    
    59
    
    
    
    474Net cash provided by operations
    
    
    2,877
    
    
    
    326
    
    
    
    45
    
    
    
    2,506Net cash used in investing
activities
    
    
    (2,022
    )
    
    
    (64
    )
    
    
    (70
    )
    
    
    (1,888
    )Net cash (used) provided by financing
activities
    
    
    (295
    )
    
    
    (280
    )
    
    
    33
    
    
    
    (48
    )Effect of exchange rate change on
cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalent at the end of the year
    
    
    1,350
    
    
    
    239
    
    
    
    67
    
    
    
    1,044
 For the Year EndedDecember 31, 2005WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA
    
    Distrilec
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of the year
    
    
    1,067
    
    
    
    168
    
    
    
    53
    
    
    
    846Net cash provided by operations
    
    
    1,998
    
    
    
    299
    
    
    
    73
    
    
    
    1,626Net cash used in investing
activities
    
    
    (1,682
    )
    
    
    (84
    )
    
    
    (54
    )
    
    
    (1,544
    )Net cash used in financing
activities
    
    
    (602
    )
    
    
    (126
    )
    
    
    (13
    )
    
    
    (463
    )Effect of exchange rate change on
cash
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Cash and cash equivalent at the end of the year
    
    
    790
    
    
    
    257
    
    
    
    59
    
    
    
    474
 For the Year EndedDecember 31, 2004WithoutWith
    
    
    
    
    
    
    
    
    
    ProportionalProportional
    
    
    
    
    
    
    
    
    
    ConsolidationConsolidation
    
    CIESA
    
    Distrilec
    
    (Unaudited)(in millions of pesos)Cash and cash equivalent at the beginning of the year
    
    
    1,091
    
    
    
    336
    
    
    
    46
    
    
    
    709Net cash provided by operations
    
    
    1,632
    
    
    
    62
    
    
    
    132
    
    
    
    1,438Net cash used in investing
activities
    
    
    (1,199
    )
    
    
    (49
    )
    
    
    (78
    )
    
    
    (1,072
    )Net cash used in financing
activities
    
    
    (451
    )
    
    
    (181
    )
    
    
    (48
    )
    
    
    (222
    )Effect of exchange rate change on
cash
    
    
    (6
    )
    
    
    
    
    
    
    1
    
    
    
    (7
    )Cash and cash equivalent at the end of the year
    
    
    1,067
    
    
    
    168
    
    
    
    53
    
    
    
    846
  144




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##### Table of Contents



Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 DIRECTORS AND SENIOR MANAGEMENT
 Board of Directors
   Year first joinedYear of
    
    Petrobras
    
    
    
    TermName
    
    appointment
    
    Energía
    
    Position
    
    ExpiresDecio Fabricio Oddone da Costa
    
    2005
    
    
    
    Chairman
    
    2008Daniel Lima de Oliveira
    
    2006
    
    
    
    Vice Chairman
    
    2008André Garcez Ghirardi
    
    2006
    
    
    
    Director
    
    2007Carlos Tadeu da Costa Fraga
    
    2006
    
    
    
    Director
    
    2008Solange da Silva Guedes
    
    2006
    
    
    
    Director
    
    2008Venina Velosa da Fonseca
    
    2006
    
    
    
    Director
    
    2007Sydney Granja Affonso
    
    2006
    
    
    
    Director
    
    2008Carlos Alberto de Meira Fontes
    
    2007
    
    2004
    
    Director
    
    2008Cedric Bridger
    
    2004
    
    
    
    Director
    
    2007Ignacio R. Arrieta
    
    2007
    
    
    
    Director
    
    2008Santiago Montezanti
    
    2007
    
    
    
    Director
    
    2007Luis Miguel Sas
    
    2003
    
    1984
    
    Director
    
    2008Carlos Alberto Pereira de Oliveira
    
    2004
    
    2003
    
    Director
    
    2007João Bezerra
    
    2006
    
    2006
    
    Director
    
    2008Vilson Reichemback da Silva
    
    2005
    
    2004
    
    Director
    
    2007Héctor Daniel Casal
    
    2003
    
    1991
    
    Director
    
    2007Claudio Fontes Nunes
    
    2006
    
    2006
    
    Director
    
    2007Rui Antonio Alves da Fonseca
    
    2006
    
    2003
    
    Director
    
    2007Adalberto Santiago Barbalho
    
    2007
    
    2007
    
    Director
    
    2008Heitor Cordeiro Chagas de Oliveira
    
    2006
    
    2006
    
    Alternate Director
    
    2007Horacio T. Liendo
    
    2007
    
    
    
    Alternate Director
    
    2007
  
    
    The member is also a member of management or an employee of shareholders who hold
significant interests in the issuer, or of other entities in which these shareholders
hold either directly or indirectly significant interests or over which these
shareholders exercise a significant influence.
 
    
    The member is an employee of the issuer or has been an employee during the last
three years.
 
    
    The member has professional relations or is part of a company or professional
association that maintains professional relations with, or that receives remunerations
or fees (other than directors fees) from, the issuer or from its shareholders that
hold either directly or indirectly significant interests in or
exercise a significant influence over the issuer, or from which such shareholders hold
either directly or indirectly significant interests or exercise a significant influence.
  145




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##### Table of Contents




    
    The member is either directly or indirectly a holder of significant interests in the
issuer or in an entity that has significant interests in or exercises a significant
influence over the issuer.
 
    
    The member sells or provides either directly or indirectly goods or services to the
issuer or to shareholders that hold either directly or indirectly significant interests
in or exercise a significant influence over the issuer and receives compensation for
such services that is substantially higher than that received as a director.
 
    
    The member is married or is a family member, up to fourth degree by blood or up to
second degree by affinity, to an individual who would not qualify as independent.
   Decio Fabricio, Oddone da Costa (46)
 Daniel Lima de Oliveira (55)
 André Garcez Ghirardi (56)
  146




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##### Table of Contents



Carlos Tadeu da Costa Fraga (49)
 Solange da Silva Guedes (46)
 Venina Velosa da Fonseca
 Sydney Granja Affonso (55)
 Carlos Alberto de Meira Fontes (57)
 Cedric Bridger (71)
 Ignacio R. Arrieta (31) cum laude
  147




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##### Table of Contents



Santiago L. Montezanti (31) cum laude
 Luis Miguel Sas (44)
 Carlos Alberto Pereira de Oliveira (49)
 João Bezerra (49)
 Vilson Reichemback da Silva (56)
 Héctor Daniel Casal (51)
 Claudio Fontes Nunes (52)
  148




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##### Table of Contents



Rui Antonio Alves da Fonseca (50)
 Adalberto Santiago Barbalho
 Heitor Cordeiro Chagas de Oliveira (62)
 Horacio T. Liendo (27)
 Administration and Organization
   Our Executive Officers
   149




---



##### Table of Contents



Name
    
    PositionCarlos Alberto de Meira Fontes
    
    Chief Executive OfficerLuis Miguel Sas
    
    Chief Financial OfficerCarlos A. Pereira de Oliveira
    
    Director of Oil and Gas Exploration and Production Business UnitAdalberto Santiago Barbalho
    
    Director of Refining and Petrochemicals Business UnitsJoão Bezerra
    
    Director of Gas and Energy Business UnitVilson Reichemback Da Silva
    
    Director of the Commercial Downstream Business UnitHeitor Cordeiro Chagas
    
    Director of Human ResourcesHéctor Daniel Casal
    
    Director of Legal AffairsClaudio Fontes Nunes
    
    Director of ServicesRui Antonio Alves da Fonseca
    
    Director of Quality, Environmental and Safety and Occupational HealthMichael Ditchfield
    
    Executive Manager of Planning and Management ControlPablo Maria Puiggari
    
    Executive Manager of Communications
  Michael Ditchfield (44)
 Pablo María Puiggari
 COMPENSATION
    150




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##### Table of Contents



BOARD PRACTICES
 Audit Committee
       
    
    To supervise the performance of the internal control systems, the performance and
reliability of the administrative and accounting system, the reliability of the
financial statements and all the financial information and the disclosure of relevant
events.
  151




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##### Table of Contents




    
    To establish and supervise the implementation of procedures for the reception,
documentation and treatment of claims or reports on irregularities in connection with
accounting, internal control or auditing matters, on a confidential and anonymous
basis.
 
    
    To issue founded opinions with respect to transactions with related parties as
required by applicable law. To issue founded opinions whenever a conflict of interest
exists or may arise for us and to communicate this opinion to self-regulated entities
as required by the CNV.
 
    
    To provide the market with complete information with respect to transactions where
members of the corporate bodies and / or controlling shareholders of ours have
conflicts of interests.
 
    
    To opine with respect to the reasonableness of the compensation and stock option
plans proposed by the Board of Director at the shareholders meetings.
 
    
    To opine with respect to the compliance of legal requirements and on the
reasonableness of proposals to issue shares or securities convertible into shares, in
the case of capital increases that exclude or limit preemptive rights.
 
    
    To issue at least once, at the time of submittal of the annual financial statements,
a report on the treatment given during the year to the matters under its
responsibility.
 
    
    To issue an opinion on the proposal submitted by the Board for the appointment (or
revocation) of the independent auditor and communicate it to the shareholders meeting.
 
    
    To evaluate the qualifications and independence of the independent auditors.
 
    
    To issue and maintain pre-approval procedures in connection with any service
(whether audit-related or not) to be provided by the independent auditor, under which
the Committee will be exclusively authorized to pre-approve any service provided by the
said Auditor.
 
    
    To evaluate the quality of our accounting standards and the main changes to such
accounting standards.
  Compensation Committee
  Statutory Syndic Committee
   152




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##### Table of Contents



First year ofName
    
    appointment
    
    PositionJuan Carlos Cincotta
    
    2004
    
    MemberJusto Federico Norman
    
    2003
    
    MemberRogelio Norberto Maciel
    
    2003
    
    MemberOlga M. Morrone de Quintana
    
    2004
    
    AlternateMariana P. Ardizzone
    
    2004
    
    AlternateMaría Laura Maciel
    
    2004
    
    Alternate
     Juan Carlos Cincotta (62)
 Justo F. Norman (62)
  153




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##### Table of Contents



Rogelio N. Maciel (71)
 Olga M. Morrone de Quintana (71)
 Mariana P. Ardizzone (34)
 Maria Laura Maciel (44)
  EMPLOYEES
  As of December 31,2006
    
    2005
    
    2004Oil and Gas Exploration and Production
    
    
    959
    
    
    
    1,053
    
    
    
    987Refining and Distribution
    
    
    3,031
    
    
    
    2,872
    
    
    
    2,918Petrochemical
    
    
    214
    
    
    
    210
    
    
    
    208Gas and Energy
    
    
    111
    
    
    
    104
    
    
    
    95Corporate
    
    
    813
    
    
    
    797
    
    
    
    746Total
    
    
    5,128
    
    
    
    5,036
    
    
    
    4,954
   SHARE OWNERSHIP
   154




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##### Table of Contents



Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 MAJOR SHAREHOLDERS
    Class B Shares% of the TotalOutstandingShareholder
    
    Number of Shares
    
    SharesPetrobras Participaciones S.L.
    
    
    1,249,716,746
    
    
    
    58.6
    %
 RELATED PARTY TRANSACTIONS
       155




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##### Table of Contents



2006Current
    
    Non-currentTrade
    
    Other
    
    Accounts
    
    Other
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    Receivables
    
    Payable
    
    Liabilities
    
    Loans
    
    receivables
    
    Investments
    
    LoansPetroquimica Cuyo S.A.
    
    
    11
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoducto de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    Petrobras
Bolivia Refinación S.A.
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    10
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refineria del Norte S.A.
    
    
    3
    
    
    
    8
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petroleo Brasileiro S.A. -Petrobras
    
    
    4
    
    
    
    5
    
    
    
    33
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional  Braspetro B.V.
    
    
    
    
    
    
    76
    
    
    
    2
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    768Other
    
    
    1
    
    
    
    14
    
    
    
    5
    
    
    
    16
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Total
    
    
    92
    
    
    
    117
    
    
    
    136
    
    
    
    27
    
    
    
    26
    
    
    
    5
    
    
    
    147
    
    
    
    768
 2005Current
    
    Non-currentTrade
    
    Other
    
    Accounts
    
    Other
    
    
    
    
    
    OtherCompany
    
    Investments
    
    Receivables
    
    Receivables
    
    Payable
    
    Liabilities
    
    Loans
    
    Receivables
    
    Investment
    
    LoansPetroquimica Cuyo S.A.
    
    
    
    
    
    
    8
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoductos de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refineria del Norte S.A.
    
    
    
    
    
    
    17
    
    
    
    5
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petroleo Brasileiro S.A- Petrobras
    
    
    
    
    
    
    3
    
    
    
    15
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional  Braspetro B.V.
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    758Other
    
    
    
    
    
    
    2
    
    
    
    7
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Total
    
    
    2
    
    
    
    134
    
    
    
    56
    
    
    
    139
    
    
    
    2
    
    
    
    26
    
    
    
    3
    
    
    
    150
    
    
    
    758
  2006
    
    2005
    
    2004Company
    
    Purchases
    
    Sales
    
    Purchases
    
    Sales
    
    Purchases
    
    SalesOleoductos del Valle S.A.
    
    
    23
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    20
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    40
    
    
    
    34
    
    
    
    30
    
    
    
    
    
    
    
    35
    
    
    
    Refineria del Norte S.A.
    
    
    142
    
    
    
    99
    
    
    
    122
    
    
    
    82
    
    
    
    77
    
    
    
    46Petrobras International Finance Co.
    
    
    101
    
    
    
    1,428
    
    
    
    118
    
    
    
    977
    
    
    
    121
    
    
    
    488Petroquimica Cuyo S.A.
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    440
    
    
    
    1
    
    
    
    344
    
    
    
    1
    
    
    
    198
    
    
    
    Petróleo Brasileiro S.A.
    
    
    102
    
    
    
    14
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    240Petrobras Bolivia Refinación S.A.
    
    
    
    
    
    
    33
    
    
    
    3
    
    
    
    34
    
    
    
    
    
    
    
    36Total
    
    
    848
    
    
    
    1,642
    
    
    
    632
    
    
    
    1,104
    
    
    
    451
    
    
    
    810
  156




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157




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Item 8. FINANCIAL INFORMATION
 CONSOLIDATED FINANCIAL STATEMENTS
  LEGAL PROCEEDINGS
  DIVIDENDS
  1.
    
    5% is allocated to a legal reserve until the legal reserve equals 20% of our
outstanding capital,2.
    
    to compensation of the members of the Board of Directors and Statutory Audit
Committee, and3.
    
    to dividends on preferred stock, if any, and then to dividends on common stock
or to a voluntary reserve or contingency reserve or to a new account, or as otherwise
determined by the ordinary shareholders meeting.
      158




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Item 9. OFFER AND LISTING
 OFFER AND LISTING DETAILS
  ADS(1)
    
    Class B share(2)High
    
    Low
    
    High
    
    LowFull Year2002
    
    
    12.60
    
    
    
    3.60
    
    
    
    2.83
    
    
    
    1.422003
    
    
    11.25
    
    
    
    6.52
    
    
    
    3.34
    
    
    
    1.992004
    
    
    14.14
    
    
    
    8.80
    
    
    
    4.13
    
    
    
    2.652005
    
    
    16.28
    
    
    
    10.95
    
    
    
    4.64
    
    
    
    3.202006
    
    
    13.33
    
    
    
    9.85
    
    
    
    4.08
    
    
    
    3.02Quarterly2005First Quarter
    
    
    14.47
    
    
    
    10.98
    
    
    
    4.16
    
    
    
    3.25Second Quarter
    
    
    12.59
    
    
    
    10.95
    
    
    
    3.63
    
    
    
    2.20Third Quarter
    
    
    16.17
    
    
    
    11.43
    
    
    
    4.64
    
    
    
    3.22Fourth Quarter
    
    
    16.28
    
    
    
    11.45
    
    
    
    4.61
    
    
    
    3.512006First Quarter
    
    
    13.33
    
    
    
    11.10
    
    
    
    4.08
    
    
    
    3.40Second Quarter
    
    
    12.70
    
    
    
    9.85
    
    
    
    3.83
    
    
    
    3.02Third Quarter
    
    
    11.50
    
    
    
    9.97
    
    
    
    3.52
    
    
    
    3.09Fourth Quarter
    
    
    12.19
    
    
    
    10.05
    
    
    
    3.53
    
    
    
    3.11MonthlyNovember 2006
    
    
    11.78
    
    
    
    10.89
    
    
    
    3.53
    
    
    
    3.33December 2006
    
    
    12.19
    
    
    
    11.03
    
    
    
    3.51
    
    
    
    3.33January 2007
    
    
    12.12
    
    
    
    10.91
    
    
    
    3.70
    
    
    
    3.34February 2007
    
    
    11.47
    
    
    
    10.35
    
    
    
    3.45
    
    
    
    3.19March 2007
    
    
    10.40
    
    
    
    9.90
    
    
    
    3.19
    
    
    
    3.02April 2007
    
    
    10.88
    
    
    
    10.27
    
    
    
    3.30
    
    
    
    3.14
 (1)
    
    Amounts expressed in U.S. dollars.(2)
    
    Amounts expressed in Argentine pesos.
   159




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MARKETS
 Buenos Aires Stock Market
     2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Market capitalization(billions of pesos)
    
    
    1,229
    
    
    
    771
    
    
    

    690
    
    
    
    543.3
    
    
    
    348.1
    
    
    
    192.5As percent of GDP(1)
    
    
    183
    %
    
    
    145
    %
    
    
    152
    %
    
    
    144
    %
    
    
    111.20
    %
    
    
    70.90
    %Volume (in millions of pesos)
    
    
    16,089
    
    
    
    19,938
    
    
    
    14,113
    
    
    
    8,844
    
    
    
    4,117
    
    
    
    7,519Average daily trading volume (in
millions of pesos)
    
    
    64.89
    
    
    
    79.12
    
    
    
    56
    
    
    
    35.52
    
    
    
    17.5
    
    
    
    30.9Number of listed companies(1)
    
    
    86
    
    
    
    87
    
    
    
    85
    
    
    
    110
    
    
    
    117
    
    
    
    119
 (1)
    
    End-of-period figures for trading on the Buenos Aires Stock Exchange.Source:
    
    Bolsa de Comercio de Buenos Aires, CNV and Instituto Argentino de Mercado de Capitales
 
 Item 10. ADDITIONAL INFORMATION
 MEMORANDUM AND ARTICLES OF ASSOCIATION
 Register
 Inspección General de
Justicia or IGJ .
 Objects and Purposes
   160




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Provisions of the By-laws Relating to Directors
  Capital Stock
  Voting Rights
  Transfers of Class A Shares
  Special Class Voting Rights
  Cumulative Voting
   161




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Preemptive Rights
  obligaciones
negociables
    162




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Appraisal Rights
   Acquisition of Class B Shares by Class B Shareholders
  Capital Increases and Reductions
   Redemption and Repurchase
   163




---



##### Table of Contents



Preferred Shares
  Liquidation
  Changes in Shareholder Rights
  Audit Committee
  Meetings of Shareholders
 General
   164




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Notices
   Quorum and Voting Requirements
    Conflict of Interest
  Limitations on Foreign Investment in Argentina
   165




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Change of Control
  COMPARISON OF NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE STANDARDS
AND OUR CORPORATE GOVERNANCE PRACTICE
   166




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Section ofthe NYSEListedCompany
    
    New York Stock Exchange CorporateManual
    
    Governance Rules for Domestic Issuers
    
    Our PracticesDirector Independence303A.01
    
    Listed companies must have a majority
of independent directors.
Controlled companies, which would
include our company if it were a U.S.
issuer, are exempt from this
requirement. A controlled company is
one in which more than 50% of the
voting power is held by an
individual, group or another company,
rather than the public.
A director is not independent if such
director is:
(1) a person who the board determines
has a material direct or indirect
relationship with the company, its
parent or a consolidated subsidiary;
(2) an employee, or an immediate
family member of an executive
officer, of the company, its parent
or a consolidated subsidiary, other
than employment as interim chairman
or CEO;
(3) a person who receives, or whose
immediate family member receives,
more than U.S.$100,000 per year in
direct compensation from the company,
its parent or a consolidated
subsidiary, other than director and
committee fees or deferred
compensation for prior services only
(and other than compensation for
service as interim chairman or CEO or
received by an immediate family
member for service as a non-executive
employee); 
(4) a person who is affiliated with
or employed, or whose immediate
family member is affiliated with or
employed in a professional capacity,
by a present or former internal or
external auditor of the company, its
parent or a consolidated subsidiary;
(5) an executive officer, or an
immediate family member of an
executive officer, of another company
whose compensation committees
membership includes an executive
officer of the listed company, its
parent or a consolidated subsidiary;
or
(6) an executive officer or employee
of a company, or an immediate family
member of an executive officer of a
company, that makes payments to, or
receives payments from, the
    
    Argentine law does not require that the majority
of the board members be independent. Only the
majority of the directors on the Audit Committee
must be independent.
At our annual shareholders meeting, our
shareholders determine in accordance with
Resolution No. 368 of the CNV and Decree No.
677/01 whether or not each of our directors is
independent based on the following criteria.
A director is not independent if such director
is:
(1) a member of management or an employee of
shareholders who hold significant interests in
the issuer, or of other entities in which these
shareholders hold either directly or indirectly
significant interests or over which these
shareholders exercise a significant influence;
(2) an employee of the issuer or was an employee
of the issuer in the last three years;
(3) a person who has professional relations or
is part of a company or professional association
that maintains professional relations with, or
that receives remunerations or fees (other than
directors fees) from, the issuer or from its
shareholders that hold either directly or
indirectly significant interests in or exercise
a significant influence over the issuer, or from
which such shareholders hold either directly or
indirectly significant interests or exercise a
significant influence;
(4) a person who is either directly or
indirectly a holder of significant interests in
the issuer or in an entity that has significant
interests in or exercises a significant
influence over the issuer;
(5) the member is married or is a family member,
up to fourth degree by blood or up to second
degree by affinity, to an individual who would
not qualify as independent; and
(6) a person who sells or provides either
directly or indirectly goods or services to the
issuer or to shareholders that hold either
directly or indirectly significant interests in
or exercise a significant influence over the
issuer and receives compensation for such
services that is substantially higher than that
payable to a director.
Significant interests shall mean shareholdings
that represent at least 35% of the capital stock
of the relevant entity, or a smaller percentage
when the person has the right to elect one or
more directors by class of shares or by having
entered into agreements with other shareholders
relating to the governance and management
  167




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Section ofthe NYSEListedCompany
    
    New York Stock Exchange CorporateManual
    
    Governance Rules for Domestic Issuers
    
    Our Practiceslisted
company, its parent or a consolidated
subsidiary for property or services
in an amount
which, in any single fiscal year,
exceeds the greater of U.S.$1 million
or 2% of such other companys
consolidated gross revenues
(charities are not included, but any
such payments must be disclosed in
the companys proxy - or, if no proxy
is prepared, its Form 10-K/ Annual
Report-).
There is a three-year cooling off
period before non-independent
directors can be considered
independent.
Immediate family member includes a
persons spouse, parents, children,
siblings, mothers and fathers-in-law,
sons and daughters-in-law and anyone
(other than domestic employees) who
shares the persons home.
Individuals who are no longer
immediate family members due to legal
separation, divorce or death (or
incapacity) are excluded.
    
    of the relevant entity or of its controlling
shareholders.
Ignacio R. Arrieta, Santiago Montezanti and
Horacio T. Liendo are currently members of our
Board of Directors who qualify as independent
directors pursuant to the factors listed above.303A.03
    
    The non-management directors of each
listed company must meet at regularly
scheduled executive sessions without
management.
    
    Carlos Alberto de Meira Fontes, Adalberto
Santiago Barbalho , Carlos Alberto Pereira de
Oliveira, Héctor Daniel Casal, Luis Miguel Sas,
João Bezerra, Vilson Reichemback da Silva,
Claudio Fontes Nunes and Rui Antonio Alves da
Fonseca, in addition to serving on our Board,
have management positions. Our other ten
directors are non-management directors. The
non-management directors do not meet at
regularly scheduled executive sessions without
the presence of the managerial directors. See
Item 6. Directors, Senior Management and
Employees  Directors and Senior Management  Board
of Directors.Nominating/Corporate Governance Committee303A.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. Exception for
controlled companies, which would
include our company if it were a U.S.
issuer.
    
    Argentine law does not require the establishment
of a nominating committee, and we do not have a
nominating committee.
We also do not have a corporate governance
committee. Instead, the entire Board of
Directors develops, evaluates and approves our
corporate governance principles with the
assistance of an advisory body consisting of
certain of our officers.
  168




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Section ofthe NYSEListedCompany
    
    New York Stock Exchange CorporateManual
    
    Governance Rules for Domestic Issuers
    
    Our PracticesCompensation Committee303A.05
    
    Listed companies must have a
compensation committee composed
entirely of independent directors,
with a written charter that covers
certain minimum specified duties.
Exception for controlled companies,
which would include our company if it
were a U.S. issuer.
    
    Argentine regulations do not require the
establishment of a compensation
committee. However, at its October 6,
2006 meeting, in order to better
supervise salary and compensation
matters, the Board of Directors of
Petrobras Energía S.A. created a
Compensation Committee, whose purpose is
to assure the compliance with, and revise
whenever necessary, policies relating to
compensation that aim to provide the
Company with greater flexibility to make
more effective decisions. The Committee
meets monthly to approve matters relating
to compensation policy, including
variable compensation practices. The
Committee, composed of Directors Décio
Oddone da Costa, Roberto Luis Monti and
André Garcez Ghirardi, must report to the
Board of Directors at least semiannually.Audit Committee303A.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.
    
    Our Audit Committee is an advisory
committee to the Board of Directors.
Argentine law requires that the audit
committee be composed of three members
from the Board of Directors (with a
majority of independent directors), all
of whom are well-versed in business,
financial or accounting matters. Our
Audit Committee is composed of three
directors, who each satisfy the
independence requirements of Rule 10A-3.
Our Audit Committee members do not need
to satisfy the NYSE independence
standards other than those required by
Rule 10A-3. One member of our audit
committee, Mr. Cedric Bridger, qualifies
as financial expert within the meaning
of Item 16A of the Form 20-F. See Item
16A. Audit Committee Financial Expert.
Our Audit Committee is responsible for,
among other things: (1) monitoring and
evaluating the activities of the internal
and external auditors, (2) supervising
the process for preparation of our
financial statements, (3) ensuring that
our financial statements comply with
applicable legal requirements, (4)
providing the market with complete
information with respect to transactions
where members of corporate bodies or
controlling shareholders of ours have
conflicts of interest, and (5) opine on
the reasonableness of compensatory plans
for directors and managers. See Item 6.
Directors, Senior Management and
  169




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Section ofthe NYSEListedCompany
    
    New York Stock Exchange CorporateManual
    
    Governance Rules for Domestic Issuers
    
    Our PracticesEmployees
 Board Practices  Audit Committee.Under Argentine law, the shareholders
must appoint the external auditor. The
Board of Directors may present a proposal
regarding the appointment of the external
auditor to the shareholders meeting.
The Audit Committee must issue an opinion
on any such proposal presented by the
Board of Directors to the Shareholders.We also have an internal audit department.In accordance with Argentine law, we also
have established a Statutory Syndic
Committee that is comprised of three
members and three alternate members,
approved by our shareholders. Members of
the Statutory Syndic Committee are not
members of our Board of Directors. The
primary responsibilities of the Statutory
Syndic Committee are to monitor Board of
Directors and managements compliance
with the Argentine Companies Law, our
by-laws and our shareholders
resolutions. The Statutory Syndic
Committee also performs other functions,
including: (1) attending meetings of the
Board of Directors and shareholders, (2)
calling extraordinary shareholders
meetings when deemed necessary or when
required by shareholders, in accordance
with the Business Companies Law, No.
19550, (3) presenting a report on the
reports of the Board of Directors and the
annual financial statements at ordinary
shareholders meetings, and (4)
investigating written complaints of
shareholders representing not less than
2% of the capital stock. See Item 6.
Directors, Senior Management and
Employees  Board Practices  Statutory
Syndic Committee.Equity Compensation Plans303A.08
    
    Shareholders must be given the
opportunity to vote on
equity-compensation plans and
material revisions thereto, with
limited exemptions set forth in the
NYSE rules.
    
    Our Board of Directors approves the
equity compensation plans for our
executive officers and senior management.
For a description of our stock option
programs for our executive officers and
senior management see Item 6.
Directors, Senior Management and
Employees  Compensation.The Audit Committee issues an opinion on
the reasonableness of the Board of
Directors proposals regarding fees and
executive equity compensation plans.
  170




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Section ofthe NYSEListedCompany
    
    New York Stock Exchange CorporateManual
    
    Governance Rules for Domestic Issuers
    
    Our PracticesCorporate Governance Guidelines303A.09
    
    Listed companies must adopt and
disclose corporate governance
guidelines.
    
    Corporate governance guidelines are not
required by Argentine law, but the
company has nonetheless adopted the
practice of issuing corporate governance
policies.Code of Ethics for Directors, Officers and Employees303A.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.
    
    We have adopted a Code of Conduct and
Business Ethics applicable to all
employees. See Item 16B. Code of
Ethics. Any amendment to the code will
be disclosed on our web site at
www.petrobras.com.ar.
  171




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MATERIAL CONTRACTS
     TAXATION
 Argentine Taxes
 General
    Income Tax
 Capital gains
   172




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Dividends
   Capital reductions and other distributions
  Tax on personal property
    Other taxes
      173




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United States Federal Income Taxes
 General
    Taxation of our ADSs
 Distributions
    174




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Sale, exchange or other disposition
    175




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Backup withholding
  DOCUMENTS ON DISPLAY
  
 Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Qualitative Disclosures
    Commodity price risk
    176




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Foreign exchange risk
    Interest rate risks
    Quantitative Disclosure
  Foreign Currency Exchange Rate Risk and Interest Rate Risk
 Expected MaturityEstimated Fair2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    Value(in millions of pesos)Short-and Long-Term Debt
U.S. dollar:Fixed Rate
    
    
    1,976
    
    
    
    170
    
    
    
    557
    
    
    
    1,072
    
    
    
    
    
    
    
    1,228
    
    
    
    5,003
    
    
    
    5,151Average interest rate (%)
    
    
    7.18
    
    
    
    7.37
    
    
    
    9.00
    
    
    
    8.13
    
    
    
    
    
    
    
    8.3
    
    
    
    
    
    
    
    Variable rate
    
    
    157
    
    
    
    68
    
    
    
    60
    
    
    
    60
    
    
    
    304
    
    
    
    27
    
    
    
    676
    
    
    
    676Average interest rate (%)
    
    
    6.34
    
    
    
    5.73
    
    
    
    6.56
    
    
    
    6.56
    
    
    
    6.35
    
    
    
    6.57
    
    
    
    
    
    
    
    Total
    
    
    2,133
    
    
    
    238
    
    
    
    617
    
    
    
    1,132
    
    
    
    304
    
    
    
    1,255
    
    
    
    5,679
    
    
    
    5,827
  177




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Short-Term debt
    
    
    Long-Term debt
    
    
    TotalDebt obligations(1) without proportional consolidation
    
    
    2,133
    
    
    
    3,546
    
    
    
    5,679PEPSAs interest in Distrilecs debt obligations
    
    
    46
    
    
    
    183
    
    
    
    229PEPSAs interest in CIESAs debt obligations
    
    
    467
    
    
    
    987
    
    
    
    1,454Debt obligations(2) with proportional consolidation
    
    
    2,646
    
    
    
    4,716
    
    
    
    7,362
 (1)
    
    As reported in tabular presentation.(2)
    
    As reported in the consolidated balance sheet of our financial statements.
  178




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Items 12-14. NOT APPLICABLE
 
 Item 15. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
  (b) Managements Annual Report on Internal Control over Financial Reporting
      (c) Scope of Managements Report on Internal Control over Financial Reporting
   180




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(d) Changes in Internal Control over Financial Reporting
  (e) New Developments on Internal Controls Over Financial Reporting
   181




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Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 Item 16B. CODE OF ETHICS
  
 Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit and Non-Audit Fees
  Year ended December 31,2006
    
    2005(in thousands of pesos)Audit fees
(1)
    
    
    8,409
    
    
    
    6,366Audit-related
fees (2)
    
    
    1,505
    
    
    
    3,052Tax fees (3)
    
    
    271
    
    
    
    154Total fees
    
    
    10,185
    
    
    
    9,572
 (1)
    
    Includes P$1,610 million corresponding to the Fees of Ernst & Young Global, our
independent auditor until March 2006.
 (2)
    
    Includes P$557 million corresponding to the Fees of Ernst & Young Global, our independent
auditor until March 2006.(3)
    
    Corresponds to the Fees of Ernst & Young Global, our independent auditor until March 2006.
 Audit fees.
 Audit-related
fees
 Tax fees
 Independent Auditors
   182




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Audit Committee Pre-Approval Policies and Procedures
  
 Item 16D. NOT APPLICABLE
 
 Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 Item 17. NOT APPLICABLE
 
 Item 18. FINANCIAL STATEMENTS
   183




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Item 19. EXHIBITS
  ExhibitNo.
    
    Description1.1
    
    English
translation of Estatutos (by-laws) of Petrobras Energía
Participaciones S.A.****2.1
    
    Form of Deposit Agreement among Petrobras Energía Participaciones S.A. (formerly PC Holdings S.A.),
Citibank, N.A., as depositary, and the Holders and Beneficial Owners of American Depositary Shares
evidenced by American Depositary Receipts issued thereunder, including the form of American
Depositary Receipt. *****2.2
    
    Trust Deed dated June 29, 1993 between Compañía Naviera Perez Companc S.A.C.F.I.M.F.A. and Citicorp
Trustee Company Limited.*2.3
    
    Sixth Supplemental Trust Deed dated May, 1997 between Petrobras Energía Participaciones S.A. and
Citicorp Trustee Company Limited.*2.4
    
    Form of U.S.$323,500,000 Restricted Global Note and Form of U.S.$76,500,000 Unrestricted Global
Note, related to Petrobras Energías 8.125% notes due
2007.*2.5
    
    Indenture dated May 1, 1998 between Petrobras Energía Participaciones, S.A. and Citibank, N.A., as
Trustee.*2.6
    
    Sixth Supplemental Indenture dated as of July 26, 2002, to the Indenture dated as of May 1, 1998,
between Petrobras Energía and Citibank, N.A.**2.7
    
    Ninth Supplemental Trust Deed dated July 31, 2002, to the Trust Deed dated June 29, 1993, between
Petrobras Energía S.A and Citicorp Trustee Company
Limited.**2.8
    
    Amended and Restated Indenture, dated August 1, 2002, amending and restating the Indenture dated May
1, 1998, between Petrobras Energía and Citibank, N.A.**2.9
    
    Loan Agreement Number 0088/2005, dated February 21, 2005, between Petrobras Energía, as borrower,
and Petrobras International Braspetro BV., as lender (English
translation).****4.1
    
    Long-Term Incentive Plan for executive officers and senior managers approved in May 2000 together
with an English summary attached thereof, filed with the Commission on June 18, 2001 as Exhibit 4(c)
to our Annual Report on Form 20-F, and incorporated herein by
reference. **4.2
    
    Letter of Credit Issuance and Reimbursement Agreement dated October 2, 2002 among Petrobras Energía
S.A., the Lenders named therein, the Issuing Banks named therein, and JPMorgan Chase Bank, as Letter
of Credit Administrative Agent. **
  184




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ExhibitNo.
    
    Description4.3
    
    Master Settlement and Mutual Release Agreement dated as of April 16, 2004 among Petróleo Brasileiro
S.A., Petrobras Energía, Petrobras Hispano Argentina S.A., Enron Corp., Enron Argentina Ciesa
Holding S.A., Enron Pipeline Company Argentina S.A., and Ponderosa
Assets, L.P.***4.4
    
    Restructuring Agreement dated as of September 1, 2005 among Compañía de Inversiones de Energía S.A.,
Petrobras Energía S.A., Petrobras Hispano Argentina S.A., Enron Pipeline Company Argentina S.A., ABN
AMRO BANK N.V. Sucursal Argentina, and the Creditors. ******8.1
    
    List of
significant subsidiaries of Petrobras Energía as
defined in Rule 1-02(w) of Regulation S-X.12.1
    
    CEO
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated May 7, 200712.2
    
    CFO
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated May 7, 2007.13.1
    
    CEO and CFO Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated
May 7, 2007.
 *
    
    Incorporated herein by reference to our Annual Report for the year ended December 31, 2001
filed on June 28, 2002.
 **
    
    Incorporated herein by reference to our Annual Report for the year ended December 31, 2002
filed on June 30, 2003.
 ***
    
    Incorporated herein by reference to our Annual Report for the year ended December 31, 2003
filed on June 30, 2004.
 ****
    
    Incorporated herein by reference to our Annual Report for year ended December 31, 2004 filed
on June 30, 2005.
 *****
    
    Incorporated herein by reference to Exhibit No. 4.2 to Petrobras Energía Participaciones
S.A.s Registration Statement on Form F-4 (333-11130) filed with the SEC on November 15, 1999.
 ******
    
    Incorporated herein by reference to our Annual Report for year ended December 31, 2005 filed
on June 29, 2006.
   185




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SIGNATURES
  PETROBRAS ENERGÍA PARTICIPACIONES S.A.By:
    
    /s/ Carlos Alberto de Meira FontesName: Carlos Alberto de Meira FontesTitle: Chief Executive OfficerBy:
    
    /s/ Luis Miguel SasName: Luis Miguel SasTitle: Chief Financial Officer
   186




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INDEX TO FINANCIAL STATEMENTS PETROBRAS ENERGIA PARTICIPACIONES S.A. Report of independent registered public accounting firm of Petrobras Energía
Participaciones S.A. on the Consolidated Financial Statement as of December 31, 2006
    
    F-2Report of independent registered public accounting firm of Petrobras Energía
Participaciones S.A. on Internal Control over Financial Reporting as of December 31,
2006
    
    F-4Report of independent registered public accounting firm of Petrobras Energía
Participaciones S.A.on the Consolidated Financial Statements as of December 31, 2005
and 2004
    
    F-6Report of independent registered public accounting firm of Compañía de Inversiones de
Energía S.A.
    
    F-8Report of independent registered public accounting firm of Transportadora de Gas del
Sur S.A.
    
    F-10Report of independent registered public accounting firm of Compañía Inversora en
Transmisión
Eléctrica Citelec S.A.
    
    F-11Report of independent registered public accounting firm of Refinería del Norte S.A.
    
    F-12Consolidated statements of income for the years ended December 31, 2006, 2005 and 2004
    
    F-13Consolidated balance sheets as of December 31, 2006 and 2005
    
    F-14Statements of changes in shareholders equity for the years ended December 31, 2006, 2005 and 2004
    
    F-15Consolidated statements of cash flows for the
years ended December 31, 2006, 2005 and 2004
    
    F-16Notes to the consolidated financial statements for the years ended 2006, 2005 and 2004
    
    F-17
 REFINERIA DEL NORTE S.A. Statements of income for the years ended December 31, 2005, 2004 and 2003
    
    F-106Balance sheets as of December 31, 2005 and 2004
    
    F-107Statements of changes in shareholders equity for the years ended December 31,
2005, 2004 and 2003
    
    F-108Statements of cash flows for the years ended December 31, 2005, 2004 and 2003
    
    F-109Notes to the financial statements for the years ended 2005, 2004 and 2003
    
    F-110Statement of income and loss for the year ended December 31, 2006 (unaudited)
    
    F-129Balance sheet as of December 31, 2006 (unaudited)
    
    F-130Statement of changes in shareholders equity for the year ended December 31,
2006 (unaudited)
    
    F-131Statements of cash flows for the year ended December 31, 2006 (unaudited)
    
    F-132Notes to the financial statement for the year ended December 31, 2006 (unaudited)
    
    F-133
 F-1




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Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders

Petrobras Energía Participaciones S.A.:  1.
    
    We have audited the accompanying consolidated balance sheet of Petrobras Energía Participaciones S.A. and
subsidiaries as of December 31, 2006 and the related consolidated statements of income, changes in shareholders
equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audit. We did not audit the consolidated financial statements of Compañía de Inversiones de
Energía S.A. (CIESA), a jointly-controlled affiliate proportionally consolidated by Petrobras Energía
Participaciones S.A. (PEPSA). The financial statements of CIESA incorporated by the proportional consolidation
method, before considering the adjustments mentioned in Note 9 to the consolidated financial statement, reflect
total assets constituting thirteen percent and total net revenues constituting six percent, respectively, of the
related consolidated totals. The financial statements of CIESA were audited by other auditors whose reports were
furnished to us, and our opinion, insofar as it relates to the amounts included for CIESA, is based solely on the
reports of the other auditors, which includes an explanatory paragraph for going concern uncertainties.  2.
    
    We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the report of the other auditors provide a
reasonable basis for our opinion.  3.
    
    The report of the other auditors on the 2006 consolidated financial statements of CIESA, presented herein, was
qualified because CIESA did not recognize the effects of the changes in the purchasing power of the Argentine peso
from March 1 to September 30, 2003. In the opinion of the other auditors, the professional accounting principles
in Argentina, as approved by the Professional Council of Economic Sciences of the City of Buenos Aires, require
the recognition of such effects, but this recognition is not allowed by the related regulations of the National
Securities Commission of Argentina. The effect of such departure from generally accepted accounting principles in
Argentina, as approved by the Professional Council of Economic Sciences of the City of Buenos Aires is not
material for the accompanying consolidated financial statements of Petrobras Energía Participaciones S.A. and
subsidiaries.  4.
    
    In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of Petrobras Energía
Participaciones S.A. and subsidiaries as of December 31, 2006, and the results of their operations and their cash
flows for the year then ended, in conformity with generally accepted accounting principles in Argentina, as
approved by the Professional Council of Economic Sciences of the City of Buenos Aires. F-2  1




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5.
    
    Generally accepted accounting principles in Argentina, as approved by the Professional Council of Economic
Sciences of the City of Buenos Aires vary in certain significant respects from U.S. generally accepted accounting
principles. Information relating to the nature and effect of such differences is presented in Notes 21, 22 and 23
to the consolidated financial statements.  6.
    
    We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the effectiveness of Petrobras Energía Participaciones S.A. and subsidiaries s internal control over
financial reporting as of December 31, 2006, based on the criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report
dated May 7, 2007 expressed an unqualified opinion on managements assessment of, and the effective operation of,
internal control over financial reporting. Buenos Aires, Argentina

May 7, 2007 SIBILLE

(Member firm of KPMG International) Gabriel E. Soifer
Partner F-3  2




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Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders

Petrobras Energía Participaciones S.A. We have audited managements assessment, included in the accompanying Managements Annual Report on Internal Control
over Financial Reporting that Petrobras Energía Participaciones S.A. maintained effective internal control over
financial reporting as of December 31, 2006, based on the criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Petrobras Energía
Participaciones S.A.s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to
express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control
over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing
and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A companys internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. F-4  1




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In our opinion, managements assessment that Petrobras Energía Participaciones S.A. maintained effective internal
control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the
criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Also, in our opinion, Petrobras Energía Participaciones S.A. maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheet of Petrobras Energía Participaciones S.A. and subsidiaries as of December 31,
2006, and the related consolidated statements of income, shareholders equity and cash flows for the year then ended,
and our report dated May 7, 2007 expressed an unqualified opinion on those consolidated financial statements. Buenos Aires, Argentina

May 7, 2007 SIBILLE

(Member firm of KPMG International) Gabriel E. Soifer
Partner F-5  2




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 1.
    
    We have audited the accompanying consolidated balance sheets of Petrobras Energía
Participaciones S.A. (an Argentine Corporation) and its subsidiaries as of December 31, 2005,
and the related consolidated statements of income, changes in shareholders equity and cash
flows for each of the two years in the period ended December 31, 2005. These financial
statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 2.
    
    The financial statements of the affiliates Compañía Inversora en Transmisión Eléctrica
Citelec S.A. (Citelec) and Compañía de Inversiones de Energía S.A. (CIESA) as of December 31,
2005, and for each of the two years in the period ended December 31, 2005 and Transportadora
de Gas del Sur S.A. as of and for the year ended December 31, 2004, have been audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it relates to
the amounts included for those affiliates, before considering the adjustments mentioned in
note 9 to the consolidated financial statements, is based solely on the reports of the other
auditors, one of which includes an explanatory paragraph for going concern uncertainties as
explained in paragraph 7. The Company ́s share in the total assets and sales included in the
financial statements of CIESA which have been proportionally consolidated, represents 14% of
consolidated total assets as of December 31, 2005, and 5% and 6% of consolidated net sales for
the years ended December 31, 2005 and 2004, respectively. The Companys investment in the
other affiliates, which have been accounted for using the equity method, is stated at
Argentine pesos 288 million as of December 31, 2005, and the Company ́s equity in the
affiliates net income/loss is stated at Argentine pesos 172 million-income and Argentine
pesos 31 million-loss for the years ended December 31, 2005 and 2004, respectively, before
considering the adjustments discussed in note 9 to the consolidated financial statements.
 3.
    
    We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We believe
that our audits and the reports of other auditors provide a reasonable basis for our opinion.
 4.
    
    Our original report on the consolidated financial statements of Petrobras Energía
Participaciones S.A. and its subsidiaries as of December 31, 2005 and 2004 included a
qualification for not discounting the nominal values of the deferred tax assets and
liabilities, which as of December 2005 and 2004 was required by generally accepted accounting
principles effective in Argentina, as approved by the Professional Council of Economic
Sciences of the City of Buenos Aires. Such standards have been amended and currently allow
such nominal values not to be discounted. Accordingly, our present opinion over those
financial statements, as presented herein, is unqualified rather than qualified.
  F-6




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5.
    
    In our opinion, based on our audits and the reports of other auditors referred to in
paragraph 2,
the financial statements referred to in paragraph 1 present fairly, in all material respects,
the consolidated
financial position of Petrobras Energía Participaciones S.A. and its
subsidiaries as of December 31, 2005, and the consolidated results of their operations and their
cash flows for each of the two years in the period ended December 31, 2005, in conformity with
the pertinent regulations of the Business Association Law, the National Securities Commission
and generally accepted accounting principles effective in Argentina, as approved by the
Professional Council of Economics Sciences of the City of Buenos Aires, applicable to
consolidated financial statements, which differ in certain respects from US generally accepted
accounting principles (see notes 21 through 23 to the consolidated financial statements).
 6.
    
    As discussed in note 2, the Company has restated the financial statements as of December 31,
2005 and for each of the two years in the period ended December 2005 to reflect a change in
accounting principles.
 7.
    
    The financial statements and the reports of the other auditors of the affiliate CIESA as of
December 31, 2005 and for the years ended December 31, 2005 and 2004 state that they have been
prepared assuming that such affiliate will continue as a going concern. CIESA, which has been
proportionally consolidated, represents assets constituting 14% as of December 31, 2005, and
net sales constituting 5% and 6% for the years ended December 31, 2005 and 2004, respectively,
of the respective consolidated totals. As discussed in note 9 to the consolidated financial
statements, CIESA and its subsidiary Transportadora de Gas del Sur S.A. have been negatively
impacted by the Argentine Governments adoption of various economic measures including the
de-dollarization of revenue rates, the renegotiation of License and Concession contracts and
the devaluation of the Argentine peso. In addition, CIESA has suspended the payment of its
financial debt. These circumstances raise substantial doubt about the affiliate ́s ability to
continue as a going concern. The affiliate management ́s plans in regard of these matters are
also described in note 9 to the consolidated financial statements. The accompanying
consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.(Member firm of Ernst & Young Global)ENRIQUE C. GROTZPartner
  F-7




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         F-8




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F-9




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
   Comisión
Nacional de Valores (CNV)
   
  F-10




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Report of Independent Registered Public Accounting Firm
        
  F-11




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.(Member firm of Ernst & Young Global)GERMAN E. CANTALUPIPartner
  F-12




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PETROBRAS ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
 
 CONSOLIDATED STATEMENTS OF INCOME
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004  (Stated in millions of Argentine pesos  See Note 2.c)
 2006
    
    2005
    
    2004Net sales
    
    
    11,745
    
    
    
    10,655
    
    
    
    8,763Costs of sales (Note 26.c)
    
    
    (8,251
    )
    
    
    (7,046
    )
    
    
    (5,781
    )Gross profit
    
    
    3,494
    
    
    
    3,609
    
    
    
    2,982Administrative and selling expenses (Note 26.e)
    
    
    (1,094
    )
    
    
    (941
    )
    
    
    (847
    )Exploration
expenses (Note 26.e)
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )Other operating expenses, net (Note 17.c)
    
    
    (135
    )
    
    
    (329
    )
    
    
    (324
    )Operating income
    
    
    2,148
    
    
    
    2,305
    
    
    
    1,678Equity in earnings of affiliates (Note 9.b)
    
    
    219
    
    
    
    281
    
    
    
    102Financial income (expenses) and holding gains (losses)Generated by assets:Interest
    
    
    108
    
    
    
    88
    
    
    
    53Exchange difference
    
    
    49
    
    
    
    53
    
    
    
    62Holding gains
    
    
    25
    
    
    
    40
    
    
    
    38Holding gains (losses) and income from sale of listed shares
and government securities
    
    
    49
    
    
    
    (4
    )
    
    
    104Other financial expenses, net
    
    
    (6
    )
    
    
    (2
    )
    
    
    (25
    )225
    
    
    
    175
    
    
    
    232Generated by liabilities:Interest
    
    
    (611
    )
    
    
    (586
    )
    
    
    (609
    )Exchange difference
    
    
    (65
    )
    
    
    (84
    )
    
    
    (98
    )Derivatives
    
    
    
    
    
    
    (332
    )
    
    
    (688
    )Other financial expenses, net
    
    
    (55
    )
    
    
    (72
    )
    
    
    (102
    )(731
    )
    
    
    (1,074
    )
    
    
    (1,497
    )Other income (expenses), net (Note 17.d)
    
    
    93
    
    
    
    (459
    )
    
    
    (40
    )Income before income tax and minority interest in subsidiaries
    
    
    1,954
    
    
    
    1,228
    
    
    
    475Income tax (Note 12)
    
    
    (465
    )
    
    
    (211
    )
    
    
    317Minority interest in subsidiaries
    
    
    (425
    )
    
    
    (288
    )
    
    
    (17
    )Net income
    
    
    1,064
    
    
    
    729
    
    
    
    775Basic/diluted earnings per share  Stated in Argentine pesos
    
    
    0.501
    
    
    
    0.343
    
    
    
    0.365
   F-13




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##### Table of Contents



PETROBRAS ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2006 AND 2005
(Stated in millions of Argentine pesos  See Note 2.c)
 2006
    
    2005CURRENT ASSETSCash
    
    
    86
    
    
    
    104Investment (Note 9.a)
    
    
    1,479
    
    
    
    857Trade receivables
    
    
    1,416
    
    
    
    1,596Other receivables (Note 17.a)
    
    
    1,182
    
    
    
    627Inventories (Note 8)
    
    
    888
    
    
    
    782Other assets
    
    
    1
    
    
    
    Total current assets
    
    
    5,052
    
    
    
    3,966NON-CURRENT ASSETSTrade receivables
    
    
    124
    
    
    
    78Other receivables (Note 17.a)
    
    
    691
    
    
    
    672Inventories (Note 8)
    
    
    81
    
    
    
    79Investments (Note 9.a)
    
    
    3,630
    
    
    
    1,072Property, plant and equipment (Note 26.a)
    
    
    10,838
    
    
    
    12,657Other assets
    
    
    41
    
    
    
    47Total non-current assets
    
    
    15,405
    
    
    
    14,605Total assets
    
    
    20,457
    
    
    
    18,571CURRENT LIABILITIESAccounts payable
    
    
    1,603
    
    
    
    1,483Short-term debt (Note 10)
    
    
    2,646
    
    
    
    1,805Payroll and
social security taxes
    
    
    276
    
    
    
    177Taxes payable
    
    
    331
    
    
    
    228Reserves (Note 13)
    
    
    95
    
    
    
    48Other
liabilities (Note 17.b)
    
    
    192
    
    
    
    168Total current liabilities
    
    
    5,143
    
    
    
    3,909NON-CURRENT LIABILITIESAccounts payable
    
    
    49
    
    
    
    14Long-term debt (Note 10)
    
    
    4,716
    
    
    
    5,708Payroll and
social security taxes
    
    
    36
    
    
    
    17Taxes payable
    
    
    1,492
    
    
    
    1,404Reserves (Note 13)
    
    
    85
    
    
    
    103Other liabilities (Note 17.b)
    
    
    366
    
    
    
    339Total non-current liabilities
    
    
    6,744
    
    
    
    7,585Total liabilities
    
    
    11,887
    
    
    
    11,494MINORITY INTEREST IN SUBSIDIARIES
    
    
    2,350
    
    
    
    1,922SHAREHOLDERS EQUITY(Per respective statements)
    
    
    6,220
    
    
    
    5,15520,457
    
    
    
    18,571
   F-14




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##### Table of Contents



PETROBRAS ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS  ́EQUITY
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 (Stated in millions of Argentine pesos  See Note 2.c)
 2006Capital stock
    
    Retained earningsUnappropriatedCapital
    
    Adjustment to
    
    Additional paid-
    
    Legal
    
    retained
    
    Treasury
    
    Deferred
    
    
    
    
    
    2005
    
    2004stock
    
    capital stock
    
    in capital
    
    reserve
    
    earnings
    
    stock (a)
    
    results (a)
    
    Total
    
    Total
    
    TotalBalances at the beginning of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    54
    
    
    
    1,257
    
    
    
    (33
    )
    
    
    
    
    
    
    6,124
    
    
    
    5,511
    
    
    
    4,833Balance adjustment to the prior years (Note 2.f)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (947
    )
    
    
    
    
    
    
    (22
    )
    
    
    (969
    )
    
    
    (1,112
    )
    
    
    (1,234
    )Modified balances at the beginning of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    54
    
    
    
    310
    
    
    
    (33
    )
    
    
    (22
    )
    
    
    5,155
    
    
    
    4,399
    
    
    
    3,599Regular Shareholders Meeting decisions of April 28, 2006- Legal Reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred results of the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    27
    
    
    
    25Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,064
    
    
    
    
    
    
    
    
    
    
    
    1,064
    
    
    
    729
    
    
    
    775Balances at the end of the year
    
    
    2,132
    
    
    
    2,554
    
    
    
    160
    
    
    
    122
    
    
    
    1,306
    
    
    
    (33
    )
    
    
    (21
    )
    
    
    6,220
    
    
    
    5,155
    
    
    
    4,399
    F-15




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##### Table of Contents



PETROBRAS ENERGÍA PARTICIPACIONES AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (a)
(Stated in millions of Argentine pesos  See Note 2.c)
 2006
    
    2005
    
    2004Cash provided by (used in) operations:Net income
    
    
    1,064
    
    
    
    729
    
    
    
    775Reconciliation to net cash provided by (used in) operating activities:Minority interest in subsidiaries
    
    
    425
    
    
    
    288
    
    
    
    17Equity in earnings of affiliates (Note 9.b)
    
    
    (219
    )
    
    
    (281
    )
    
    
    (102
    )Financial expense, net
    
    
    (24
    )
    
    
    29
    
    
    
    45Dividends collected (Note 9.c)
    
    
    116
    
    
    
    72
    
    
    
    84Depreciation of property, plant and equipment
    
    
    1,121
    
    
    
    1,209
    
    
    
    1,156Sale of oil and gas properties
    
    
    (85
    )
    
    
    
    
    
    
    Impairment of assets  Areas in Venezuela (Note 6)
    
    
    
    
    
    
    310
    
    
    
    27Impairment of assets  Gas areas in Argentina (Note 6)
    
    
    
    
    
    
    88
    
    
    
    Seniat claim  Venezuela
    
    
    18
    
    
    
    54
    
    
    
    Reversal of the reserve for impairment of investments  Citelec and Enecor
    
    
    (39
    )
    
    
    11
    
    
    
    Impairment of unproved oil and gas properties
    
    
    78
    
    
    
    16
    
    
    
    119Income tax provision
    
    
    465
    
    
    
    211
    
    
    
    (317
    )Income tax paid
    
    
    (16
    )
    
    
    (17
    )
    
    
    (66
    )Accrued interest
    
    
    584
    
    
    
    552
    
    
    
    585Interest paid
    
    
    (491
    )
    
    
    (515
    )
    
    
    (627
    )Other
    
    
    63
    
    
    
    21
    
    
    
    (4
    )Changes in assets and liabilities:Trade receivables
    
    
    150
    
    
    
    (375
    )
    
    
    (409
    )Other receivables
    
    
    (277
    )
    
    
    (110
    )
    
    
    (72
    )Inventories
    
    
    (136
    )
    
    
    (169
    )
    
    
    (174
    )Other assets
    
    
    8
    
    
    
    8
    
    
    
    45Accounts payable
    
    
    130
    
    
    
    96
    
    
    
    333Payroll and social security taxes
    
    
    110
    
    
    
    90
    
    
    
    (25
    )Taxes payable
    
    
    (176
    )
    
    
    (8
    )
    
    
    83Other liabilities
    
    
    8
    
    
    
    (311
    )
    
    
    159Net cash provided by operations
    
    
    2,877
    
    
    
    1,998
    
    
    
    1,632Cash provided by (used in) investing activities:Acquisition of property, plant and equipment and interest in
companies and oil and gas areas
    
    
    (2,175
    )
    
    
    (1,757
    )
    
    
    (1,189
    )Sale of property, plant and equipment and interest in
companies and oil and gas areas
    
    
    124
    
    
    
    
    
    
    
    Net decrease (increase) in investments other than cash and cash equivalents
    
    
    56
    
    
    
    62
    
    
    
    (13
    )Contributions and advances to unconsolidated affiliates
    
    
    (27
    )
    
    
    (1
    )
    
    
    (6
    )Reimbursement of contributions
    
    
    
    
    
    
    14
    
    
    
    9Net cash used in investing activities
    
    
    (2,022
    )
    
    
    (1,682
    )
    
    
    (1,199
    )Cash provided by (used in) financing activities:Net (decrease) increase in short term debt
    
    
    (6
    )
    
    
    671
    
    
    
    101Receipts of long-term debt
    
    
    300
    
    
    
    205
    
    
    
    580Receipts of long-term debt from related companies
    
    
    
    
    
    
    583
    
    
    
    150Payments of long-term debt
    
    
    (589
    )
    
    
    (2,061
    )
    
    
    (1,241
    )Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (41
    )Net cash used in financing activities
    
    
    (295
    )
    
    
    (602
    )
    
    
    (451
    )Effect of exchange rate change on cash
    
    
    
    
    
    
    9
    
    
    
    (6
    )Increase (decrease) in cash
    
    
    560
    
    
    
    (277
    )
    
    
    (24
    )Cash and cash equivalents at the beginning of the year
    
    
    790
    
    
    
    1,067
    
    
    
    1,091Cash and cash equivalents at the end of the year (See Note 17.e)
    
    
    1,350
    
    
    
    790
    
    
    
    1,067
    F-16




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##### Table of Contents



PETROBRAS ENERGÍA PARTICIPACIONES S.A.
AND SUBSIDIARIES AND COMPANIES UNDER JOINT CONTROL
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Amounts stated in millions of Argentine pesos  see Note 2.c, unless otherwise indicated)
 1. Business of the Company
   2. Basis of presentation
    a) Basis of consolidation
   F-17




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##### Table of Contents



b) Foreign Currency translation
   a)
    
    transactions with the Company are not a high proportion of the entitys activities
abroad;
 b)
    
    foreign business activities are partially financed with funds from their own
transactions and with local loans;
 c)
    
    sales, workforce, materials and other costs of goods and services related to
transactions abroad are settled mainly in a currency other than the currency of the
investors financial statements; and
 d)
    
    the Companys cash flows are independent from the day-to-day activities of the foreign
business and are not directly affected by the size or frequency of the foreign business
activities.
  
    
    Assets and liabilities stated at current value are converted at the closing exchange
rates.
 
    
    Assets and liabilities measured at historical values and the income (loss) are converted
at historical exchange rates.
   F-18




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##### Table of Contents




    
    Assets and liabilities are translated by using the closing exchange rate.
 
    
    Income (loss) is translated at the historical exchange rates.
   c) Restatement in constant money
      d) Accounting for the transactions of oil and gas exploration and production joint ventures and
foreign branches
   F-19




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##### Table of Contents



e) Financial statements used
  f) Changes in professional accounting standards
    Gain (loss)
    
    Increase (decrease)Effect on Net Income for the
    
    Shareholders equity as ofyear ended December 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004Recoverable
Value (i)
    
    
    (120
    ) (a)
    
    
    10
    (c)
    
    
    (190
    ) (e)
    
    
    (70
    ) (e)Deferred Tax (ii)
    
    
    272
    (b)
    
    
    118
    (d)
    
    
    (1.060
    ) (f)
    
    
    (1.332
    ) (g)Minority Interest (iii)
    
    
    (36
    )
    
    
    (31
    )
    
    
    303
    
    
    
    339Total Effect on
unappropiated retained
earnings
    
    
    
    
    
    
    
    
    
    
    (947
    )
    
    
    (1.063
    )Deferred
loss (iii)
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    (49
    )Total Effect on
Shareholders equity
    
    
    116
    
    
    
    97
    
    
    
    (969
    )
    
    
    (1.112
    )
 (i)
    
    In calculating the recoverability of Property, plant and equipment and certain intangible
assets, the recoverable value is considered to be the higher of the net realizable value and
the discounted value of the expected cash flows. Before the changes in the standards, the book
value was adjusted to its recoverable value if its carrying amount exceeded the undiscounted
value in use. This first comparison has now been eliminated.(ii)
    
    The difference between the inflation-adjusted book value of Property, Plant and Equipment and
other non-monetary assets and their tax basis is considered to be a temporary difference that
gives rise to the recognition of a deferred liability, which  as provided by CNV General
Resolution No. 487  can either be booked or disclosed in notes to financial statements. The
Company Management opted to book this effect.(iii)
    
    The effects of the translation of foreign operations net of the foreign-exchange differences
generated by the debt denominated in foreign currency designated as hedge of net investment
abroad no longer classified between liabilities and shareholders equity, and instead, are
classified in shareholders equity.
 (a)
    
    An amount of (132) was booked in Other Income (Expenses), net, and 12 as lower depreciation charge in the line Cost of sales.(b)
    
    An amount of 170 was booked in the line of Deferred Taxes, 115 in Equity in earnings of affiliates and (13) in Other Income (Expenses), net.(c)
    
    Corresponds to an amount booked as a lower depreciation charge in the Cost of Sales.(d)
    
    An amount of 106 was booked in the line of Deferred Taxes, 26 in Equity in earnings of affiliates and (14) in Other Income
(Expenses), net.(e)
    
    Corresponds to an amount booked as a lower value of Property, Plant and Equipment.(f)
    
    An amount of (1.217) was
booked as higher Taxes payable, (100) as a lower Investment, and
257 as lower Minority Interest corresponding to
jointly controlled companies.(g)
    
    An amount of (1.550) was
booked as higher highet Taxes Payables, (216) as lower
Investments, 159 as higher Other Receivables in Non Current
Assets, and 275 as a lower Minority Interest corresponding to jointly controlled companies.
  F-20




---



##### Table of Contents



3.
    
    Accounting standards
     4.
    
    Valuation methods
  a) Accounts denominated in foreign currency:
   b) Inventories:
        F-21




---



##### Table of Contents



c) Investments:
        d) Trade receivables and payables:
    e) Financial receivables and payables:
   F-22




---



##### Table of Contents



f) Other receivables and payables:
  g) Property, plant and equipment:
          F-23




---



##### Table of Contents



h) Environmental costs:
     F-24




---



##### Table of Contents



i) Income tax, minimum presumed income tax and withholdings on export of hydrocarbons:
          F-25




---



##### Table of Contents



j) Liabilities for labor costs:
   k) Contingencies:
     l) Basic/diluted earnings per share:
   F-26




---



##### Table of Contents



m) Shareholders  equity accounts:
   Derivativefinancialinstruments
    
    Foreign currencymeasurement (a)
    
    traslation (b)
    
    TotalBalances at 12/31/2003
    
    
    (18
    )
    
    
    (56
    )
    
    
    (74
    )Period movements
    
    
    16
    
    
    
    9
    
    
    
    25Balances at 12/31/2004
    
    
    (2
    )
    
    
    (47
    )
    
    
    (49
    )Period movements
    
    
    2
    
    
    
    25
    
    
    
    27Balances at 12/31/2005
    
    
    
    
    
    
    (22
    )
    
    
    (22
    )Period movements
    
    
    
    
    
    
    1
    
    
    
    1Balances at 12/31/2006
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )
 (a)
    
    See Note 5(b)
    
    See Note 2.b
 n) Revenue recognition:
     F-27




---



##### Table of Contents



o) Statement of income accounts:
  
 
 
   5. Accounting for derivative financial instruments
     F-28




---



##### Table of Contents



6. Oil and gas areas and participation in joint ventures
      F-29




---



##### Table of Contents



Oriente
 Investment commitments
   F-30




---



##### Table of Contents



Asset Retirement Obligations
   2006
    
    2005
    
    2004Beginning balance
    
    
    126
    
    
    
    91
    
    
    
    73Accretion
    
    
    9
    
    
    
    8
    
    
    
    7Estimating cash flow changes (1)
    
    
    12
    
    
    
    30
    
    
    
    1Foreign currency translation / other
    
    
    (1
    )
    
    
    (3
    )
    
    
    10Ending balance (Note 17.b)
    
    
    146
    
    
    
    126
    
    
    
    91
 (1)
    
    principally relates to: (a) changes in the Companys expectations as to the number of
wells to be abandoned before the end of the concession period, and (b) an increase in
restoration and abandonment well costs as a consequence of general price increases in the
industry
 Exploratory well costs
  2006
    
    2005
    
    2004Balance at the beginning of the year
    
    
    61
    
    
    
    5
    
    
    
    115Additions
    
    
    123
    
    
    
    56
    
    
    
    5Transferred to development
    
    
    
    
    
    
    
    
    
    
    (13
    )Charged to expense
    
    
    (78
    )
    
    
    
    
    
    
    (100
    )Inflation and foreign currency translation
    
    
    
    
    
    
    
    
    
    
    (2
    )Balance at the end of the year
    
    
    106
    
    
    
    61
    
    
    
    5Number of well at year end
    
    
    26
    
    
    
    14
    
    
    
    2
  2006
    
    2005
    
    2004Amount
    
    Wells
    
    Amount
    
    Wells
    
    Amount
    
    WellsLess than one year
    
    
    91
    
    
    
    23
    
    
    
    56
    
    
    
    12
    
    
    
    5
    
    
    
    2Between one and three years
    
    
    15
    
    
    
    3
    
    
    
    5
    
    
    
    2
    
    
    
    
    
    
    
    Total
    
    
    106
    
    
    
    26
    
    
    
    61
    
    
    
    14
    
    
    
    5
    
    
    
    2
  F-31




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##### Table of Contents



Operations in Ecuador
 License of Block 31
    Crude Oil Transportation Agreement with Oleoductos de Crudos Pesados Ltd. (OCP)
     F-32




---



##### Table of Contents



Preliminary Agreement with Teikoku Co. Ltd.  Teikoku
   Operations in Venezuela
      F-33




---



##### Table of Contents



Recoverability of investments in Argentine oil and gas areas
    Divestments of equity in oil and gas areas
   F-34




---



##### Table of Contents



7. Credit risk
      8. Inventories
  2006
    
    2005Current
    
    Non-current
    
    Current
    
    Non-currentCrude oil stock
    
    
    167
    
    
    
    
    
    
    
    105
    
    
    
    Raw materials and materials
    
    
    161
    
    
    
    82
    
    
    
    200
    
    
    
    81Work in progress and finished products
    
    
    466
    
    
    
    
    
    
    
    435
    
    
    
    Advances to suppliers
    
    
    67
    
    
    
    
    
    
    
    41
    
    
    
    Other
    
    
    28
    
    
    
    
    
    
    
    4
    
    
    
    Reserve for materials obsolescence (Note 13)
    
    
    (1
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    (2
    )888
    
    
    
    81
    
    
    
    782
    
    
    
    79
  F-35




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##### Table of Contents



9. Investments, equity in earnings of affiliates and dividends collected from affiliates
   12/31/2006
    
    12/31/2005Book
    
    BookName and issuer
    
    Cost
    
    value
    
    valueCurrent:Government securities
    
    
    5
    
    
    
    7
    
    
    
    25Certificates of deposit
    
    
    1,038
    
    
    
    1,038
    
    
    
    561Mutual funds
    
    
    225
    
    
    
    225
    
    
    
    126Related companies (Note 18)
    
    
    
    
    
    
    
    
    
    
    2Citelec S.A. (Note 9.II)
    
    
    298
    
    
    
    202
    
    
    
    202Yacylec S.A. (Note 9.II)
    
    
    25
    
    
    
    13
    
    
    
    Hidroneuquén S.A. (Note 25)
    
    
    26
    
    
    
    26
    
    
    
    Reserve for impairment of investments (Note 13)
    
    
    
    
    
    
    (35
    )
    
    
    (59
    )Other
    
    
    
    
    
    
    3
    
    
    
    1,617
    
    
    
    1,479
    
    
    
    857Non-current:Government securities
    
    
    1
    
    
    
    1
    
    
    
    1Advances to joint venture partners in Venezuela
    
    
    268
    
    
    
    268
    
    
    
    244Related companies (Note 18)
    
    
    147
    
    
    
    147
    
    
    
    150Mixed companies in Venezuela (Note 6)
    
    
    2,657
    
    
    
    2,696
    
    
    
    Equity in affiliates (Note 26 b)
    
    
    589
    
    
    
    837
    
    
    
    814Reserve for impairment of investments (Note 13)
    
    
    
    
    
    
    (325
    )
    
    
    (139
    )Other
    
    
    
    
    
    
    6
    
    
    
    23,662
    
    
    
    3,630
    
    
    
    1,072
  12/31/2006
    
    12/31/2005
    
    12/31/2004Petrobras Bolivia Refinación S.A.
    
    
    82
    
    
    
    54
    
    
    
    18Oleoducto de Crudos Pesados Ltd.
    
    
    6
    
    
    
    2
    
    
    
    1Inversora Mata S.A.
    
    
    3
    
    
    
    (7
    )
    
    
    4Oleoductos del Valle S.A.
    
    
    8
    
    
    
    4
    
    
    
    8Petrolera Entre Lomas S.A.
    
    
    33
    
    
    
    27
    
    
    
    18Petroquímica Cuyo S.A.
    
    
    15
    
    
    
    7
    
    
    
    13Refinería del Norte S.A.
    
    
    32
    
    
    
    47
    
    
    
    42Transportadora de Gas del Sur S.A. (ii)
    
    
    
    
    
    
    18
    
    
    
    13Mixed companies in Venezuela (Note 6)
    
    
    39
    
    
    
    
    
    
    
    Citelec S.A. (i)
    
    
    
    
    
    
    136
    
    
    
    (19
    )Other
    
    
    1
    
    
    
    (7
    )
    
    
    4219
    
    
    
    281
    
    
    
    102
 (i)
    
    Includes 23 and 23 to adapt Citelecs accounting principles to those of the
Company for the fiscal years 2005 and 2004, respectively, and an allowance for
investment depreciation of (59) for the fiscal year 2005.(ii)
    
    Includes 2 to adapt TGSs accounting principles to those of the Company for
the fiscal years 2004.
  F-36




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##### Table of Contents



2006
    
    2005
    
    2004Petrobras Bolivia Refinación S.A.
    
    
    76
    
    
    
    1
    
    
    
    13Petroquimíca Cuyo S.A.
    
    
    5
    
    
    
    7
    
    
    
    9Petrolera Entre Lomas S.A.
    
    
    22
    
    
    
    16
    
    
    
    12Oleoductos del Valle S.A.
    
    
    7
    
    
    
    6
    
    
    
    6Oleoductos de Crudos Pesados
    
    
    6
    
    
    
    
    
    
    
    Yacylec S.A.
    
    
    
    
    
    
    3
    
    
    
    3Refinería del Norte S.A.
    
    
    
    
    
    
    39
    
    
    
    41116
    
    
    
    72
    
    
    
    84
 I. Petrobras Energías corporate reorganization
    II.
    
    Investment in companies over which joint control or significant influence is exercised and
which are subject to transfer restrictions:
 a) Distrilec:
    F-37




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##### Table of Contents



b) CIESA:
  c) Citelec:
    d) Yacylec S.A. (Yacylec):
    F-38




---



##### Table of Contents



III. Situation of the interests in public utility companies
        F-39




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##### Table of Contents



Procuración del Tesoro de la Nación ( Sindicatura General de la Nación
    F-40




---



##### Table of Contents



IV. CIESAs Master Settlement Agreement and Mutual Release Agreement
    V. Petrobras Bolivia Refinación S.A.
   VI. Expansion of TGSs gas transportation system
   F-41




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##### Table of Contents



VII. Transener S.A.s financial debt restructuring
  (1)
    
    Issuance of corporate bonds at par for a nominal value of about US$ 80 million, with
final maturity in December 2016, accruing interest at a 3% annual rate until December
2007, and then increasing by 4% to 7% until the maturity term thereof.
 (2)
    
    Issuance of discount corporate bonds for a nominal value of about US$ 200 million,
with final maturity in December 2015, accruing interest at a 9% annual rate until December
2008, and 10% for the remaining period.
 (3)
    
    Issuance of 76,017,610 Class B shares. At the end of the term for the holders of
Transener S.A.s class C shares to exercise the preemptive right and the right to
accrue, the Company will make available 8,447,500 class B shares for shareholders or
will deliver cash in lieu of class C shares.
 (4)
    
    Payment in cash for an amount of about US$ 70 million.
    F-42




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##### Table of Contents



10. Financing
  12/31/2006
    
    12/31/2005Current
    
    Non-current
    
    Current
    
    Non-currentFinancial institutions
    
    
    1,186
    
    
    
    869
    
    
    
    1,238
    
    
    
    887Notes
    
    
    1,434
    
    
    
    3,079
    
    
    
    541
    
    
    
    4,063Investment agreement with IFC
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Related companies (Note 18)
    
    
    26
    
    
    
    768
    
    
    
    26
    
    
    
    7582,646
    (a)
    
    
    4,716
    
    
    
    1,805
    (a)
    
    
    5,708
 (a)
    
    Includes 398 and 682 corresponding to current portion of long-term debt for the fiscal years
ended December 31, 2006 and 2005, respectively.
 I. Petrobras Energías Global Programs of nonconvertible notes
 a) US$ 2.5 billion program
    -
    
    Class G, for a face value of US$250 million maturing in January 2007 at a 9% annual rate.-
    
    Class H, for a face value of US$181.5 million maturing in May 2009, at a 9% annual rate.-
    
    Class I, for a face value of US$349.2 million maturing in July 2010, at a 8.125% annual rate.-
    
    Class N, for a face value of US$ 97 million, with principal amortized in two
installments, the first  equivalent to 9.9099% of nominal value  settled on the same day
of issuance, January 24, 2003, and the remaining due in June 2011, accruing interest at
nine-month period LIBOR plus 1%. As of December 31, 2006 the amount of US$ 87.4 million
is effective in this class.-
    
    Class Q, for a face value of US$ 3.98 million, with two principal amortization
installments: the first equivalent to 10% of the face value settled on the same day of
issuance, April 25, 2003, and the remainder in April 2008, at an interest rate of 5.625%.
As of December 31, 2006, as they were not completely exchanged, the Company is carrying
US$ 170,000 of such issuance in its own portfolio net of the nonconvertible notes.-
    
    Class R, for a face value of US$ 200 million, with due in October 2013, accruing
interest at 9.375%.
  F-43




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##### Table of Contents



b) US$1.2 billion program
    II. Cross default covenants
     III. Financing of the Genelba Electric Power Generation Plant
  IV. Edesur Indebtedness
    F-44




---



##### Table of Contents



Banco Central de la República Argentina
   V. CIESA and TGS indebtedness
        F-45




---



##### Table of Contents



VI. Detail of long-term debt
  Type
    
    Amount
    
    Currency
    
    Annual interest rate(In millions of pesos)Financial institutions10
    
    
    US$
    
    8.61%22
    
    
    $
    
    13.25%22
    
    
    US$
    
    8.35%46
    
    
    US$
    
    4.902% to 6.559%25
    
    
    US$
    
    9.01%27
    
    
    US$
    
    5.00%30
    
    
    US$
    
    8.62%73
    
    
    $
    
    14.05%123
    
    
    US$
    
    Libo+1.19106
    
    
    US$
    
    Libo+1.65106
    
    
    US$
    
    5.30% to 7. 50%279
    
    
    US$
    
    7.00% to 10.0%Related companies (See Note 18)154
    
    
    US$
    
    7.50%614
    
    
    US$
    
    7.22%NotesClass Q
    
    
    11
    
    
    US$
    
    5.625%Serie A (TGS)
    
    
    171
    
    
    US$
    
    (i)Class N
    
    
    248
    
    
    US$
    
    Libo+1Serie B-A
and B-B (TGS)
    
    
    403
    
    
    US$
    
    (i)Class H
    
    
    557
    
    
    US$
    
    9.00%Class R
    
    
    617
    
    
    US$
    
    9.375%Class I
    
    
    1,072
    
    
    US$
    
    8.125%4,716
 (i)
    
    See Note 10.V.
  From 1 to 2 years
    
    
    418From 2 to 3 years
    
    
    788From 3 to 4 years
    
    
    1,259From 4 to 5years
    
    
    577Over 5years
    
    
    1,6744,716
  F-46




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##### Table of Contents



11. Fund for investments required to increase the electric power supply in the electronic
wholesale market (FONINVEMEM)
      12. Income tax and deferred tax
  12/31/2006
    
    12/31/2005
    
    12/31/2004Income tax for the fiscal yearCurrent
    
    
    296
    
    
    
    148
    
    
    
    124Deferred tax
    
    
    169
    
    
    
    63
    
    
    
    (441
    )Total income tax  expense (benefit)
    
    
    465
    
    
    
    211
    
    
    
    (317
    )
  F-47




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##### Table of Contents



12/31/2006
    
    12/31/2005Deferred tax assetsTax loss carryfowards and other tax losses
    
    
    1,304
    
    
    
    1,658Reserve for contingencies
    
    
    90
    
    
    
    74Pension plan obligations
    
    
    11
    
    
    
    4Derivatives
    
    
    
    
    
    
    6Other
    
    
    60
    
    
    
    17Total gross deferred tax assets
    
    
    1,465
    
    
    
    1,759Less valuation allowance (Note 13 and Note 17)
    
    
    (1,154
    ) (3)
    
    
    (1,359
    ) (3)Total net deferred tax assets
    
    
    311
    
    
    
    400Deferred tax liabilitiesRevenue recognition
    
    
    
    
    
    
    (34
    )Property, plant and equipment
    
    
    (1,207
    )
    
    
    (1,129
    )Prepaid expenses
    
    
    (6
    )
    
    
    (8
    )Non-current investments
    
    
    (236
    )
    
    
    (197
    )Other
    
    
    (2
    )
    
    
    (3
    )Total gross deferred tax liabilities
    
    
    (1,451
    ) (1)
    
    
    (1,371
    ) (2)Total net deferred tax liabilities
    
    
    (1,140
    )
    
    
    (971
    )
 (1)
    
    311 are presented in the non-current Other receivables line and 1,451
are presented in the non-current Taxes payable line.(2)
    
    400 are presented in the non-current Other receivables line and 1,371
are presented in the non-current Taxes payable line.(3)
    
    Upon the issuance of the annual financial statements, the Companys
Management evaluates the recovery of tax loss carryforwards taking into
consideration, among other elements, the projected business profits, tax planning
strategies, temporariness of future taxable income, considering the term of
expiration of the tax loss carryforwards, the future reversal of the existing
temporary differences and the recent-year tax history. All the evidence available
both positive and negative is duly weighted and considered in the analysis.
  F-48




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##### Table of Contents



12/31/2006
    
    12/31/2005
    
    12/31/2004Income before income tax and minority
interests in the subsidiaries income
    
    
    1,954
    
    
    
    1,228
    
    
    
    475Statutory tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Statutory tax rate applied to income for the fiscal year
    
    
    684
    
    
    
    430
    
    
    
    166Permanent differences at income tax rate- Equity in losses of non-current investments
    
    
    (181
    )
    
    
    (93
    )
    
    
    (156
    )- Changes in valuation allowance
    
    
    (95
    )
    
    
    (106
    )
    
    
    (413
    )- Loss (gain) in foreign subsidiaries
    
    
    29
    
    
    
    (14
    )
    
    
    68- Other
    
    
    28
    
    
    
    (6
    )
    
    
    18Tax expense (benefit)
    
    
    465
    
    
    
    211
    
    
    
    (317
    )
  Items
    
    12/31/2006
    
    12/31/2005
    
    12/31/2004General tax loss carryforward
    
    
    1,304
    
    
    
    1,573
    
    
    
    1,615Deferred losses
    
    
    
    
    
    
    85
    
    
    
    1701,304
    
    
    
    1,658
    
    
    
    1,785
 Use up to
    
    12/31/2006
    
    12/31/2005
    
    12/31/20042007
    
    
    1,255
    
    
    
    1,631
    
    
    
    1,6152010
    
    
    34
    
    
    
    12
    
    
    
    852011 and thereafter
    
    
    15
    
    
    
    15
    
    
    
    851,304
    
    
    
    1,658
    
    
    
    1,785
  F-49




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##### Table of Contents



13. Contingencies, allowances and environmental matters
  Balances at
    
    
    
    
    
    Balancesthe beginning
    
    Net increase
    
    at the endAccount
    
    of the year
    
    (decrease)
    
    of the yearDeducted from assets:CurrentFor doubtful accounts
    
    
    85
    
    
    
    25
    
    
    
    110For other receivables
    
    
    
    
    
    
    92
    
    
    
    92For other tax credits (Note 17.a)
    
    
    88
    
    
    
    (42
    )
    
    
    46Inventories obsolescence (Note 8)
    
    
    3
    
    
    
    (2
    )
    
    
    1For investments (Note 9)
    
    
    59
    
    
    
    (24
    )
    
    
    35235
    
    
    
    49
    
    
    
    284Non-currentFor other receivablesTax loss carryforwards
    
    
    1,274
    
    
    
    (120
    )
    
    
    1,154Deferred tax losses
    
    
    85
    
    
    
    (85
    )
    
    
    For investments (Note 9)
    
    
    175
    
    
    
    176
    
    
    
    351For property, plant and equipment
    
    
    656
    
    
    
    (301
    )
    
    
    355Inventories obsolescence (Note 8)
    
    
    2
    
    
    
    (1
    )
    
    
    12,192
    
    
    
    (331
    )
    
    
    1,861TOTAL 2006
    
    
    2,427
    
    
    
    (282
    )
    
    
    2,145TOTAL 2005
    
    
    1,943
    
    
    
    484
    
    
    
    2,427Included in liabilities:CurrentFor contingenciesLabor and commercial contingencies
    
    
    48
    
    
    
    47
    
    
    
    9548
    
    
    
    47
    
    
    
    95Non- currentFor contingenciesLabor and commercial contingencies
    
    
    103
    
    
    
    (18
    )
    
    
    85103
    
    
    
    (18
    )
    
    
    85TOTAL 2006
    
    
    151
    
    
    
    29
    
    
    
    180TOTAL 2005
    
    
    107
    
    
    
    44
    
    
    
    151
 a) Environmental matters
   F-50




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##### Table of Contents



b) Value-added tax on operations in Ecuador
    c) Amendment to Ecuadors Hydrocarbons Law
  d) Other issues
   F-51




---



##### Table of Contents



14. Contractual commitments, warranty bond, surety ships and guarantees granted
   Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1 - 3 years
    
    3 - 5 years
    
    years
    
    Until(in millions of pesos)Purchase ObligationsShip or pay agreement with OCP (1) (2) (6)
    
    
    2,692
    
    
    
    168
    
    
    
    389
    
    
    
    430
    
    
    
    1,705
    
    
    
    2018Long-term service agreement (6)
    
    
    159
    
    
    
    133
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    2010Bolivian gas and oil transportation agreement (6)
    
    
    133
    
    
    
    11
    
    
    
    11
    
    
    
    22
    
    
    
    89
    
    
    
    2019Petroleum services and materials (6)
    
    
    417
    
    
    
    236
    
    
    
    138
    
    
    
    21
    
    
    
    22
    
    
    
    2019Ethylene (4)(6)
    
    
    1,483
    
    
    
    203
    
    
    
    319
    
    
    
    261
    
    
    
    700
    
    
    
    2015Benzene (5)(6)
    
    
    3,357
    
    
    
    416
    
    
    
    755
    
    
    
    602
    
    
    
    1,584
    
    
    
    2015Oil Purchase agreements for Refinery (6)
    
    
    1,468
    
    
    
    1,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007Gas transportation capacity with TGS (3)
    
    
    189
    
    
    
    27
    
    
    
    54
    
    
    
    54
    
    
    
    54
    
    
    
    2014Gas purchase agreements for Genelba (6)
    
    
    114
    
    
    
    84
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    2009Total
    
    
    10,012
    
    
    
    2,746
    
    
    
    1,722
    
    
    
    1,390
    
    
    
    4,154Sales ObligationsNatural gas
    
    
    1,423
    
    
    
    247
    
    
    
    338
    
    
    
    329
    
    
    
    509
    
    
    
    2018Styrene
    
    
    744
    
    
    
    123
    
    
    
    621
    
    
    
    
    
    
    
    
    
    
    
    2009Electric power
    
    
    144
    
    
    
    100
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    2009LPG
    
    
    82
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007Oil sale agreement
    
    
    3,350
    
    
    
    1,579
    
    
    
    1,771
    
    
    
    
    
    
    
    
    
    
    
    2009Total
    
    
    5,743
    
    
    
    2,131
    
    
    
    2,774
    
    
    
    329
    
    
    
    509
 (1)
    
    Net of transportation capacity sold to third parties(2)
    
    Estimated price US$2.73 per barrel.(3)
    
    Estimated price P$7.9 million per million of cubic meters.(4)
    
    Estimated price US$920 per ton. Contractual prices are in US Dollars. Peso amounts translated using exchange rate as of December 31, 2006.(5)
    
    Estimated price US$744 per ton. Contractual prices are in US Dollars. Peso amounts translated using exchange rate as of December 31, 2006.(6)
    
    Prices are generally
determined by formulas based on future market prices.Estimated prices used to
calculate the monetary equivalent of these purchase obligations for purposes of the table are
based on current market prices as of December 31, 2006 and may not reflect actual future
prices of these commodities. Accordingly, the peso amounts provided in this table with
respect to these obligations are provided for illustrative purpose only.
  Obligations by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1 - 3 years
    
    3 - 5 years
    
    yearsPurchase ObligationsShip or pay agreement with OCP (in million of barrels)
    
    
    321
    
    
    
    20
    
    
    
    47
    
    
    
    53
    
    
    
    201Bolivian gas
and oil transportation agreement (in millions of cubic meters)
    
    
    6,490
    
    
    
    569
    
    
    
    1,139
    
    
    
    1,139
    
    
    
    3,643Ethylene (in thousands of tons)
    
    
    525
    
    
    
    56
    
    
    
    112
    
    
    
    102
    
    
    
    255Benzene (in thousands of tons)
    
    
    1,469
    
    
    
    155
    
    
    
    315
    
    
    
    286
    
    
    
    713Oil Purchase agreements for Refinery (in millon of barrels)
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Gas transportation capacity with TGS (in millon of cubic meters)
    
    
    24
    
    
    
    3
    
    
    
    7
    
    
    
    7
    
    
    
    7Gas purchase agreements for Genelba (in million of cubic meters)
    
    
    564
    
    
    
    367
    
    
    
    197
    
    
    
    
    
    
    
    Sales ObligationsNatural gas (in millions of cubic meters)
    
    
    7,806
    
    
    
    1,411
    
    
    
    1,801
    
    
    
    1,647
    
    
    
    2,947Styrene (in thousands of tons)
    
    
    165
    
    
    
    29
    
    
    
    136
    
    
    
    
    
    
    
    Electric power (in MWh)
    
    
    1,938
    
    
    
    1,299
    
    
    
    639
    
    
    
    
    
    
    
    LPG (in thousands of tons)
    
    
    58
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    Oil sale agreement (in millions of bbls)
    
    
    17
    
    
    
    9
    
    
    
    8
    
    
    
    
    
    
    
    
  F-52




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##### Table of Contents



15. Social benefits and other benefits of Petrobras Energía
 a) Defined contribution plan
 Supplementary Pension Plan for Personnel
   b) Defined benefit plan
 Indemnity Plan
  Compensatory Fund
     F-53




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##### Table of Contents



2006
    
    2005Change in benefit obligationBenefit obligation at beginning
    
    
    99
    
    
    
    68Service cost
    
    
    2
    
    
    
    1Interest cost
    
    
    16
    
    
    
    6Actuarial loss
    
    
    15
    
    
    
    26Benefits paid
    
    
    (7
    )
    
    
    (7
    )Curtailment or conclusion effect
    
    
    
    
    
    
    Unrecognized prior service cost
    
    
    36
    
    
    
    5Benefit obligation at the end of the year
    
    
    161
    
    
    
    99Change in plan assetsFair value of plan assets at beginning
    
    
    40
    
    
    
    45Return on plan assets
    
    
    2
    
    
    
    2Benefits paid
    
    
    (7
    )
    
    
    (7
    )Fair value of plan assets at the end of the year
    
    
    35
    
    
    
    40
 2006
    
    2005Reconciliation of funded (unfunded) statusUnfunded status at the end of the year
    
    
    (126
    )
    
    
    (59
    )Unrecognized prior service cost
    
    
    41
    
    
    
    5Unrecognized actuarial loss
    
    
    53
    
    
    
    41Net liability recognized
    
    
    (32
    )
    
    
    (13
    )
 2006
    
    2005Components of net periodic benefit costService cost
    
    
    2
    
    
    
    1Interest cost
    
    
    16
    
    
    
    6Return on plan assets
    
    
    (2
    )
    
    
    (2
    )Amortization of actuarial gain and losses and unrecognized prior service cost
    
    
    2
    
    
    
    Net periodic benefit cost
    
    
    18
    
    
    
    5Weighted-average assumptionsDiscount rate
    
    
    4
    %
    
    
    4
    %Rate of return on plan assets
    
    
    6
    %
    
    
    4
    %Rate of compesation increase (a)
    
    
    2
    %
    
    
    2
    %
  c) Stock option plan
   F-54




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##### Table of Contents



2001 Plan
 i.
    
    5,364,125 options to receive the value arising from the positive difference between the
average listed price of Petrobras Participaciones shares on the New York Stock Exchange
during the 20 days prior to exercising the option and 1.64 Argentine pesos per share, for
the same number of shares (appreciation rights).
  
 ii.
    
    596,014 options to receive the same number of shares at no cost for the beneficiary.
These options may be exercised as from March 5, 2005 (full value). As of December 31,
2006 the exercised options amounted to 496,043, almost entirely in cash.
  2000 Plan
 i.
    
    3,171,137 options to receive the value arising from the positive difference between the
average listed price of Petrobras Participaciones shares on the New York Stock Exchange
during the 20 days prior to exercising the option and 1.48 Argentine pesos per share, for
such number of shares (appreciation rights).
 ii.
    
    352,347 options to receive the same number of shares at no cost to the beneficiary.
These options may be exercised as from May 29, 2004 (full value).
    2006
    
    2005
    
    2004Weighted -
    
    
    
    
    
    Weighted -
    
    
    
    
    
    Weighted -Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageOptions
    
    Exercise Price
    
    Options
    
    Exercise Price
    
    Options
    
    Exercise PriceOutstanding at the beginning of the year
    
    
    1,198,803
    
    
    
    1.59
    
    
    
    3,195,192
    
    
    
    1.60
    
    
    
    7,557,205
    
    
    
    1.59Exercised
    
    
    (237,255
    )
    
    
    1.60
    
    
    
    (1,996,389
    )
    
    
    1.60
    
    
    
    (4,362,013
    )
    
    
    1.58Forfaited
    
    
    (306,851
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    654,697
    
    
    
    1,59
    
    
    
    1,198,803
    
    
    
    1.59
    
    
    
    3,195,192
    
    
    
    1.60Exercisable at the end of the year
    
    
    654,697
    
    
    
    1,59
    
    
    
    1,198,803
    
    
    
    1,59
    
    
    
    2,599,178
    
    
    
    1.59
   F-55




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##### Table of Contents



16. Capital stock and restrictions on unappropriated retained earnings
  December, 312006
    
    2005
    
    2004Common stock
 face value $
    
    
    1
    
    
    
    1
    
    
    
    1Class B: 1 vote per share
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
     17. Other receivables, other liabilities, other operating expenses, net, other income
(expenses), net and supplemental cash flow information.
 12/31/2006
    
    12/31/2005Current
    
    Non-current
    
    Current
    
    Non-currenta) Other receivablesJoint ventures
    
    
    26
    
    
    
    
    
    
    
    60
    
    
    
    Related companies (Note 18)
    
    
    117
    
    
    
    5
    
    
    
    56
    
    
    
    3Tax credits
    
    
    480
    
    
    
    328
    
    
    
    393
    
    
    
    220Deferred tax assets
    
    
    
    
    
    
    1,465
    
    
    
    
    
    
    
    1,759Advisory services to other companies
    
    
    1
    
    
    
    
    
    
    
    6
    
    
    
    Receivables from the sale of companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments to recover
    
    
    197
    
    
    
    
    
    
    
    32
    
    
    
    1Letters of credit advances
    
    
    
    
    
    
       
    
    
    
    
    
    
    
    Prepaid expenses
    
    
    53
    
    
    
    24
    
    
    
    39
    
    
    
    28Credit for new projects in the mixed companies in Venezuela
    
    
    272
    
    
    
    
    
    
    
    
    
    
    
    Other collaterals
    
    
    5
    
    
    
    
    
    
    
    35
    
    
    
    Commercial agreements
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    Credit allowance (Note 13)
    
    
    (138
    )
    
    
    (1,154
    )
    
    
    (88
    )
    
    
    (1,359
    )Other
    
    
    100
    
    
    
    23
    
    
    
    94
    
    
    
    201,182
    
    
    
    691
    
    
    
    627
    
    
    
    672
  F-56




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##### Table of Contents



12/31/2006
    
    12/31/2005Current
    
    Non-current
    
    Current
    
    Non-currentb) Other liabilitiesRelated companies (Note 18)
    
    
    27
    
    
    
    
    
    
    
    2
    
    
    
    Receivables in advance
    
    
    46
    
    
    
    58
    
    
    
    11
    
    
    
    55Accrual for expenses- Environmental remediation
    
    
    55
    
    
    
    64
    
    
    
    29
    
    
    
    56- Other
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    42Innova preferred stock
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Litigation reserves and fines
    
    
    26
    
    
    
    22
    
    
    
    22
    
    
    
    30Abandonment costs in oil & gas areas (Note 6)
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    126Debt for investment in companies
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Derivatives
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    Unified Fund-Basic Price of Electric Power (1)
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    3Other
    
    
    37
    
    
    
    9
    
    
    
    47
    
    
    
    12192
    
    
    
    366
    
    
    
    168
    
    
    
    339
 (1)
    
    To ensure completion of works in Pichi Picún Leufú Hydroelectrical Complex
within the term of the concession and a profitability to make the investment viable, the
Energy Department granted the Company the amount of 25. For the purpose of determining
whether or not this amount should be repaid, a support price system was implemented for
the electric power to be generated by the Complex and sold on the Wholesale Electric
Power Market. This support price system will be applied over a ten-year term, which will
be divided into two consecutive five-year periods, as from December 1999. In order to
implement this system, an Annual Monomial Support Price (AMSP) was set in the amounts of
US$/Kwh 0.021 and US$/Kwh 0.023 for the first and second period, respectively. In order
to determine the amount to be reimbursed, each year of the above mentioned term, the
difference between the Annual Average Monomial Price of the Complex bars generation, and
the aforesaid AMSP, valued in terms of the electric power generated by the Complex
during that year will be determined. Owing to the selling prices set for the energy
generated by the Complex, and the future prices estimated, considering that it implies
profitability reinsurance, as of December 31, 2006 the Company accrued a profit of 22.
 12/31/2006
    
    12/31/2005
    
    12/31/2004c) Other operating expenses, netAdvisory services to other companies
    
    
    48
    
    
    
    37
    
    
    
    35Environmental remediation expenses
    
    
    (5
    )
    
    
    (29
    )
    
    
    (51
    )Taxes on bank transactions
    
    
    (98
    )
    
    
    (90
    )
    
    
    (84
    )Contingencies
    
    
    (24
    )
    
    
    (3
    )
    
    
    (28
    )Oil transportation agreement with OCP
    
    
    (178
    )
    
    
    (184
    )
    
    
    (184
    )Fundopem (2)
    
    
    46
    
    
    
    42
    
    
    
    27Commercial claims resolution
    
    
    75
    
    
    
    
    
    
    
    Tax credit allowance
    
    
    (1
    )
    
    
    (78
    )
    
    
    Recovery of insurances
    
    
    12
    
    
    
    
    
    
    
    Other
    
    
    (10
    )
    
    
    (24
    )
    
    
    (39
    )(135
    )
    
    
    (329
    )
    
    
    (324
    )
 (2)
    
    Tax benefits enjoyed by Innova S.A. consisting in a partial reduction of certain taxes
in accordance with a program of incentives that the Brazilian state of Rio Grande do Sul
provides to companies located there.
  F-57




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##### Table of Contents



12/31/2006
    
    12/31/2005
    
    12/31/2004d) Other income (expenses), netSales of oil areas (Note 6)
    
    
    85
    
    
    
    
    
    
    
    Reversal of Citelec S.A.s impairment
    
    
    23
    
    
    
    
    
    
    
    Reversal of
Hidroneuquén S.A.s impairment
    
    
    10
    
    
    
    
    
    
    
    Enecor S.A.s impairment
    
    
    6
    
    
    
    (11
    )
    
    
    Net impairment of assets in Venezuela (Note 6) (1)
    
    
    (6
    )
    
    
    (310
    )
    
    
    (27
    )Net impairment of areas in Argentina (Note 6)
    
    
    
    
    
    
    (88
    )
    
    
    Other assets impairment
    
    
    
    
    
    
    
    
    
    
    (20
    )Seniat claim  Venezuela
    
    
    (18
    )
    
    
    (54
    )
    
    
    Disposal of property, plant and equipment
    
    
    (15
    )
    
    
    (24
    )
    
    
    (11
    )Gain from AE (out-of-court composition with creditors)  Edesur S.A.
    
    
    
    
    
    
    
    
    
    
    18Financial debt refinancing
    
    
    
    
    
    
    
    
    
    
    (12
    )Losses from settled financial debt in advance
    
    
    
    
    
    
    (9
    )
    
    
    Sale price adjustment  Conuar S.A.
    
    
    
    
    
    
    23
    
    
    
    Other, net
    
    
    8
    
    
    
    14
    
    
    
    1293
    
    
    
    (459
    )
    
    
    (40
    )
 (3)
    
    Corresponds to the Oil and Gas Exploration and Production business segment (See note
19)..
 2006
    
    2005
    
    2004e) Supplemental cash flow informationCash
    
    
    86
    
    
    
    104
    
    
    
    139Time deposits and Mutual Funds
    
    
    1,264
    
    
    
    686
    
    
    
    928Cash and cash equivalent
    
    
    1,350
    
    
    
    790
    
    
    
    1,067
  18. Balances and transactions with related companies
      F-58




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##### Table of Contents



2006Current
    
    Non-currentTrade
    
    Other
    
    Accounts
    
    Other
    
    
    
    
    
    OtherCompany
    
    Receivables
    
    Receivables
    
    Payable
    
    Liabilities
    
    Loans
    
    receivables
    
    Investments
    
    LoansPetroquímica Cuyo S.A.
    
    
    11
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoducto de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    Petrobras
Bolivia Refinación S.A.
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transportadora de Gas delSur S.A.
    
    
    10
    
    
    
    12
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del Norte S.A.
    
    
    3
    
    
    
    8
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo Brasileiro S.A. -Petrobras
    
    
    4
    
    
    
    5
    
    
    
    33
    
    
    
    11
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras Internacional  Braspetro B.V.
    
    
    
    
    
    
    76
    
    
    
    2
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    768Other
    
    
    1
    
    
    
    14
    
    
    
    5
    
    
    
    16
    
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    Total
    
    
    92
    
    
    
    117
    
    
    
    136
    
    
    
    27
    
    
    
    26
    
    
    
    5
    
    
    
    147
    
    
    
    768
 2005Current
    
    Non-currentTrade
    
    Other
    
    Accounts
    
    Other
    
    
    
    
    
    OtherCompany
    
    Investments
    
    Receivables
    
    Receivables
    
    Payable
    
    Liabilities
    
    Loans
    
    Receivables
    
    Investment
    
    LoansPetroquímica Cuyo S.A.
    
    
    
    
    
    
    8
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Oleoductos
de Crudos Pesados Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Refinería del None S.A.
    
    
    
    
    
    
    17
    
    
    
    5
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrobras International Finance Co.
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petróleo
Brasileiro S.A.- Petrobras
    
    
    
    
    
    
    3
    
    
    
    15
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Propyme SGR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Petrobras
Internacional  Braspetro B.V.
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    758Other
    
    
    
    
    
    
    2
    
    
    
    7
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Total
    
    
    2
    
    
    
    134
    
    
    
    56
    
    
    
    139
    
    
    
    2
    
    
    
    26
    
    
    
    3
    
    
    
    150
    
    
    
    758
  F-59




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##### Table of Contents



2006
    
    2005
    
    2004Company
    
    Purchases
    
    Sales
    
    Purchases
    
    Sales
    
    Purchases
    
    SalesOleoductos del Valle S.A.
    
    
    23
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    20
    
    
    
    Transportadora de Gas del Sur S.A.
    
    
    40
    
    
    
    34
    
    
    
    30
    
    
    
    
    
    
    
    35
    
    
    
    Refineía del Norte S.A.
    
    
    142
    
    
    
    99
    
    
    
    122
    
    
    
    82
    
    
    
    77
    
    
    
    46Petrobras International Finance Co.
    
    
    101
    
    
    
    1,428
    
    
    
    118
    
    
    
    977
    
    
    
    121
    
    
    
    488Petroquímica Cuyo S.A.
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Petrolera Entre Lomas S.A.
    
    
    440
    
    
    
    1
    
    
    
    344
    
    
    
    1
    
    
    
    198
    
    
    
    Petroleo Brasileiro S.A.
    
    
    102
    
    
    
    14
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    240Petrobras Bolivia Refinación S.A.
    
    
    
    
    
    
    33
    
    
    
    3
    
    
    
    34
    
    
    
    36
    
    
    
    36Total
    
    
    848
    
    
    
    1,642
    
    
    
    632
    
    
    
    1,104
    
    
    
    451
    
    
    
    810
 19.
    
    Business segment and geographic consolidated information
   a)
    
    The Oil and Gas Exploration and Production segment is composed of the Companys
participation in oil and gas blocks and its interest in Oleoductos del Valle S.A. and
Oleoducto de Crudos Pesados Ltd.b)
    
    The Refining and Distribution segment includes the Companys operations in Refinería
San Lorenzo and Bahía Blanca, its own gas station network and the Companys interests in
Refinería del Norte S.A. and Petrobras Bolivia Refinación S.A.c)
    
    Petrochemicals, comprising the Companys own fertilizer and styrenics operations
developed in Argentina and Brazil plants and interest in Petroquímica Cuyo S.A.d)
    
    Gas and Energy segment comprises operations in Marketing and Transportation of Gas and
Electricity. The Marketing and Transportation of Gas operations includes the sale of gas
and the liquefied petroleum gas brokerage and trading, and its interest in Transportadora
de Gas del Sur S.A. The Electricity operations includes Companys operations in the Genelba
plant and in the Pichi Picún Leufú Hydroelectric Complex, and its interest in Edesur S.A.,
Transener S.A., Enecor S.A. and Yacylec S.A.
     F-60




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##### Table of Contents



2006Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    Marketing and
    
    
    
    
    
    Corporateand
    
    and
    
    
    
    
    
    Transportation
    
    
    
    
    
    andProduction
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    Electricity
    
    Eliminations
    
    TotalTotal Assets
    
    
    9,752
    
    
    
    2,549
    
    
    
    1,710
    
    
    
    2,832
    
    
    
    2,292
    
    
    
    1,322
    
    
    
    20,457Total Liabilities
    
    
    2,966
    
    
    
    811
    
    
    
    590
    
    
    
    2,191
    
    
    
    720
    
    
    
    4,609
    
    
    
    11,887
 2005Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    Marketing and
    
    
    
    
    
    Corporateand
    
    and
    
    
    
    
    
    Transportation
    
    
    
    
    
    andProduction
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    Electricity
    
    Eliminations
    
    TotalTotal Assets
    
    
    9,170
    
    
    
    2,151
    
    
    
    1,475
    
    
    
    2,830
    
    
    
    2,285
    
    
    
    660
    
    
    
    18,571Total Liabilities
    
    
    4,881
    
    
    
    692
    
    
    
    593
    
    
    
    2,313
    
    
    
    713
    
    
    
    2,302
    
    
    
    11,494
  2006Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    Marketing and
    
    
    
    
    
    Corporateand
    
    and
    
    
    
    
    
    Transportation
    
    
    
    
    
    andProduction
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    Electricity
    
    Eliminations
    
    TotalConsolidated Statement of IncomeNet salesTo third parties
    
    
    2,653
    
    
    
    4,262
    
    
    
    2,447
    
    
    
    1,202
    
    
    
    1,181
    
    
    
    
    
    
    
    11,745Inter-segment
    
    
    2,128
    
    
    
    269
    
    
    
    43
    
    
    
    184
    
    
    
    26
    
    
    
    (2,650
    )
    
    
    4,781
    
    
    
    4,531
    
    
    
    2,490
    
    
    
    1,386
    
    
    
    1,207
    
    
    
    (2,650
    )
    
    
    11,745Cost of sales
    
    
    (2,119
    )
    
    
    (4,715
    )
    
    
    (2,183
    )
    
    
    (1,050
    )
    
    
    (863
    )
    
    
    2,679
    
    
    
    (8,251
    )Gross profit
    
    
    2,662
    
    
    
    (184
    )
    
    
    307
    
    
    
    336
    
    
    
    344
    
    
    
    29
    
    
    
    3,494Administrative and selling expenses
    
    
    (288
    )
    
    
    (290
    )
    
    
    (177
    )
    
    
    (28
    )
    
    
    (116
    )
    
    
    (195
    )
    
    
    (1,094
    )Exploration expenses
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )Other operating (expenses) income, net
    
    
    (78
    )
    
    
    6
    
    
    
    32
    
    
    
    37
    
    
    
    (36
    )
    
    
    (96
    )
    
    
    (135
    )Operating income (loss)
    
    
    2,179
    
    
    
    (468
    )
    
    
    162
    
    
    
    345
    
    
    
    192
    
    
    
    (262
    )
    
    
    2,148Equity earnings of affiliates
    
    
    89
    
    
    
    114
    
    
    
    15
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    219Other (expenses) income
    
    
    (860
    )
    
    
    97
    
    
    
    (49
    )
    
    
    (252
    )
    
    
    (46
    )
    
    
    (193
    )
    
    
    (1,303
    )Net income (loss)
    
    
    1,408
    
    
    
    (257
    )
    
    
    128
    
    
    
    93
    
    
    
    147
    
    
    
    (455
    )
    
    
    1,064
  F-61




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##### Table of Contents



2005Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    Marketing and
    
    
    
    
    
    Corporateand
    
    and
    
    
    
    
    
    Transportation
    
    
    
    
    
    andProduction
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    Electricity
    
    Eliminations
    
    TotalConsolidated Statement of IncomeNet salesTo third parties
    
    
    2,935
    
    
    
    3,572
    
    
    
    2,140
    
    
    
    1,009
    
    
    
    999
    
    
    
    
    
    
    
    10,655Inter-segment
    
    
    1,722
    
    
    
    284
    
    
    
    38
    
    
    
    110
    
    
    
    18
    
    
    
    (2,172
    )
    
    
    4,657
    
    
    
    3,856
    
    
    
    2,178
    
    
    
    1,119
    
    
    
    1,017
    
    
    
    (2,172
    )
    
    
    10,655Cost of sales
    
    
    (2,022
    )
    
    
    (3,749
    )
    
    
    (1,801
    )
    
    
    (849
    )
    
    
    (757
    )
    
    
    2,132
    
    
    
    (7,046
    )Gross profit
    
    
    2,635
    
    
    
    107
    
    
    
    377
    
    
    
    270
    
    
    
    260
    
    
    
    (40
    )
    
    
    3,609Administrative and selling expenses
    
    
    (248
    )
    
    
    (251
    )
    
    
    (143
    )
    
    
    (22
    )
    
    
    (86
    )
    
    
    (191
    )
    
    
    (941
    )Exploration expenses
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Other operating (expenses) income,
net
    
    
    (314
    )
    
    
    (5
    )
    
    
    33
    
    
    
    32
    
    
    
    (4
    )
    
    
    (71
    )
    
    
    (329
    )Operating income (loss)
    
    
    2,039
    
    
    
    (149
    )
    
    
    267
    
    
    
    280
    
    
    
    170
    
    
    
    (302
    )
    
    
    2,305Equity earnings of affiliates
    
    
    15
    
    
    
    101
    
    
    
    7
    
    
    
    127
    
    
    
    31
    
    
    
    
    
    
    
    281Other (expenses) income
    
    
    (1,551
    )
    
    
    77
    
    
    
    (87
    )
    
    
    (235
    )
    
    
    (78
    )
    
    
    17
    
    
    
    (1,857
    )Net income (loss)
    
    
    503
    
    
    
    29
    
    
    
    187
    
    
    
    172
    
    
    
    123
    
    
    
    (285
    )
    
    
    729
 2004Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    Marketing and
    
    
    
    
    
    Corporateand
    
    and
    
    
    
    
    
    Transportation
    
    
    
    
    
    andProduction
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    Electricity
    
    Eliminations
    
    TotalStatement of incomeNet salesTo third parties
    
    
    2,080
    
    
    
    3,085
    
    
    
    1,857
    
    
    
    930
    
    
    
    811
    
    
    
    
    
    
    
    8,763Inter-segment
    
    
    1,567
    
    
    
    274
    
    
    
    20
    
    
    
    49
    
    
    
    14
    
    
    
    (1,924
    )
    
    
    3,647
    
    
    
    3,359
    
    
    
    1,877
    
    
    
    979
    
    
    
    825
    
    
    
    (1,924
    )
    
    
    8,763Cost of sales
    
    
    (1,737
    )
    
    
    (3,102
    )
    
    
    (1,503
    )
    
    
    (711
    )
    
    
    (628
    )
    
    
    1,900
    
    
    
    (5,781
    )Gross profit
    
    
    1,910
    
    
    
    257
    
    
    
    374
    
    
    
    268
    
    
    
    197
    
    
    
    (24
    )
    
    
    2,982Administrative and selling expenses
    
    
    (221
    )
    
    
    (244
    )
    
    
    (123
    )
    
    
    (22
    )
    
    
    (75
    )
    
    
    (162
    )
    
    
    (847
    )Exploration expenses
    
    
    (133
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133
    )Other operating (expenses) income, net
    
    
    (286
    )
    
    
    (3
    )
    
    
    27
    
    
    
    (1
    )
    
    
    11
    
    
    
    (72
    )
    
    
    (324
    )Operating income (loss)
    
    
    1,270
    
    
    
    10
    
    
    
    278
    
    
    
    245
    
    
    
    133
    
    
    
    (258
    )
    
    
    1,678Equity earnings of affiliates
    
    
    33
    
    
    
    57
    
    
    
    16
    
    
    
    35
    
    
    
    (39
    )
    
    

    
    
    
    
    102Other (expenses) income
    
    
    (1,046
    )
    
    
    (12
    )
    
    
    (66
    )
    
    
    (213
    )
    
    
    (50
    )
    
    
    382
    
    
    
    (1,005
    )Net income
    
    
    257
    
    
    
    55
    
    
    
    228
    
    
    
    67
    
    
    
    44
    
    
    
    124
    
    
    
    775
   F-62




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##### Table of Contents



12/31/2006Argentina
    
    Venezuela
    
    Bolivia
    
    Peru
    
    Brazil
    
    Ecuador
    
    Other
    
    Eliminations
    
    TotalTotal Assets
    
    
    13,525
    
    
    
    3,272
    
    
    
    432
    
    
    
    1,076
    
    
    
    675
    
    
    
    1,045
    
    
    
    432
    
    
    
    
    
    
    
    20,457Net sales
    
    
    8,751
    
    
    
    312
    
    
    
    207
    
    
    
    902
    
    
    
    1,215
    
    
    
    652
    
    
    
    14
    
    
    
    (308
    )
    
    
    11,745Operating income
(expenses)
    
    
    1,130
    
    
    
    186
    
    
    
    45
    
    
    
    446
    
    
    
    54
    
    
    
    287
    
    
    
    1
    
    
    
    (1
    )
    
    
    2,148
 12/31/2005Argentina
    
    Venezuela
    
    Bolivia
    
    Peru
    
    Brazil
    
    Ecuador
    
    Other
    
    Eliminations
    
    TotalTotal Assets
    
    
    12,028
    
    
    
    3,588
    
    
    
    389
    
    
    
    957
    
    
    
    706
    
    
    
    791
    
    
    
    112
    
    
    
    
    
    
    
    18,571Net sales
    
    
    7,378
    
    
    
    1,175
    
    
    
    136
    
    
    
    705
    
    
    
    972
    
    
    
    449
    
    
    
    12
    
    
    
    (172
    )
    
    
    10,655Operating income
(expenses)
    
    
    1,157
    
    
    
    639
    
    
    
    18
    
    
    
    385
    
    
    
    48
    
    
    
    66
    
    
    
    (8
    )
    
    
    
    
    
    
    2,305
 12/31/2004Argentina
    
    Venezuela
    
    Bolivia
    
    Peru
    
    Brazil
    
    Ecuador
    
    Other
    
    Eliminations
    
    TotalNet sales
    
    
    6,429
    
    
    
    811
    
    
    
    108
    
    
    
    458
    
    
    
    774
    
    
    
    211
    
    
    
    11
    
    
    
    (39
    )
    
    
    8,763Operating
income
(expenses)
    
    
    1,157
    
    
    
    325
    
    
    
    3
    
    
    
    221
    
    
    
    104
    
    
    
    (128
    )
    
    
    (4
    )
    
    
    
    
    
    
    1,678
 20.
    
    Controlling Group
   21.
    
    Summary of significant differences between accounting principles followed by the
Company and US GAAP, and summary of new US GAAP accounting pronouncements not yet adopted.
  A  Explanation of the main differences included in the reconciliation from Argentina GAAP to US
GAAP, corresponding to Petrobras Energía Participaciones and its subsidiaries
 1) Deferred charges
    F-63




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2) Debt refinancing costs
   3) Pension plan obligations
     4) Foreign currency translation
     F-64




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##### Table of Contents



5) Discounting of certain receivables and liabilities
   6) Guarantors accounting for guarantees
   7) Accounting for inventories
  8) Accounting for business combinations
     F-65




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##### Table of Contents



Purchase Price Allocation
    
    2006
    
    2005Property plant and equipment
    
    
    194
    
    
    
    229Equity in affiliattes
    
    
    7
    
    
    
    45Goodwill (1)
    
    
    112
    
    
    
    155Liabilities
    
    
    
    
    
    
    1Deferred income taxes
    
    
    (70
    )
    
    
    (97
    )Residual value at year end
    
    
    243
    
    
    
    333
 (1)
    
    Correspond 101 to Petrochemical business segment and 11 to the refining business
segment as of December 31, 2006, and 113 to Petrochemical business segment 9 to Gas and Energy
business segment, 11 to the refining business segment and 22 to Oil and Exploration and
Production business segment as of December 31, 2005.
     9) Impairment of goodwill, property, plant and equipment, and equity in affiliates
 a)
    
    As described above in 8.a), the purchase price of Petrobras Energía has been allocated
under US GAAP (but not under Argentine GAAP) to the identifiable assets acquired and
liabilities assumed, based upon their fair values as of acquisition date, being the excess
reflected as goodwill.Impairment of goodwill, property, plant and equipment recorded under US GAAP in the year
ended December 31, 2006:The company performs the impairment test of the goodwill, following the method established
under SFAS 142. In 2006, under US GAAP, the Company recorded an impairment charge of 70
(before the effect of income taxes) to write off the allocated purchase price of goodwill,
and equity in affiliates (43 and 27, respectively) originated in the business combination
described in 8.a) above.
The impairment of goodwill in the Condensed Financial Information in note 23 was allocated
to the Other Operating Income Caption.Impairment of property, plant and equipment recorded under US GAAP in the year ended
December 31, 2005:As described in Note 6  Operations in Venezuela, in the year ended December 31, 2005, under
Argentine GAAP, the Company recorded an impairment charge in order to adjust the book value
of its Venezuelan assets to their recoverable value related to Property, Plant and
Equipment. Under US GAAP, in 2005, an additional impairment charge for 975 was recorded, to
write off the purchased price allocated, originated in the business combination described in
8.a) above.
  F-66




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##### Table of Contents



b)
    
    Under US GAAP, once an impairment loss is allocated to the carrying value of the
long-lived assets, the reduced carrying amount represents the new cost basis of the
long-lived assets. As a result, SFAS 144 prohibits entities from reversing the impairment
loss should facts and circumstances change in the future.
Under Argentine GAAP, impairment
charges can be reversed in future years due to changes in the above-mentioned facts and
circumstances. As of December 31, 2005, Petrobras Energía recorded a 44 gain related to an
impairment reversal of gas areas in Argentina (See Note Recoverability of investments in
Argentine oil and gas areas). In the reconciliation to US GAAP included in Note 22, such
gain was reversed. In 2006, the reconciliation includes a gain of 6 correspond to the
reversal of the related higher depreciation.c)
    
    Method of calculation of impairment related to property, plant and equipmentFollowing the changes in professional accounting standards under Argentine GAAP described in
Note 2.f, the book value of a long-lived asset is adjusted to its recoverable value if its
carrying amount exceeds the recoverable value in use. From a regulatory standpoint,
recoverable value is defined as the larger of net realizable value and discounted value in
use, defined as the addition of the discounted expected net cash flows that arise as a
direct result of the use and eventual disposition of the assets.Under US GAAP the book value of a long-lived asset is adjusted to its fair value if its
carrying amount exceeds the undiscounted value in use.Under Argentine GAAP, following this guidance, as of December 31, 2006, 2005 and 2004,
Petrobras Energía S.A. carried a valuation allowance of 165, 190 (which include an addition
to the allowance of 132) and 70. In the reconciliation to US GAAP these charges were
reversed since under US GAAP, the carrying amount exceeded the undiscounted cash flow.The related effect on the depreciation of property, plant and equipment, in the
reconciliation to US GAAP totaled 25, 12 and 10 for the years 2006, 2005 and 2004.Prior to the changes to Argentine GAAP referred to in note 2.f, there were no substantial
differences between Argentine GAAP and US GAAP in the calculation of impairment of property,
plant and equipment, except for the reversal of the impairment charges discussed in 9)
above.
 10) Income taxes
  11) Proportional consolidation
    F-67




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12) Minority Interest
  B  Explanation of the main differences included in the reconciliation from Argentina GAAP to US
GAAP, applicable to our equity in affiliates
     2) Troubled debt restructuring of TGS and Transener.
      F-68




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C  Presentation
 1) Classification of impairment losses
    F-69




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2) Balance sheet classification differences related to deferred income tax assets (liabilities)
   3) Accounting for Purchases and Sales of Inventory with the Same Counterparty
   D  Other
 1) Restatements of financial statements for general price-level changes
  E  New accounting standards and developments under US GAAP not yet adopted
 Accounting for Uncertainty in Income Taxes   FIN 48
  Accounting for Certain Hybrid Financial Instruments  SFAS 155
   F-70




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Fair Value Measurements  SFAS 157
  The Fair Value Option for Financial Assets and Financial Liabilities  SFAS 159
  F) Recently adopted accounting pronouncements
 FASB Statement 158  Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans  an Amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS 158)
   F-71




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22.
    
    Reconciliation of net income and shareholders equity to US GAAP
    Reconciliation of net income to US GAAP
 2006
    
    2005
    
    2004Net income under Argentine GAAP
    
    
    1,064
    
    
    
    729
    
    
    
    775US GAAP adjustments:Foreign currency translation adjustment (Note 21.A.4)
    
    
    7
    
    
    
    (13
    )
    
    
    22Amortization of deferred charges (Note 21.A.1)
    
    
    7
    
    
    
    9
    
    
    
    8Debt refinancing costs (Note 21.A.2)
    
    
    3
    
    
    
    14
    
    
    
    18Business Combination (Note 21.A.8)
    
    
    (14
    )
    
    
    (167
    )
    
    
    (136
    )Impairment (Note 21.A.9)
    
    
    (19
    )
    
    
    (12
    )
    
    
    (10
    )Other
    
    
    (4
)
    
    
    (21
    )
    
    
    (10
    )Impairment of property plant & equipment (Note 21.A.9)
    
    
    
    
    
    
    (887
    )
    
    
    Fair value of liabilities (Note 21.A.8.a)
    
    
    (1
    )
    
    
    (49
    )
    
    
    (36
    )Impairment
of goodwill (Note 21. A.S. a and Note 21.A.9.a)
    
    
    (43
    )
    
    
    
    
    
    
    Discounted value of assets and liabilities (Note 21.A.5)
    
    
    2
    
    
    
    21
    
    
    
    9Minority interest (Note 21.A.12)
    
    
    27
    
    
    
    236
    
    
    
    13Inventories (Note 21.A.7)
    
    
    10
    
    
    
    (36
    )
    
    
    1Deferred income taxes (Note 21.A.10)
    
    
    71
    
    
    
    339
    
    
    
    121US GAAP adjustments applicable to equity in earnings of
affiliatesDeferred income taxes
    
    
    (2
    )
    
    
    89
    
    
    
    12Depreciation of property plant and equipment (Note 21.B.3)
    
    
    (13
    )
    
    
    (13
    )
    
    
    (10
    )Capitalized exchange losses (Note 21.B.1)
    
    
    1
    
    
    
    13
    
    
    
    2Impairment of Property Plant & Equipment (Note 21.A.9.a)
    
    
    (27
    )
    
    
    
    
    
    
    Minority interest (Note 21.B.4)
    
    
    (1
    )
    
    
    146
    
    
    
    (15
    )Reversal of equity in earnings of CIESA and Citelec (i)
(Note 21.A.11)
    
    
    (100
    )
    
    
    (222
    )
    
    
    15Debt restructuring (Note 21.B.2)
    
    
    11
    
    
    
    (256
    )
    
    
    (48
    )Other
    
    
    (7
    )
    
    
    3
    
    
    
    27Total US GAAP adjustments
    
    
    (92
    )
    
    
    (806
    )
    
    
    (13
    )Net income (loss) under US GAAP
    
    
    972
    
    
    
    (77
    )
    
    
    760
 i)
    
    This adjustment reverses the equity in earnings accounted for under Argentine GAAP and
complements the effects of other US GAAP adjustments recognized in items listed above
respect to CIESA (2006, 2005 and 2004) and CITELEC (2006 and 2005). As of December 31,
2006, 2005 and 2004, CIESA presented a deficit in shareholders equity under US GAAP, and
therefore it was valued at zero. CITELEC, in turn, had negative shareholders equity, as of
December 31, 2004, and was valued at zero. As of December 31, 2006
and 2005, CITELEC was valued at 28 under US GAAP, which represents its book value as of the
date when it was classified as held for sale.
  F-72




---



##### Table of Contents



Earnings per share
 2006
    
    2005
    
    2004Basic / Diluted net income (loss) per share under US GAAP
    
    
    0.458
    
    
    
    (0.036
    )
    
    
    0.356Basic / Diluted net income (loss) per share under Argentine GAAPClass B
    
    
    0.501
    
    
    
    0.343
    
    
    
    0.365Number of
shares -in millions (1)
    
    
    2,132
    
    
    
    2,132
    
    
    
    2,132
 (1)
    
    Earnings per share are calculated based on the weighted average number of shares
outstanding during the year.
 Consolidated statement of comprehensive income and Accumulated Comprehensive Income
 2006
    
    2005
    
    2004Net income (loss) under US GAAP
    
    
    972
    
    
    
    (77
    )
    
    
    760Foreign currency translation adjustment (Note 21.A.4)Net change during period
    
    
    17
    
    
    
    38
    
    
    
    3Deferred Pension Plan Obligations (Note 21.A.3)(Increase) decrease in additional minimum liability, net of tax
    
    
    (6
    )
    
    
    (16
    )
    
    
    (10
    )Deferred hedge gains and losses, net of tax:Reclassification to net income
    
    
    
    
    
    
    2
    
    
    
    16Deferred hedge (loss) gains
    
    
    
    
    
    
    
    
    
    
    (6
    )Total Comprehensive Income (Loss)
    
    
    983
    
    
    
    (53
    )
    
    
    763Accumulated Other Comprehensive Income (Loss):Amounts not recognized as net periodic pension costs, net of tax (Note 21.A.3)
    
    
    (32
    )
    
    
    (26
    )
    
    
    (10
    )Foreign currency translation adjustment (Note 21.A.4)
    
    
    10
    
    
    
    (7
    )
    
    
    (45
    )Deferred hedge gains and losses, net of tax
    
    
    
    
    
    
    
    
    
    
    (2
    )Adjustment to initially apply SFAS 158, net of tax (Note 21.A.3)
    
    
    (21
    )
    
    
    
    
    
    
    Total Accumulated Other Comprehensive Loss
    
    
    (43
    )
    
    
    (33
    )
    
    
    (57
    )
  F-73




---



##### Table of Contents



Reconciliation of shareholders equity to US GAAP
 2006
    
    2005Shareholders equity under Argentine GAAP
    
    
    6220
    
    
    
    5,155US GAAP adjustments:Deferred charges (Note 21.A.1)
    
    
    (5
    )
    
    
    (12
    )Debt refinancing costs (Note 21.A.2)
    
    
    (6
    )
    
    
    (9
    )Pension plan obligations (Note 21.A.3)
    
    
    (93
    )
    
    
    (40
    )Foreign
currency translation adjustment (Note 21.A.4)
    
    
    (63
    )
    
    
    (78
    )Property plant and equipmentBusiness Combination (Note 21.A.8)
    
    
    293
    
    
    
    293Impairment (Note 21.A.9)
    
    
    127
    
    
    
    146Other
    
    
    7
    
    
    
    12Goodwill
(Note 21.A.8.a and Note 21.A.9.a)
    
    
    112
    
    
    
    155Fair value of liabilities (Note 21.A.8.a)
    
    
   
    
    
    
    1Discounted value of assets and liabilities (Note 21.A.5)
    
    
    50
    
    
    
    47Inventories (Note 21.A.7)
    
    
    (33
    )
    
    
    (43
    )Guarantees (Note 21.A.6)
    
    
    (9
    )
    
    
    (9
    )Minority interest (Note 21.A.12)
    
    
    30
    
    
    
    Deferred income taxes (Note 21.A.10)
    
    
    (110
    )
    
    
    (200
    )US GAAP adjustments applicable to equity in affiliatesDeferred income taxes
    
    
    121
    
    
    
    124Property plant and equipment (Note 21.B.3 and Note 21.A.9.a)
    
    
    (168
    )
    
    
    (128
    )Capitalized exchange losses (Note 21.B.1)
    
    
    (33
    )
    
    
    (33
    )Minority interest (Note 21.B.4)
    
    
    144
    
    
    
    145Reversal of equity in affiliates of CIESA and Citelec (a) (Note 21.A.11)
    
    
    (50
    )
    
    
    50Debt restructuring (Note 21.B.2)
    
    
    (293
    )
    
    
    (304
    )Other
    
    
    (46
    )
    
    
    (39
    )Total US GAAP adjustments
    
    
    (25
    )
    
    
    78Shareholders equity under US GAAP
    
    
    6,195
    
    
    
    5,233
 a)
    
    This amount corresponds to the adjustment to reverse equity in earnings accounted for
under Argentine GAAP and the effects of other US GAAP adjustments recognized in items
listed above respect to CIESA (2006, 2005 and 2004) and CITELEC (2004). As of December 31,
2006, 2005 and 2004, CIESA had negative shareholders equity under US GAAP, and was valued
at zero. CITELEC, in turn, had negative shareholders equity as of December 31, 2004, and
was valued at zero. As of December 31, 2006 and 2005, CITELEC was valued at 28, which
represents its book value as of the date when it was classified as held for sale.
  F-74




---



##### Table of Contents



Description of changes in shareholders equity under US GAAP
 2006
    
    2005
    
    2004Shareholders equity under US GAAP as of
beginning of the year
    
    
    5,233
    
    
    
    5,286
    
    
    
    4,523Other comprehensive income
    
    
    11
    
    
    
    24
    
    
    
    3Net (loss) income under US GAAP
    
    
    972
    
    
    
    (77
    )
    
    
    760Adjustment to initially apply SFAS 158
    
    
    (21
    )
    
    
    
    
    
    
    Shareholders equity under US GAAP as of
the end of the year
    
    
    6,195
    
    
    
    5,233
    
    
    
    5,286
 US GAAP summarized consolidated data
  Year ended December 31,2006
    
    2005
    
    2004US GAAP consolidated income and loss dataSales
    
    
    11,303
    
    
    
    10,287
    
    
    
    8,351Less  taxes on sales and services
    
    
    (218
    )
    
    
    (158
    )
    
    
    (119
    )Net sales
    
    
    11,085
    
    
    
    10,129
    
    
    
    8,232Cost of sales
    
    
    (7,902
    )
    
    
    (6,874
    )
    
    
    (5,588
    )Gross profit
    
    
    3,183
    
    
    
    3,255
    
    
    
    2,644Administrative and selling expenses
    
    
    (1,071
    )
    
    
    (923
    )
    
    
    (830
    )Exploration expenses
    
    
    (117
    )
    
    
    (34
    )
    
    
    (133
    )Other operating income (expense), net
    
    
    (61
    )
    
    
    (1,685
    )
    
    
    (333
    )Operating income
    
    
    1,934
    
    
    
    613
    
    
    
    1,348Equity in earnings of affiliates
    
    
    151
    
    
    
    57
    
    
    
    110Financial income (expense) and holding gains (losses)
    
    
    (406
    )
    
    
    (906
    )
    
    
    (1,161
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes and minority interest
    
    
    1,679
    
    
    
    (236
    )
    
    
    297Income tax (expenses) benefit
    
    
    (398
    )
    
    
    126
    
    
    
    424Minority interest in subsidiaries
    
    
    (309
    )
    
    
    33
    
    
    
    39Net income (loss) for the year
    
    
    972
    
    
    
    (77
    )
    
    
    760
  F-75




---



##### Table of Contents



Year ended December 31,2006
    
    2005US GAAP condensed consolidated balance sheet dataCurrent assets
    
    
    4,641
    
    
    
    3,592Investments
    
    
    3,521
    
    
    
    1,004Property, plant and equipment
    
    
    9,159
    
    
    
    10,955Other non current assets
    
    
    696
    
    
    
    607Total non current assets
    
    
    13,376
    
    
    
    12,566Total assets
    
    
    18,017
    
    
    
    16,158Short-term debt (a)
    
    
    2,179
    
    
    
    1,358Other liabilities
    
    
    2,343
    
    
    
    1,993Total current liabilities
    
    
    4,522
    
    
    
    3,351Long-term debt
    
    
    3,729
    
    
    
    4,475Other non current liabilities
    
    
    1,679
    
    
    
    1,517Total non current liabilities
    
    
    5,408
    
    
    
    5,992Total liabilities
    
    
    9,930
    
    
    
    9,343Minority interest in subsidiaries
    
    
    1,892
    
    
    
    1,582Shareholders equity
    
    
    6,195
    
    
    
    5,23318,017
    
    
    
    16,158
 a)
    
    The weighted average annual interest rates for outstanding short-term
borrowings were 4.62% and 3.37% at December 31, 2006 and 2005,
respectively.
 Year ended December 31,2006
    
    2005
    
    2004US GAAP condensed consolidated cash flow dataNet cash provided by operations
    
    
    2,551
    
    
    
    1,699
    
    
    
    1,570Net cash used in investing activities
    
    
    (1,958
    )
    
    
    (1,598
    )
    
    
    (1,150
    )Net cash used in financing activities
    
    
    (15
    )
    
    
    (476
    )
    
    
    (270
    )(Decrease) Increase in cash
    
    
    578
    
    
    
    (375
    )
    
    
    150Effect of the exchange rate on cash
    
    
    
    
    
    
    9
    
    
    
    (6
    )Cash and cash equivalent at the beginning
    
    
    533
    
    
    
    899
    
    
    
    755Cash and cash equivalent at the end under US GAAP
    
    
    1,111
    
    
    
    533
    
    
    
    899
  F-76




---



##### Table of Contents



23.
    
    Additional financial statements disclosures required by US GAAP and the SEC
 a) Income taxes
  2006
    
    2005Deferred tax assetsTax loss carryforwards
    
    
    1,123
    
    
    
    1,328Other tax losses
    
    
    
    
    
    
    71Property, plant and equipment
    
    
    53
    
    
    
    263Reserve for contingencies
    
    
    90
    
    
    
    74Non-current investments
    
    
    150
    
    
    
    209Pension plan obligations
    
    
    44
    
    
    
    18Derivatives
    
    
    
    
    
    
    6Receivables
    
    
    
    
    
    
    9Other deferred tax assets, not significant individually
    
    
    54
    
    
    
    60Total gross deferred tax assets
    
    
    1,514
    
    
    
    2,038Less-Valuation allowance
    
    
    (1,194
    )
    
    
    (1,386
    )Total net deferred tax assets
    
    
    320
    
    
    
    652Deferred tax liabilitiesRevenue recognition
    
    
    
    
    
    
    (34
    )Prepaid expenses
    
    
    (6
    )
    
    
    (14
    )Property, plant and equipment
    
    
    (985
    )
    
    
    (1,150
    )Non-current investments
    
    
    (248
    )
    
    
    (265
    )Other deferred tax liabilities, not significant individually
    
    
    (1
    )
    
    
    (27
    )Total gross deferred tax liabilities
    
    
    (1,240
    )
    
    
    (1,490
    )Net deferred tax liabilities
    
    
    (920
    )
    
    
    (838
    )
  2006
    
    2005
    
    2004Income before income tax and minority interest in subsidiaries
    
    
    1,679
    
    
    
    (236
    )
    
    
    297Statutory tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Statutory tax rate applied to pre-tax income (loss)
    
    
    588
    
    
    
    (83
    )
    
    
    104Equity in earnings and dividends from affiliates
    
    
    (185
    )
    
    
    (227
    )
    
    
    (238
    )Remeasurement and foreign earnings
    
    
    29
    
    
    
    (2
    )
    
    
    (67
    )Change in valuation allowances
    
    
    (81
    )
    
    
    147
    
    
    
    (253
    )Impairment, amortization and other decreases of goodwill
    
    
   15
    
    
    
   
    
    
    
    Tax
adjustments and other, net
    
    
    32
    
    
    
    39
    
    
    
    30Tax expense (benefit)
    
    
    398
    
    
    
    (126
    )
    
    
    (424
    )
  F-77




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004CurrentArgentina
    
    
    6
    
    
    
    15
    
    
    
    Foreign
    
    
    290
    
    
    
    129
    
    
    
    64296
    
    
    
    144
    
    
    
    64DeferredArgentina
    
    
    109
    
    
    
    (444
    )
    
    
    (432
    )Foreign
    
    
    (7
    )
    
    
    174
    
    
    
    (56
    )102
    
    
    
    (270
    )
    
    
    (488
    )Total tax
expense (benefit)
    
    
    398
    
    
    
    (126
    )
    
    
    (424
    )
  2007
    
    
    3,4932010
    
    
    633,556
 b) Fair value of financial instruments
     F-78




---



##### Table of Contents



2006
    
    2005Carrying
    
    
    
    
    
    Carryingamount
    
    
    
    
    
    amountunder
    
    Fair
    
    under
    
    FairUS GAAP
    
    Value
    
    US GAAP
    
    ValueFinancial liabilities:Long-term debt
    
    
    3,729
    
    
    
    3,877
    
    
    
    4,475
    
    
    
    4,605
 c) Summarized financial information of unconsolidated affiliates
   - Oil and Gas Exploration and Production:
 - Refining and Distribution
 - Petrochemical
 - Gas and Energy
   2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration
    
    Refining and
    
    
    
    
    
    Transportationand Production
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    ElectricityCurrent Assets
    
    
    2,812
    
    
    
    1,374
    
    
    
    172
    
    
    
    
    
    
    
    205Non Current Assets
    
    
    6,587
    
    
    
    606
    
    
    
    132
    
    
    
    
    
    
    
    1,966Current Liabilities
    
    
    1,945
    
    
    
    1,074
    
    
    
    111
    
    
    
    
    
    
    
    180Non Current Liabilities
    
    
    3,712
    
    
    
    153
    
    
    
    49
    
    
    
    
    
    
    
    1,141Shareholders Equity
    
    
    3,742
    
    
    
    753
    
    
    
    143
    
    
    
    
    
    
    
    850Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Sales
    
    
    3,308
    
    
    
    4,229
    
    
    
    470
    
    
    
    
    
    
    
    501Gross profit
    
    
    1,582
    
    
    
    605
    
    
    
    80
    
    
    
    
    
    
    
    168Net income
    
    
    377
    
    
    
    272
    
    
    
    35
    
    
    
    
    
    
    
    34
 2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration
    
    Refining and
    
    
    
    
    
    Transportationand Production
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    ElectricityCurrent Assets
    
    
    598
    
    
    
    1,144
    
    
    
    136
    
    
    
    
    
    
    
    177Non Current Assets
    
    
    4,687
    
    
    
    653
    
    
    
    105
    
    
    
    
    
    
    
    2,049Current Liabilities
    
    
    369
    
    
    
    948
    
    
    
    90
    
    
    
    
    
    
    
    139Non Current Liabilities
    
    
    3,794
    
    
    
    166
    
    
    
    46
    
    
    
    
    
    
    
    1,220Shareholders Equity
    
    
    1,121
    
    
    
    684
    
    
    
    104
    
    
    
    
    
    
    
    474Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392Sales
    
    
    1,384
    
    
    
    2,931
    
    
    
    337
    
    
    
    
    
    
    
    431Gross profit
    
    
    784
    
    
    
    491
    
    
    
    64
    
    
    
    
    
    
    
    126Net income
    
    
    168
    
    
    
    278
    
    
    
    19
    
    
    
    
    
    
    
    407
  F-79




---



##### Table of Contents



2004Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration
    
    Refining and
    
    
    
    
    
    Transportationand Production
    
    Distribution
    
    Petrochemical
    
    of Gas
    
    ElectricitySales
    
    
    1,247
    
    
    
    2,425
    
    
    
    293
    
    
    
    994
    
    
    
    356Gross profit
    
    
    695
    
    
    
    388
    
    
    
    91
    
    
    
    528
    
    
    
    89Net income (loss)
    
    
    149
    
    
    
    184
    
    
    
    33
    
    
    
    189
    
    
    
    (20
    )
 d) Summarized financial information of proportionally consolidated jointly controlled
companies
  2006
    
    2005
    
    2004CIESA (a)
    
    Distrilec
    
    Total
    
    CIESA (a)
    
    Distrilec
    
    Total
    
    CIESA (a)
    
    Distrilec
    
    TotalCurrent Assets
    
    
    366
    
    
    
    183
    
    
    
    549
    
    
    
    361
    
    
    
    175
    
    
    
    536Non Current Assets
    
    
    2,278
    
    
    
    1,342
    
    
    
    3,620
    
    
    
    2,354
    
    
    
    1,375
    
    
    
    3,729Current Liabilities
    
    
    620
    
    
    
    256
    
    
    
    876
    
    
    
    556
    
    
    
    260
    
    
    
    816Non Current Liabilities
    
    
    1,384
    
    
    
    419
    
    
    
    1,803
    
    
    
    1,623
    
    
    
    396
    
    
    
    2,019Shareholders Equity
    
    
    211
    
    
    
    509
    
    
    
    720
    
    
    
    197
    
    
    
    546
    
    
    
    743Minority Interest
    
    
    429
    
    
    
    341
    
    
    
    770
    
    
    
    339
    
    
    
    348
    
    
    
    687Sales
    
    
    632
    
    
    
    695
    
    
    
    1,327
    
    
    
    513
    
    
    
    651
    
    
    
    1,164
    
    
    
    472
    
    
    
    535
    
    
    
    1,007Gross Profit
    
    
    312
    
    
    
    101
    
    
    
    413
    
    
    
    243
    
    
    
    97
    
    
    
    340
    
    
    
    253
    
    
    
    86
    
    
    
    339Net Income (loss)
    
    
    71
    
    
    
    (37
    )
    
    
    34
    
    
    
    42
    
    
    
    (8
    )
    
    
    34
    
    
    
    23
    
    
    
    
    
    
    
    23Cash provided by (used
in):Operating activities
    
    
    326
    
    
    
    45
    
    
    
    371
    
    
    
    299
    
    
    
    73
    
    
    
    372Investing activities
    
    
    (64
    )
    
    
    (70
    )
    
    
    (134
    )
    
    
    (84
    )
    
    
    (54
    )
    
    
    (138
    )Financing activities
    
    
    (280
    )
    
    
    33
    
    
    
    (247
    )
    
    
    (126
    )
    
    
    (13
    )
    
    
    (139
    )
 (a)
    
    For US GAAP reporting purposes, CIESA was not proportionally consolidated, as
explained in Note 21 A.11).
 e) Pension plan:
 Defined contribution plan:
  Defined benefit plan:
   F-80




---



##### Table of Contents



2006
    
    2005
    
    2004Change in Proyected Benefit ObligationProyected Benefit Obligation at beginning
    
    
    99
    
    
    
    68
    
    
    
    51Service cost
    
    
    2
    
    
    
    1
    
    
    
    1Interest cost
    
    
    16
    
    
    
    6
    
    
    
    4Actuarial loss
    
    
    15
    
    
    
    26
    
    
    
    17Benefits paid
    
    
    (7
    )
    
    
    (7
    )
    
    
    (4
    )Curtailment or conclusion effect
    
    
    
    
    
    
    
    
    
    
    (1
    )Unrecognized prior service cost
    
    
    36
    
    
    
    5
    
    
    
    Projected Benefit Obligation at the end of the year (1)
    
    
    161
    
    
    
    99
    
    
    
    68Accumulated benefit Obligation at end of year
    
    
    161
    
    
    
    99
    
    
    
    68Change in plan assetsFair value of plan assets at beginning
    
    
    40
    
    
    
    45
    
    
    
    47Return on plan assets
    
    
    2
    
    
    
    2
    
    
    
    2Benefits paid
    
    
    (7
    )
    
    
    (7
    )
    
    
    (4
    )Fair value of plan assets at the end of the year (2)
    
    
    35
    
    
    
    40
    
    
    
    45Status of the plansFunded (unfunded) status at year end
    
    
    (126
    )
    
    
    (59
    )
    
    
    (23
    )
 (1)
    
    As of December 31, 2006 and 2005, the Projected Benefit Obligation is comprised of 118 and
94 corresponding to the Compensatory Fund, and 43 and 5 corresponding to the indemnity plan,
respectively.(2)
    
    Both for December 31,2006 and 2005 all assets contributed correspond to the Compensatory
Fund (note 15)
 2006
    
    2005
    
    2004Amounts recorded in the consolidated balance sheet consisists of:Total liabilities
    
    
    (126
    )
    
    
    (59
    )
    
    
    (23
    )Intangible Assets
    
    
    
    
    
    
    5
    
    
    
    Cumulative amounts recorded in Accumulated other comprehensive income consists of:Unrecognised prior service cost
    
    
    40
    
    
    
    
    
    
    
    Unrecognized actuarial loss
    
    
    53
    
    
    
    41
    
    
    
    15Total
recored in Accumulated other comprehensive income at year end, before tax
    
    
    93
    
    
    
    41
    
    
    
    15
 2006
    
    2005Reconciliation of amounts recognized in Accumulated other comprehensive incomeAmounts recorded before tax at beginning of year:
    
    
    41
    
    
    
    16Reclasification of Intangible assets due to SFAS 158
    
    
    40
    
    
    
    Change in unrecognized actuarial loss
    
    
    14
    
    
    
    25Amortization of actuarial loss recognized in net periodic benefit costAmounts
recorded before tax at end of year:
    
    
    (2
    )
    
    
    93
    
    
    
    41
 2006
    
    2005
    
    2004Components of net periodic pension benefit costService cost
    
    
    2
    
    
    
    1
    
    
    
    1Interest cost
    
    
    16
    
    
    
    6
    
    
    
    4Return on plan assets
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Amortization of actuarial gain and losses and unrecognized prior service cost
    
    
    2
    
    
    
    
    
    
    
    (1
    )Net periodic benefit cost
    
    
    18
    
    
    
    5
    
    
    
    2Weighted-average assumptionsDiscount rate
    
    
    4
    %
    
    
    4
    %
    
    
    4
    %Rate of return on plan assets
    
    
    6
    %
    
    
    4
    %
    
    
    4
    %Rate of compesation increase
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %
  F-81




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##### Table of Contents



PensionBenefits2007
    
    
    102008
    
    
    112009
    
    
    112010
    
    
    102011
    
    
    112012-2016
    
    
    60
 Adoption of SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans
     Balances prior toSFAS No. 158
    
    
    
    
    
    Balances afterAdoption
    
    Adoption
    
    Adjustments
    
    SFAS No. 158Intangible assets
    
    
    40
    
    
    
    (40
    )
    
    
    Accumulated other comprehensive loss (income)
    
    
    53
    
    
    
    40
    
    
    
    93Liabilities
    
    
    125
    
    
    
    
    
    
    
    125Deferred tax assets
    
    
    30
    
    
    
    14
    
    
    
    44
  F-82




---



##### Table of Contents



Accumulated other comprehensive income (loss), before income taxes
 Pension BenefitsPrior service cost
    
    
    40Net actuarial loss
    
    
    53
 Amounts expected to be recognized in 2007 net periodic benefit cost
 Pension BenefitsPrior service cost
    
    
    2Net actuarial loss
    
    
    3
 f) Business segment consolidated information
  2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    Refining and
    
    
    
    
    
    Transportation of
    
    
    
    
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Gas
    
    Electricity
    
    Eliminations
    
    TotalUnaffiliated
revenues
    
    
    2,653
    
    
    
    4,262
    
    
    
    2,447
    
    
    
    1,202
    
    
    
    1,181
    
    
    
    
    
    
    
    11,745Intersegment
revenues
    
    
    2,128
    
    
    
    269
    
    
    
    43
    
    
    
    184
    
    
    
    26
    
    
    
    (2,650
    )
    
    
    Total revenues
    
    
    4,781
    
    
    
    4,531
    
    
    
    2,490
    
    
    
    1,386
    
    
    
    1,207
    
    
    
    (2,650
    )
    
    
    11,745Depreciation,
depletion and
amortization
    
    
    (720
    )
    
    
    (62
    )
    
    
    (80
    )
    
    
    (93
    )
    
    
    (139
    )
    
    
    (27
    )
    
    
    (1,121
    )Equity in
earnings
of unconsolidated
affiliates
    
    
    89
    
    
    
    114
    
    
    
    15
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    219Interest expense
    
    
    (221
    )
    
    
    (4
    )
    
    
    (25
    )
    
    
    (130
    )
    
    
    (23
    )
    
    
    (208
    )
    
    
    (611
    )Interest revenue
    
    
    35
    
    
    
    
    
    
    
    5
    
    
    
    15
    
    
    
    18
    
    
    
    35
    
    
    
    108Dividends received
from unconsolidated
affiliates
    
    
    35
    
    
    
    76
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116Additions to
property, plant and
equipment
    
    
    1,327
    
    
    
    238
    
    
    
    194
    
    
    
    68
    
    
    
    82
    
    
    
    1
    
    
    
    1,910Identifiable assets
    
    
    6,891
    
    
    
    2,243
    
    
    
    1,659
    
    
    
    2,808
    
    
    
    2,291
    
    
    
    1,322
    
    
    
    17,214Investments in and
advances to
unconsolidated
affiliates
    
    
    2,861
    
    
    
    306
    
    
    
    51
    
    
    
    24
    
    
    
    1
    
    
    
    
    
    
    
    3,243Total assets
    
    
    9,752
    
    
    
    2,549
    
    
    
    1,710
    
    
    
    2,832
    
    
    
    2,292
    
    
    
    1,322
    
    
    
    20,457
  F-83




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##### Table of Contents



2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    Refining and
    
    
    
    
    
    Transportation of
    
    
    
    
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Gas
    
    Electricity
    
    Eliminations
    
    TotalUnaffiliated revenues
    
    
    2,935
    
    
    
    3,572
    
    
    
    2,140
    
    
    
    1,009
    
    
    
    999
    
    
    
    
    
    
    
    10,655Intersegment
revenues
    
    
    1,722
    
    
    
    284
    
    
    
    38
    
    
    
    110
    
    
    
    18
    
    
    
    (2,172
    )
    
    
    Total revenues
    
    
    4,657
    
    
    
    3,856
    
    
    
    2,178
    
    
    
    1,119
    
    
    
    1,017
    
    
    
    (2,172
    )
    
    
    10,655Depreciation,
depletion and
amortization
    
    
    (820
    )
    
    
    (65
    )
    
    
    (69
    )
    
    
    (90
    )
    
    
    (137
    )
    
    
    (28
    )
    
    
    (1,209
    )Equity in earnings
of unconsolidated
affiliates
    
    
    15
    
    
    
    101
    
    
    
    7
    
    
    
    127
    
    
    
    31
    
    
    
    
    
    
    
    281Interest expense
    
    
    (303
    )
    
    
    (5
    )
    
    
    (26
    )
    
    
    (106
    )
    
    
    (1
    )
    
    
    (145
    )
    
    
    (586
    )Interest revenue
    
    
    33
    
    
    
    1
    
    
    
    9
    
    
    
    7
    
    
    
    11
    
    
    
    27
    
    
    
    88Dividends received
from unconsolidated
affiliates
    
    
    22
    
    
    
    40
    
    
    
    7
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    72Additions to
property, plant and
equipment
    
    
    1,047
    
    
    
    177
    
    
    
    95
    
    
    
    72
    
    
    
    60
    
    
    
    70
    
    
    
    1,521Identifiable assets
    
    
    8,839
    
    
    
    1,872
    
    
    
    1,437
    
    
    
    2,695
    
    
    
    2,254
    
    
    
    660
    
    
    
    17,757Investments in and
advances to
unconsolidated
affiliates
    
    
    331
    
    
    
    279
    
    
    
    38
    
    
    
    135
    
    
    
    31

    
    
    
    
    
    
    
    814Total assets
    
    
    9,170
    
    
    
    2,151
    
    
    
    1,475
    
    
    
    2,830
    
    
    
    2,285
    
    
    
    660
    
    
    
    18,571
 2004Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    Marketing andExploration and
    
    Refining and
    
    
    
    
    
    Transportation of
    
    
    
    
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Gas
    
    Electricity
    
    Eliminations
    
    TotalUnaffiliated revenues
    
    
    2,080
    
    
    
    3,085
    
    
    
    1,857
    
    
    
    930
    
    
    
    811
    
    
    
    
    
    
    
    8,763Intersegment revenues
    
    
    1,567
    
    
    
    274
    
    
    
    20
    
    
    
    49
    
    
    
    14
    
    
    
    (1,924
    )
    
    
    Total revenues
    
    
    3,647
    
    
    
    3,359
    
    
    
    1,877
    
    
    
    979
    
    
    
    825
    
    
    
    (1,924
    )
    
    
    8,763Depreciation, depletion and amortization
    
    
    (762
    )
    
    
    (68
    )
    
    
    (71
    )
    
    
    (87
    )
    
    
    (138
    )
    
    
    (30
    )
    
    
    (1,156
    )Equity in earnings of unconsolidated affiliates
    
    
    33
    
    
    
    57
    
    
    
    16
    
    
    
    35
    
    
    
    (39
    )
    
    
    
    
    
    
    102Interest expense
    
    
    (261
    )
    
    
    (1
    )
    
    
    (17
    )
    
    
    (117
    )
    
    
    (22
    )
    
    
    (191
    )
    
    
    (609
    )Interest revenue
    
    
    20
    
    
    
    1
    
    
    
    5
    
    
    
    2
    
    
    
    9
    
    
    
    16
    
    
    
    53Dividends received from unconsolidated affiliates
    
    
    18
    
    
    
    54
    
    
    
    9
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    84Additions to property, plant and equipment
    
    
    864
    
    
    
    72
    
    
    
    86
    
    
    
    50
    
    
    
    62
    
    
    
    14
    
    
    
    1,148Identifiable assets
    
    
    8,473
    
    
    
    1,900
    
    
    
    1,327
    
    
    
    2,571
    
    
    
    2,255
    
    
    
    850
    
    
    
    17,376Investments in and advances to unconsolidated
affiliates
    
    
    352
    
    
    
    214
    
    
    
    42
    
    
    
    119
    
    
    
    45
    
    
    
    
    
    
    
    772Total assets
    
    
    8,825
    
    
    
    2,114
    
    
    
    1,369
    
    
    
    2,690
    
    
    
    2,300
    
    
    
    850
    
    
    
    18,148
  F-84




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##### Table of Contents



g) Significant assumptions
   F-85




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##### Table of Contents



24. Oil and Gas Supplementary Disclosures (Unaudited)
   Capitalized costs
  2006
    
    2005Argentine
    
    
    
    
    
    ArgentineGAAP
    
    US GAAP
    
    GAAP
    
    US GAAP(in millions of constant pesos - note 2.c.)Consolidated companies:Proved properties:Equipment, camps and other facilities
    
    
    2,837
    
    
    
    2,727
    
    
    
    3,642
    
    
    
    3,532Mining properties and wells
    
    
    7,163
    
    
    
    6,069
    
    
    
    9,311
    
    
    
    10,095Unproved properties
    
    
    107
    
    
    
    107
    
    
    
    276
    
    
    
    276Total capitalized costs
    
    
    10,107
    
    
    
    8,903
    
    
    
    13,229
    
    
    
    13,903Accumulated depreciation and allowances
which reduce the value of assets
    
    
    (5,200
    )
    
    
    (3,858
    )
    
    
    (6,316
    )
    
    
    (6,841
    )Subtotal of consolidated companies
    
    
    4,907
    
    
    
    5,045
    
    
    
    6,913
    
    
    
    7,062Companys share in capitalized costs by
unconsolidated affiliates
    
    
    680
    
    
    
    702
    
    
    
    126
    
    
    
    151Total net capitalized costs
    
    
    5,587
    
    
    
    5,747
    
    
    
    7,039
    
    
    
    7,213
 Costs incurred
   F-86




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##### Table of Contents



2006
    
    2005Argentine and US GAAP
    
    Argentine and US GAAPRest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-Argentine
    
    America
    
    Total
    
    Argentine
    
    America
    
    TotalConsolidated companies:Acquisition of properties:- Proved
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Unproved
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    130
    
    
    
    60
    
    
    
    190
    
    
    
    90
    
    
    
    2
    
    
    
    92Development costs
    
    
    665
    
    
    
    589
    
    
    
    1,254
    
    
    
    583
    
    
    
    835
    
    
    
    1,418Subtotal costs incurred
by consolidated companies
    
    
    795
    
    
    
    649
    
    
    
    1,444
    
    
    
    673
    
    
    
    837
    
    
    
    1,510Companys share in costs
incurred by
unconsolidated affiliates
    
    
    9
    
    
    
    55
    
    
    
    64
    
    
    
    10
    
    
    
    3
    
    
    
    13Total costs incurred
    
    
    804
    
    
    
    704
    
    
    
    1,508
    
    
    
    683
    
    
    
    840
    
    
    
    1,523
 2004Argentine and US GAAPRest ofLatin-Argentine
    
    America
    
    TotalConsolidated companies:Acquisition of properties:- Proved
    
    
    
    
    
    
    
    
    
    
    - Unproved
    
    
    
    
    
    
    
    
    
    
    Exploration costs
    
    
    19
    
    
    
    9
    
    
    
    28Development costs
    
    
    477
    
    
    
    556
    
    
    
    1,033Subtotal costs incurred by
consolidated companies
    
    
    496
    
    
    
    565
    
    
    
    1,061Companys share in costs
incurred by unconsolidated
affiliates
    
    
    9
    
    
    
    5
    
    
    
    14Total costs incurred
    
    
    505
    
    
    
    570
    
    
    
    1,075
  F-87




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##### Table of Contents



Results of operations
  2006Argentine GAAP
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total(in millions of constant pesos - note 2.c)Results of operations of consolidated
companies:Net sales:- to third parties
    
    
    566
    
    
    
    2,087
    
    
    
    2,653
    
    
    
    566
    
    
    
    2,087
    
    
    
    2,653- transfers to other operations
    
    
    2,128
    
    
    
    
    
    
    
    2,128
    
    
    
    2,128
    
    
    
    
    
    
    
    2,128Total net sales
    
    
    2,694
    
    
    
    2,087
    
    
    
    4,781
    
    
    
    2,694
    
    
    
    2,087
    
    
    
    4,781Production costs:- Operating costs
    
    
    (484
    )
    
    
    (218
    )
    
    
    (702
    )
    
    
    (484
    )
    
    
    (218
    )
    
    
    (702
    )- Royalties and other
    
    
    (359
    )
    
    
    (684
    )
    
    
    (1,043
    )
    
    
    (359
    )
    
    
    (684
    )
    
    
    (1,043
    )Total production costs
    
    
    (843
    )
    
    
    (902
    )
    
    
    (1,745
    )
    
    
    (843
    )
    
    
    (902
    )
    
    
    (1,745
    )Exploration costs
    
    
    (68
    )
    
    
    (49
    )
    
    
    (117
    )
    
    
    (68
    )
    
    
    (49
    )
    
    
    (117
    )Depreciation, depletion, amortization and
allowances which reduce the value of assets
    
    
    (485
    )
    
    
    (225
    )
    
    
    (710
    )
    
    
    (523
    )
    
    
    (223
    )
    
    
    (746
    )Results of operations before income tax
    
    
    1,298
    
    
    
    911
    
    
    
    2,209
    
    
    
    1,260
    
    
    
    913
    
    
    
    2,173Income tax
    
    
    (454
    )
    
    
    (308
    )
    
    
    (762
    )
    
    
    (441
    )
    
    
    (309
    )
    
    
    (750
    )Results of operations  consolidated companies
    
    
    844
    
    
    
    603
    
    
    
    1,447
    
    
    
    819
    
    
    
    604
    
    
    
    1,423Companys share in results of operations by
unconsolidated affiliates
    
    
    32
    
    
    
    40
    
    
    
    72
    
    
    
    27
    
    
    
    40
    
    
    
    67Total Results of oil and gas operations
    
    
    876
    
    
    
    643
    
    
    
    1,519
    
    
    
    846
    
    
    
    644
    
    
    
    1,490
  F-88




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##### Table of Contents



2005Argentine GAAP
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total(in millions of constant pesos - note 2.c)Results of operations of consolidated
companies:Net sales:- to third parties
    
    
    458
    
    
    
    2,477
    
    
    
    2,935
    
    
    
    458
    
    
    
    2,477
    
    
    
    2,935- transfers to other operations
    
    
    1,722
    
    
    
    
    
    
    
    1,722
    
    
    
    1,722
    
    
    
    
    
    
    
    1,722Total net sales
    
    
    2,180
    
    
    
    2,477
    
    
    
    4,657
    
    
    
    2,180
    
    
    
    2,477
    
    
    
    4,657Production costs:- Operating costs
    
    
    (378
    )
    
    
    (328
    )
    
    
    (706
    )
    
    
    (378
    )
    
    
    (328
    )
    
    
    (706
    )- Royalties and other
    
    
    (306
    )
    
    
    (635
    )
    
    
    (941
    )
    
    
    (306
    )
    
    
    (635
    )
    
    
    (941
    )Total production costs
    
    
    (684
    )
    
    
    (963
    )
    
    
    (1,647
    )
    
    
    (684
    )
    
    
    (963
    )
    
    
    (1,647
    )Exploration costs
    
    
    (32
    )
    
    
    (2
    )
    
    
    (34
    )
    
    
    (32
    )
    
    
    (2
    )
    
    
    (34
    )Depreciation, depletion, amortization and
allowances which reduce the value of assets
    
    
    (506
    )
    
    
    (650
    )
    
    
    (1,156
    )
    
    
    (448
    )
    
    
    (1,720
    )
    
    
    (2,168
    )Results of operations before income tax
    
    
    958
    
    
    
    862
    
    
    
    1,820
    
    
    
    1,016
    
    
    
    (208
    )
    
    
    808Income tax
    
    
    (328
    )
    
    
    (612
    )
    
    
    (940
    )
    
    
    (357
    )
    
    
    (238
    )
    
    
    (595
    )Results of operations  consolidated
companies
    
    
    630
    
    
    
    250
    
    
    
    880
    
    
    
    659
    
    
    
    (406
    )
    
    
    213Companys share in results of operations by
unconsolidated affiliates
    
    
    26
    
    
    
    (11
    )
    
    
    15
    
    
    
    22
    
    
    
    (43
    )
    
    
    (21
    )Total Results of oil and gas operations
    
    
    656
    
    
    
    239
    
    
    
    895
    
    
    
    681
    
    
    
    (489
    )
    
    
    192
  F-89




---



##### Table of Contents



2004Argentine GAAP
    
    US GAAPRest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total(in millions of constant pesos  note 2.c)Results of operations of consolidated
companies:Net sales:- to third parties
    
    
    480
    
    
    
    1,600
    
    
    
    2,080
    
    
    
    480
    
    
    
    1,600
    
    
    
    2,080- transfers to other operations
    
    
    1,567
    
    
    
    
    
    
    
    1,567
    
    
    
    1,567
    
    
    
    
    
    
    
    1,567Total net sales
    
    
    2,047
    
    
    
    1,600
    
    
    
    3,647
    
    
    
    2,047
    
    
    
    1,600
    
    
    
    3,647Production costs:- Operating costs
    
    
    (318
    )
    
    
    (290
    )
    
    
    (608
    )
    
    
    (318
    )
    
    
    (290
    )
    
    
    (608
    )- Royalties and other
    
    
    (339
    )
    
    
    (398
    )
    
    
    (737
    )
    
    
    (339
    )
    
    
    (398
    )
    
    
    (737
    )Total production costs
    
    
    (657
    )
    
    
    (688
    )
    
    
    (1,345
    )
    
    
    (657
    )
    
    
    (688
    )
    
    
    (1,345
    )Exploration costs
    
    
    (50
    )
    
    
    (83
    )
    
    
    (133
    )
    
    
    (50
    )
    
    
    (83
    )
    
    
    (133
    )Depreciation, depletion, amortization and
allowances which reduce the value
of assets
    
    
    (413
    )
    
    
    (336
    )
    
    
    (749
    )
    
    
    (430
    )
    
    
    (447
    )
    
    
    (877
    )Results of operations before income tax
    
    
    926
    
    
    
    493
    
    
    
    1,419
    
    
    
    909
    
    
    
    382
    
    
    
    1,291Income tax
    
    
    (386
    )
    
    
    (155
    )
    
    
    (541
    )
    
    
    (367
    )
    
    
    (117
    )
    
    
    (484
    )Results of operations  consolidated
companies
    
    
    541
    
    
    
    338
    
    
    
    879
    
    
    
    542
    
    
    
    265
    
    
    
    807Companys share in results of operations by
unconsolidated
affiliates
    
    
    17
    
    
    
    6
    
    
    
    23
    
    
    
    14
    
    
    
    4
    
    
    
    18Total Results of oil and gas operations
    
    
    558
    
    
    
    344
    
    
    
    902
    
    
    
    557
    
    
    
    269
    
    
    
    826
  F-90




---



##### Table of Contents



Estimated oil and gas reserves
     F-91




---



##### Table of Contents



CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDSIN THOUSAND OF BARRELS
    
    NATURAL GAS IN MILLION OF CUBIC FEETSCONSOLIDATED
    
    UNCONSOLIDAEDCOMPANIES
    
    COMPANIES
    
    CONSOLIDATED COMPANIES
    
    UNCONSOLIDAED COMPANIESREST OF
    
    
    
    
    
    REST OF
    
    
    
    
    
    
    
    
    
    REST OF
    
    
    
    
    
    REST OFLATIN-
    
    
    
    
    
    LATIN-
    
    
    
    
    
    
    
    
    
    LATIN-
    
    
    
    
    
    LATIN-ARGENTINA
    
    AMERICA
    
    ARGENTINA
    
    AMERICA
    
    TOTAL
    
    ARGENTINA
    
    AMERICA
    
    ARGENTINA
    
    AMERICA
    
    TOTALProved reserves (developed and
undeveloped)Reserves as of December 31,
2003*
    
    
    209,658
    
    
    
    379,424
    
    
    
    6,517
    
    
    
    10,786
    
    
    
    606,385
    
    
    
    932,986
    
    
    
    384,881
    
    
    
    13,323
    
    
    
    
    
    
    
    1,331,190Increase (Decrease)
originated in:Revisions of previous estimates
    
    
    (25,158
    )
    
    
    (4,468
    )
    
    
    (108
    )
    
    
    (1,285
    )
    
    
    (31,019
    )
    
    
    229,305
    
    
    
    (1,749
    )
    
    
    611
    
    
    
    
    
    
    
    228,167Improved recovery
    
    
    2,262
    
    
    
    9,555
    
    
    
    291
    
    
    
    
    
    
    
    12,108
    
    
    
    11,482
    
    
    
    
    
    
    
    699
    
    
    
    
    
    
    
    12,181Extensions and discoveries
    
    
    5,309
    
    
    
    36,966
    
    
    
    
    
    
    
    
    
    
    
    42,275
    
    
    
    7,165
    
    
    
    6,498
    
    
    
    
    
    
    
    
    
    
    
    13,663Purchase of
proved reserves 
in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years production
    
    
    (21,898
    )
    
    
    (24,147
    )
    
    
    (583
    )
    
    
    (365
    )
    
    
    (46,993
    )
    
    
    (95,053
    )
    
    
    (23,643
    )
    
    
    (1,003
    )
    
    
    
    
    
    
    (119,699
    )Reserves as of December 31,
2004* (2)
    
    
    170,173
    
    
    
    397,330
    
    
    
    6,117
    
    
    
    9,136
    
    
    
    582,756
    
    
    
    1,085,885
    
    
    
    365,987
    
    
    
    13,630
    
    
    
    
    
    
    
    1,465,502Increase (Decrease)
originated in:Revisions of previous estimates
    
    
    (7,066
    )
    
    
    4,807
    
    
    
    (99
    )
    
    
    (624
    )
    
    
    (2,982
    )
    
    
    (88,102
    )
    
    
    22,612
    
    
    
    238
    
    
    
    
    
    
    
    (65,252
    )Improved recovery
    
    
    (9,505
    )
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    (9,485
    )
    
    
    12
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    56Extensions and discoveries
    
    
    3,850
    
    
    
    8,762
    
    
    
    232
    
    
    
    
    
    
    
    12,844
    
    
    
    23,541
    
    
    
    13,787
    
    
    
    233
    
    
    
    
    
    
    
    37,561Purchase of
proved reserves in
place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years production
    
    
    (19,272
    )
    
    
    (24,553
    )
    
    
    (617
    )
    
    
    (261
    )
    
    
    (44,703
    )
    
    
    (83,393
    )
    
    
    (22,577
    )
    
    
    (1,225
    )
    
    
    
    
    
    
    (107,195
    )Reserves as of December 31,
2005* (1)
    
    
    138,180
    
    
    
    386,346
    
    
    
    5,653
    
    
    
    8,251
    
    
    
    538,430
    
    
    
    (937,943
    )
    
    
    379,809
    
    
    
    12,920
    
    
    
    
    
    
    
    1,330,672Increase (Decrease)
originated in:Revisions of previous estimates
    
    
    (2,522
    )
    
    
    (257,027
    )
    
    
    (114
    )
    
    
    70,303
    
    
    
    (189,360
    )
    
    
    26,198
    
    
    
    (175,162
    )
    
    
    (934
    )
    
    
    79,120
    
    
    
    (70,778
    )Improved recovery
    
    
    (426
    )
    
    
    4,705
    
    
    
    464
    
    
    
    
    
    
    
    4,743
    
    
    
    156
    
    
    
    6,830
    
    
    
    568
    
    
    
    
    
    
    
    7,554Extensions and discoveries
    
    
    5,510
    
    
    
    6,900
    
    
    
    
    
    
    
    
    
    
    
    12,410
    
    
    
    63,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,595Purchase of
proved reserves in
place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of proved reserves in place
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,541
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years production
    
    
    (19,124
    )
    
    
    (13,391
    )
    
    
    (671
    )
    
    
    (4,560
    )
    
    
    (37,746
    )
    
    
    (90,133
    )
    
    
    (18,155
    )
    
    
    (1,128
    )
    
    
    (1,802
    )
    
    
    (111,218
    )Reserves as
of
December 31, 2006 (*)
    
    
    117,077
    
    
    
    127,533
    
    
    
    5,332
    
    
    
    73,994
    
    
    
    323,936
    
    
    
    937,759
    
    
    
    193,322
    
    
    
    11,426
    
    
    
    77,318
    
    
    
    1,219,825(*)Includes proved developed
reserves:As of December 31, 2003
    
    
    138,607
    
    
    
    166,349
    
    
    
    4,320
    
    
    
    3,576
    
    
    
    312,852
    
    
    
    641,341
    
    
    
    207,144
    
    
    
    10,514
    
    
    
    
    
    
    
    858,999As of December 31, 2004
    
    
    114,654
    
    
    
    165,634
    
    
    
    3,999
    
    
    
    2,485
    
    
    
    286,773
    
    
    
    544,353
    
    
    
    208,436
    
    
    
    9,785
    
    
    
    
    
    
    
    762,574As of December 31, 2005
    
    
    93,980
    
    
    
    174,227
    
    
    
    4,113
    
    
    
    2,000
    
    
    
    274,320
    
    
    
    447,161
    
    
    
    203,255
    
    
    
    10,217
    
    
    
    
    
    
    
    660,633As of December 31, 2006
    
    
    77,826
    
    
    
    66,033
    
    
    
    4,019
    
    
    
    36,702
    
    
    
    184,580
    
    
    
    488,585
    
    
    
    136,771
    
    
    
    9,095
    
    
    
    43,113
    
    
    
    677,564
   F-92




---



##### Table of Contents



Standardized measure of discounted future net cash flows
    F-93




---



##### Table of Contents



2006
    
    2005
    
    2004Rest of
    
    
    
    
    
    
    
    
    
    Rest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total(in millions of pesos - note 2.c.)Consolidated companies:Future cash
flows
    
    
    17,264
    
    
    
    20,460
    
    
    
    37,724
    
    
    
    24,589
    
    
    
    41,868
    
    
    
    66,457
    
    
    
    20,124
    
    
    
    30,131
    
    
    
    50,255Future
production costs
    (6,381
    )
    
    
    (6,954
    )
    
    
    (13,335
    )
    
    
    (6,020
    )
    
    
    (10,133
    )
    
    
    (16,153
    )
    
    
    (5,025
    )
    
    
    (7,228
    )
    
    
    (12,253
    )Future development and abandonment
costs
    
    
    (2,383
    )
    
    
    (2,230
    )
    
    
    (4,613
    )
    
    
    (2,030
    )
    
    
    (4,068
    )
    
    
    (6,098
    )
    
    
    (1,898
    )
    
    
    (3,695
    )
    
    
    (5,593
    )Future income tax
    
    
    (2,310
    )
    
    
    (3,644
    )
    
    
    (5,954
    )
    
    
    (5,298
    )
    
    
    (10,294
    )
    
    
    (15,592
    )
    
    
    (4,099
    )
    
    
    (5,518
    )
    
    
    (9,617
    )Undiscounted future net cash flows
    
    
    6,190
    
    
    
    7,632
    
    
    
    13,822
    
    
    
    11,241
    
    
    
    17,373
    
    
    
    28,614
    
    
    
    9,102
    
    
    
    13,690
    
    
    
    22,79210% annual discount
    
    
    (2,040
    )
    
    
    (3,497
    )
    
    
    (5,537
    )
    
    
    (4,006
    )
    
    
    (7,656
    )
    
    
    (11,662
    )
    
    
    (3,511
    )
    
    
    (6,099
    )
    
    
    (9,610
    )Subtotal of consolidated companies
    
    
    4,150
    
    
    
    4,135
    
    
    
    8,285
    
    
    
    7,235
    
    
    
    9,717
    
    
    
    16,952
    
    
    
    5,591
    
    
    
    7,591
    
    
    
    13,182Companys share in
standardized measure by
unconsolidated affiliates
    
    
    194
    
    
    
    1,450
    
    
    
    1,644
    
    
    
    287
    
    
    
    183
    
    
    
    470
    
    
    
    198
    
    
    
    162
    
    
    
    360Standardized measure of
discounted
future net cash flows
    
    
    4,344
    
    
    
    5,585
    
    
    
    9,929
    
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
    
    
    
    5,789
    
    
    
    7,753
    
    
    
    13,542
   F-94




---



##### Table of Contents



Changes in the standardized measure of discounted future net cash flows
  CONSOLIDATED AND UNCONSOLIDATED COMPANIES2006
    
    2005
    
    2004Rest of
    
    
    
    
    
    
    
    
    
    Rest of
    
    
    
    
    
    
    
    
    
    Rest ofLatin-
    
    
    
    
    
    
    
    
    
    Latin-
    
    
    
    
    
    
    
    
    
    Latin-Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total
    
    Argentina
    
    America
    
    Total(in million of pesos - note 2.c.)Standardized measure at beginning of
year
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
    
    
    
    5,789
    
    
    
    7,753
    
    
    
    13,542
    
    
    
    5,245
    
    
    
    5,328
    
    
    
    10,573Changes related to oil & gas
activities:Hydrocarbons sales net of production costs
    
    
    (1,916
    )
    
    
    (1,563
    )
    
    
    (3,479
    )
    
    
    (1,548
    )
    
    
    (1,825
    )
    
    
    (3,373
    )
    
    
    (1,494
    )
    
    
    (1,147
    )
    
    
    (2,641
    )Net change in sales prices, net of future
production costs
    
    
    (4,114
    )
    
    
    (488
    )
    
    
    (4,602
    )
    
    
    4,168
    
    
    
    4,985
    
    
    
    9,153
    
    
    
    1,999
    
    
    
    2,813
    
    
    
    4,812Changes in future development costs
    
    
    (756
    )
    
    
    (334
    )
    
    
    (1,090
    )
    
    
    (571
    )
    
    
    (879
    )
    
    
    (1,450
    )
    
    
    (521
    )
    
    
    (997
    )
    
    
    (1,518
    )Extensions, discoveries and improved
recovery, net of future production and
associated costs
    
    
    326
    
    
    
    505
    
    
    
    831
    
    
    
    (518
    )
    
    
    282
    
    
    
    (236
    )
    
    
    442
    
    
    
    1,570
    
    
    
    2,012Development costs incurred
    
    
    674
    
    
    
    644
    
    
    
    1,318
    
    
    
    593
    
    
    
    838
    
    
    
    1,431
    
    
    
    486
    
    
    
    561
    
    
    
    1,047Revisions of quantity estimates
    
    
    (155
    )
    
    
    (750
    )
    
    
    (905
    )
    
    
    (579
    )
    
    
    486
    
    
    
    (93
    )
    
    
    (827
    )
    
    
    (40
    )
    
    
    (867
    )Purchase of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sale of reserves in place
    
    
    (323
    )
    
    
    
    
    
    
    (323
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in income taxes
    
    
    2,000
    
    
    
    3,132
    
    
    
    5,132
    
    
    
    (921
    )
    
    
    (2,944
    )
    
    
    (3,865
    )
    
    
    (271
    )
    
    
    (1,248
    )
    
    
    (1,519
    )Accretion of discount
    
    
    1,138
    
    
    
    1,636
    
    
    
    2,774
    
    
    
    868
    
    
    
    1,119
    
    
    
    1,987
    
    
    
    777
    
    
    
    741
    
    
    
    1,518Changes in production rates
    
    
    100
    
    
    
    178
    
    
    
    278
    
    
    
    31
    
    
    
    (218
    )
    
    
    (187
    )
    
    
    (34
    )
    
    
    188
    
    
    
    154Effect of the ending of old contracts
and the signing of the new ones before
tax (Bolivia and Venezuela)
    
    
    
    
    
    
    (7,084
    )
    
    
    (7,084
    )Other changes
    
    
    (152
    )
    
    
    (191
    )
    
    
    (343
    )
    
    
    210
    
    
    
    303
    
    
    
    513
    
    
    
    (13
    )
    
    
    (16
    )
    
    
    (29
    )Standardized measure at end of year
    
    
    4,344
    
    
    
    5,585
    
    
    
    9,929
    
    
    
    7,522
    
    
    
    9,900
    
    
    
    17,422
    
    
    
    5,789
    
    
    
    7,753
    
    
    
    13,542
  25. Subsequent events
 Award of two oil blocks in the Northern area of Argentina.
  Execution of a Stock Purchase Agreement for the Sale of Shareholding in
Hidroneuquén S.A.
   F-95




---



##### Table of Contents



ENRE Resolution No. 50/2007
  Divestment of Citelec
  Acquisition of additional interests in Sierra Chata and Parva Negra areas
  Amendment to Ecuador ́s Hydrocarbons law
  g)
    
    Resolutions adopted by the Regular Shareholders Meeting of Petrobras Energía
Participaciones S.A. held on March 30, 2007
   F-96




---



##### Table of Contents



h)
    
    Public Offering of Notes
  26. Other consolidated information
  a)
    
    Property, plant and equipment.b)
    
    Equity in affiliatesc)
    
    Costs of sales.d)
    
    Foreign currency assets and liabilities.e)
    
    Consolidated detail of expenses incurred and depreciation.f)
    
    Information about ownership in subsidiaries and affiliates.g)
    
    Oil and gas areas and participation in joint ventures.h)
    
    Combined joint ventures and consortium assets, liabilities and results.
  F-97




---



##### Table of Contents



2006Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    Refining
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    and
    
    
    
    
    
    
    
    
    
    Transportation
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Electricity
    
    of Gas
    
    Eliminations
    
    TotalNet book value at
beginning of the
year
    
    
    6,913
    
    
    
    947
    
    
    
    702
    
    
    
    1,863
    
    
    
    2,069
    
    
    
    163
    
    
    
    12,657Effect of translation
    
    
    47
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Net increase
    
    
    1,327
    
    
    
    238
    
    
    
    194
    
    
    
    82
    
    
    
    68
    
    
    
    1
    
    
    
    1,910Deconsolidation of
the assets in
Venezuela
(Note 6)
    
    
    (2,660
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,660
    )Depreciation
    
    
    (720
    )
    
    
    (62
    )
    
    
    (80
    )
    
    
    (139
    )
    
    
    (93
    )
    
    
    (27
    )
    
    
    (1,121
    )Net book value at the
end of the year
    
    
    4,907
    
    
    
    1,123
    
    
    
    821
    
    
    
    1,806
    
    
    
    2,044
    
    
    
    137
    
    
    
    10,838
 2005Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    Refining
    
    
    
    
    
    
    
    
    
    Transportation
    
    Corporate andProduction
    
    and Distribution
    
    Petrochemical
    
    Electricity
    
    of Gas
    
    Eliminations
    
    TotalNet book value at
beginning of the
year
    
    
    6,624
    
    
    
    835
    
    
    
    670
    
    
    
    1,940
    
    
    
    2,087
    
    
    
    121
    
    
    
    12,277Effect of translation
    
    
    62
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Net increase
    
    
    1,047
    
    
    
    177
    
    
    
    95
    
    
    
    60
    
    
    
    72
    
    
    
    70
    
    
    
    1,521Depreciation
    
    
    (820
    )
    
    
    (65
    )
    
    
    (69
    )
    
    
    (137
    )
    
    
    (90
    )
    
    
    (28
    )
    
    
    (1,209
    )Net book value at
the end of the year
    
    
    6,913
    
    
    
    947
    
    
    
    702
    
    
    
    1,863
    
    
    
    2,069
    
    
    
    163
    
    
    
    12,657
 2004Oil and Gas
    
    
    
    
    
    
    
    
    
    Gas and EnergyExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marketing andand
    
    Refining
    
    
    
    
    
    
    
    
    
    Transportation
    
    Corporate andProduction
    
    and Distribution
    
    Petrochemical
    
    Electricity
    
    of Gas
    
    Eliminations
    
    TotalNet book value at
beginning of the
year
    
    
    6,472
    
    
    
    831
    
    
    
    652
    
    
    
    2,016
    
    
    
    2,124
    
    
    
    137
    
    
    
    12,232Effect of translation
    
    
    50
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Net increase
    
    
    864
    
    
    
    72
    
    
    
    86
    
    
    
    62
    
    
    
    50
    
    
    
    14
    
    
    
    1,148Depreciation
    
    
    (762
    )
    
    
    (68
    )
    
    
    (71
    )
    
    
    (138
    )
    
    
    (87
    )
    
    
    (30
    )
    
    
    (1,156
    )Net book value at
the end of the year
    
    
    6,624
    
    
    
    835
    
    
    
    670
    
    
    
    1,940
    
    
    
    2,087
    
    
    
    121
    
    
    
    12,277
  F-98




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##### Table of Contents



12/31/2006
    
     12/31/2005Description of securitiesFace
    
    
    
    
    
    
    
    
    
    Book
    
    BookName and issuer
    
    Value
    
    Amount
    
    Cost
    
    value
    
    valueCitelec S.A.(Note9.II.c)
    
    $
    1
    
    
    
    73,154,437
    
    
    
    
    
    
    
    
    
    
    
    Coroil S.A.
    
    Bs     1,000
    
    
    490
    
    
    
    48
    
    
    
    48
    
    
    
    46Petrobras Bolivia Refinacion S.A.
    
    $B
    11,000
    
    
    
    178,752
    
    
    
    103
    
    
    
    183
    
    
    
    177Hidroneuquen S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Inversora Mata S.A.
    
    Bs      1,000
    
    
    490
    
    
    
    94
    
    
    
    94
    
    
    
    95Oleoducto de Crudos Pesados Ltd.
    
    U$S
    0.01
    
    
    
    31,500
    
    
    
    98
    
    
    
    96
    
    
    
    95Oleoductos
del Valle S.A.
    
    $
    10
    
    
    
    2,542,716
    
    
    
    64
    
    
    
    64
    
    
    
    65Petrolera
Entre Lomas S.A.
    
    $
    1
    
    
    
    96,050
    
    
    
    68
    
    
    
    68
    
    
    
    55Petroquimica Cuyo S.A.
    
    $
    0.083
    
    
    
    240,000,000
    
    
    
    51
    
    
    
    51
    
    
    
    39Refineria del Norte S.A.
    
    $
    10
    
    
    
    2,610,809
    
    
    
    63
    
    
    
    123
    
    
    
    102Transportadora de Gas del Sur S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost related with CIESA S.Areestructuring (Note 9 .IV)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    110TGS S.A. goodwill in CIESA S.A.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    25Yacylec S.A.
 
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Reserve for impairment of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    (36
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    589
    
    
    
    837
    
    
    
    814
  F-99




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##### Table of Contents



2006Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    MarketingExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    andand
    
    Refining and
    
    
    
    
    
    
    
    
    
    Transportation
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Electricity
    
    of Gas
    
    Eliminations
    
    TotalInventories at
the beginning of the
year
    
    
    165
    
    
    
    527
    
    
    
    263
    
    
    
    42
    
    
    
    10
    
    
    
    (146
    )
    
    
    861Effect of traslation
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Costs (Section e)
    
    
    2,017
    
    
    
    205
    
    
    
    245
    
    
    
    271
    
    
    
    682
    
    
    
    
    
    
    
    3,420Holding gain (losses)
    
    
    (1
    )
    
    
    17
    
    
    
    18
    
    
    
    1
    
    
    
    (3
    )
    
    
    (7
    )
    
    
    25Purchases,
consumption and
other
    
    
    95
    
    
    
    4,535
    
    
    
    1,974
    
    
    
    589
    
    
    
    368
    
    
    
    (2,650
    )
    
    
    4,911Inventories at the
end of the year
    
    
    (159
    )
    
    
    (569
    )
    
    
    (318
    )
    
    
    (40
    )
    
    
    (7
    )
    
    
    124
    
    
    
    (969
    )Costs of sales
    
    
    2,119
    
    
    
    4,715
    
    
    
    2,183
    
    
    
    863
    
    
    
    1,050
    
    
    
    (2,679
    )
    
    
    8,251
 2005Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    MarketingExploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    andand
    
    Refining and
    
    
    
    
    
    
    
    
    
    Transportation
    
    Corporate andProduction
    
    Distribution
    
    Petrochemical
    
    Electricity
    
    of Gas
    
    Eliminations
    
    TotalInventories at the
beginning of the
year
    
    
    130
    
    
    
    331
    
    
    
    278
    
    
    
    33
    
    
    
    3
    
    
    
    (77
    )
    
    
    698Effect of traslation
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Costs (Section e)
    
    
    1,884
    
    
    
    151
    
    
    
    171
    
    
    
    275
    
    
    
    507
    
    
    
    
    
    
    
    2,988Holding gain (losses)
    
    
    (6
    )
    
    
    88
    
    
    
    (6
    )
    
    
    (10
    )
    
    
    
    
    
    
    (26
    )
    
    
    40Purchases,
consumption and
other
    
    
    178
    
    
    
    3,706
    
    
    
    1,621
    
    
    
    501
    
    
    
    349
    
    
    
    (2,175
    )
    
    
    4,180Inventories at the
end of the year
    
    
    (165
    )
    
    
    (527
    )
    
    
    (263
    )
    
    
    (42
    )
    
    
    (10
    )
    
    
    146
    
    
    
    (861
    )Costs of sales
    
    
    2,022
    
    
    
    3,749
    
    
    
    1,801
    
    
    
    757
    
    
    
    849
    
    
    
    (2,132
    )
    
    
    7,046
 2004Gas and EnergyOil and Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hydrocarbons
    
    Corporate,Exploration
    
    
    
    
    
    
    
    
    
    
    
    
    
    Marketing
    
    Other Discontinuedand
    
    
    
    
    
    
    
    
    
    
    
    
    
    and
    
    Investments andProduction
    
    Refining
    
    Petrochemical
    
    Electricity
    
    Transportation
    
    Eliminations
    
    TotalInventories at
the beginning of the
year
    
    
    114
    
    
    
    255
    
    
    
    155
    
    
    
    35
    
    
    
    8
    
    
    
    (57
    )
    
    
    510Effect of traslation
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Costs (Section e)
    
    
    1,667
    
    
    
    136
    
    
    
    163
    
    
    
    296
    
    
    
    319
    
    
    
    
    
    
    
    2,581Holding gain (losses)
    
    
    (9
    )
    
    
    23
    
    
    
    37
    
    
    
    (17
    )
    
    
    
    
    
    
    4
    
    
    
    38Purchases,
consumption and
other
    
    
    94
    
    
    
    3,020
    
    
    
    1,426
    
    
    
    347
    
    
    
    387
    
    
    
    (1,923
    )
    
    
    3,351Inventories at the
end of the year
    
    
    (130
    )
    
    
    (331
    )
    
    
    (278
    )
    
    
    (33
    )
    
    
    (3
    )
    
    
    77
    
    
    
    (698
    )Costs of sales
    
    
    1,735
    
    
    
    3,103
    
    
    
    1,503
    
    
    
    628
    
    
    
    711
    
    
    
    (1,899
    )
    
    
    5,781
  F-100




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##### Table of Contents



d) Foreign currency assets and liabilities as of December 31, 2006 and 2005.
 (Stated in millions of Argentine Pesos  See Note 2.c)
 Book amountForeign currency and
    
    Exchange
    
    in localamount
    
    rate
    
    currencyCURRENT ASSETSCash
    
    

    US$
    7
    
    
    
    3.0700
    
    
    
    21Eu
    

    
    
    
    
    4.0454
    
    
    
    BS
    

    5,602
    
    
    
    0.0014
    
    
    
    8Rs
    

    6
    
    
    
    1.4361
    
    
    
    938Investments
    
    

    US$
    

    367
    
    
    
    3.0700
    
    
    
    1,127Rs
    

    13
    
    
    
    1.4361
    
    
    
    19l,146Trade receivables
    
    

    US$
    


    213
    
    
    
    3.0700
    
    
    
    654Rs
    

    86
    
    
    
    1.4361
    
    
    
    124Eu
    

    1
    
    
    
    4.0454
    
    
    
    6BS
    

    2,801
    
    
    
    0.0014
    
    
    
    4788Other receivables
    
    

    US$
    


    176
    
    
    
    3.0700
    
    
    
    539BS
    
    83,333
    
    
    
    0.0014
    
    
    
    119Rs
    

    8
    
    
    
    1.4361
    
    
    
    12670TOTAL 2006
    
    
    
    
    
    
    2,642TOTAL 2005
    
    
    
    
    
    
    2,106NON-CURRENT ASSETSTrade receivables
    
    
    US$
    

    3
    
    
    
    3.0700
    
    
    
    10Other receivables
    
    

    US$
    

    4
    
    
    
    3.0700
    
    
    
    13Rs
    

    29
    
    
    
    1 .4361
    
    
    
    4154Investments
    
    

    US$
    


    95
    
    
    
    3.0700
    
    
    
    292TOTAL 2006
    
    
    
    
    
    
    356TOTAL 2005
    
    
    
    
    
    
    163TOTAL ASSETS
    
    
    
    


    2006
    
    
    
    
    
    
    
    2,9982005
    
    
    
    
    
    
    
    2,269
 Bookamount inForeign currency and
    
    Exchange
    
    localamount
    
    rate
    
    currencyCURRENT LIABILITIESAccounts payable
    
    
    US$
    
    277
    
    
    
    3.0700
    
    
    
    849Rs

    
    15
    
    
    
    1.4361
    
    
    
    21BS
    

    55,322
    
    
    
    0.0014
    
    
    
    79Sol

    
    2
    
    
    
    0.9196
    
    
    
    2951Short-term debt
    
    
    US$
    
    811
    
    
    
    3.0700
    
    
    
    2,490Bs
    

    18,207
    
    
    
    0.0014
    
    
    
    262,516Payroll and social
    
    
    Sol
    

    3
    
    
    
    0.9196
    
    
    
    3security taxes
    
    
    BS
    

    
    
    
    
    0.0014
    
    
    
 Rs
    

    7
    
    
    
    1.4361
    
    
    
    10US$
    
    11
    
    
    
    3.0700
    
    
    
    3346Taxes payable
    
    

    US$
    
    
    
    
      
    3.0700
    
    
    
    Rs
    

    6
    
    
    
    1.4361
    
    
    
    9BS

    
    4,902
    
    
    
    0.0014
    
    
    
    716Other liabilities
    
    
    Rs

    
    1
    
    
    
    1.4361
    
    
    
    1US$
    
    32
    
    
    
    3.0700
    
    
    
    9899TOTAL 2006
    
    
    
    
    
    
    3,628TOTAL 2005
    
    
    
    
    
    
    3,019NON- CURRENT LIABILITIESAccounts payable
    
    

    US$
    
    2
    
    
    
    3.0700
    
    
    
    6Long-term debt
    
    

    US$
    
    1,426
    
    
    
    3.0700
    
    
    
    4,379Taxes payable
    
    
    U$S
    

    80
    
    
    
    3.0700
    
    
    
    246Rs
    

    54
    
    
    
    1.4361
    
    
    
    77323Other liabilities
    
    

    US$
    
    109
    
    
    
    3.0700
    
    
    
    334TOTAL 2006
    
    
    
    
    
    
    5,042TOTAL 2005
    
    
    
    
    
    
    6,047TOTAL LIABILITIES
    
    
    
    
    

    2006
    
    
    
    
    
    
    
    8,6702005
    
    
    
    
    
    
    
    9,066
 US$
    
    Millions of American DollarsBS
    
    Millions of BolivaresRS
    
    Millions of RealesSol
    
    Millions of Peruvian SolesEU
    
    Millions of Euros
  F-101




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##### Table of Contents



2004
    

2005
    
    2006Administrativeand selling
    
    ExplorationAccounts
    
    Total
    
    Total
    
    Total
    
    Costs
    
    expenses
    
    expensesSalaries and wages
    
    
    354
    
    
    
    435
    
    
    
    531
    
    
    
    230
    
    
    
    301
    
    
    
    Social security taxes
    
    
    47
    
    
    
    72
    
    
    
    96
    
    
    
    42
    
    
    
    54
    
    
    
    Other benefits to personnel
    
    
    111
    
    
    
    128
    
    
    
    166
    
    
    
    58
    
    
    
    108
    
    
    
    Taxes, charges and contributions
    
    
    84
    
    
    
    42
    
    
    
    96
    
    
    
    82
    
    
    
    13
    
    
    
    1Fees and professional advisory
    
    
    116
    
    
    
    100
    
    
    
    110
    
    
    
    33
    
    
    
    76
    
    
    
    1Depreciation of property, plant
and equipment
    
    
    1,156
    
    
    
    1,209
    
    
    
    1,121
    
    
    
    1,030
    
    
    
    91
    
    
    
    Amortization of other assets
    
    
    14
    
    
    
    14
    
    
    
    8
    
    
    
    1
    
    
    
    7
    
    
    
    Oil and gas royalties
    
    
    390
    
    
    
    507
    
    
    
    716
    
    
    
    716
    
    
    
    
    
    
    
    Spares and repairs
    
    
    138
    
    
    
    129
    
    
    
    158
    
    
    
    149
    
    
    
    9
    
    
    
    Geological and geophysical
expenses
    
    
    7
    
    
    
    34
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    32Transportation and freights
    
    
    252
    
    
    
    293
    
    
    
    332
    
    
    
    37
    
    
    
    295
    
    
    
    Construction contracts and
other services
    
    
    446
    
    
    
    466
    
    
    
    520
    
    
    
    388
    
    
    
    132
    
    
    
    Impairment of unproved oil and
gas properties
    
    
    119
    
    
    
    16
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78Fuel, gas, energy and other
    
    
    51
    
    
    
    68
    
    
    
    71
    
    
    
    61
    
    
    
    10
    
    
    
    Other operating costs and
consumption
    
    
    361
    
    
    
    557
    
    
    
    694
    
    
    
    600
    
    
    
    89
    
    
    
    5Recovery of expenses
    
    
    (85
    )
    
    
    (107
    )
    
    
    (98
    )
    
    
    (7
    )
    
    
    (91
    )
    
    
    
    
    
    
    Total 2006
    
    
    
    
    
    
    
    
    
    
    4,631
    
    
    
    3,420
    
    
    
    1,094
    
    
    
    117Total 2005
    
    
    
    
    
    
    3,963
    
    
    
    
    
    
    
    2,988
    
    
    
    941
    
    
    
    34Total 2004
    
    
    3,561
    
    
    
    
    
    
    
    
    
    
    
    2,581
    
    
    
    847
    
    
    
    133
  F-102




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##### Table of Contents



% OF OWNERSHIP AND VOTES
    
    
    BUSINESS SEGMENTDIRECT
    
    
    INDIRECTSubsidiariesCorod
Producción S.A. (Venezuela)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionEcuadortlc S.A. (Ecuador)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionEnecor S.A.
    
    
    
    
    
    
    53.07
    
    
    Gas and EnergyEG3 Asfalto S.A.
    
    
    
    
    
    
    75.17
    
    
    Refining and DistributionEG3 Red S.A.
    
    
    
    
    
    
    75.82
    
    
    Refining and DistributionInnova S.A. (Brasil)
    
    
    
    
    
    
    75.82
    
    
    PetrochemicalPetrobras
Energía de México S.A. de C.V. (México)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras Finance Bermuda (Islas Bermudas)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Holding Austria AG (Austria)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras de
Valores Internacional de España S.A. (España)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía S.A.
    
    
    75.82
    
    
    
    
    
    
    CorporatePetrobras
Energía Internacional S.A.
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía Operaciones S.A. (Ecuador)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras Financial Services Austria GMBH (Austria)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras
Hispano Argentina S.A. (España)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras
Bolivia Internacional S.A. (Bolivia)
    
    
    
    
    
    
    75.82
    
    
    CorporatePetrobras Energía Ecuador (Gran Cayman)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras
Energía Perí S.A. (Perú)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrobras Energía Venezuela S.A. (Venezuela)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionPetrolera San Carlos S.A. (Venezuela)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionTransporte y Servicios de Gas en Uruguay S.A. (Uruguay)
    
    
    
    
    
    
    48.94
    
    
    Gas and EnergyWorld Energy Business S.A.
    
    
    
    
    
    
    75.82
    
    
    Gas and EnergyElectricidade Com S.A. (Brasil)
    
    
    
    
    
    
    75.82
    
    
    Gas and EnergyPetrobras Energía Colombia (Gran Cayman)
    
    
    
    
    
    
    75.82
    
    
    Oil and Gas Exploration and ProductionWorld Fund Financial Services (Gran Cayman)
    
    
    
    
    
    
    75.82
    
    
    CorporateMain affiliates  join controlCía. de Inversiones de Energía S.A.
    
    
    
    
    
    
    37.91
    
    
    Gas and EnergyCitelec S.A.
    
    
    
    
    
    
    37.91
    
    
    Gas and EnergyDistrilec Inversora S.A.
    
    
    
    
    
    
    36.77
    
    
    Gas and EnergyEdesur S.A.
    
    
    
    
    
    
    20.72
    
    
    Gas and EnergyTransba S.A.
    
    
    
    
    
    
    18.31
    
    
    Gas and EnergyTransener S.A.
    
    
    
    
    
    
    20.35
    
    
    Gas and EnergyTransportadora de Gas del Sur S.A.
    
    
    
    
    
    
    20.96
    
    
    Gas and EnergyMain affiliates  significance influenceCoroil S.A. (Venezuela)
    
    
    
    
    
    
    37.15
    
    
    Oil and Gas Exploration and ProductionPetrobras
Bolivia Refinación S.A. (Bolivia)
    
    
    
    
    
    
    37.15
    
    
    Refining and DistributionOleoducto de Crudos Pesados Ltd. (Gran Cayman)
    
    
    
    
    
    
    8.66
    
    
    Oil and Gas Exploration and ProductionOleoducto de Crudos Pesados S.A. (Ecuador)
    
    
    
    
    
    
    8.66
    
    
    Oil and Gas Exploration and ProductionInversora Mata S.A. (Venezuela)
    
    
    
    
    
    
    37.15
    
    
    Oil and Gas Exploration and ProductionOleoductos del Valle S.A.
    
    
    
    
    
    
    17.51
    
    
    Oil and Gas Exploration and ProductionPropyme S.G.R
    
    
    
    
    
    
    37.91
    
    
    CorporatePetrolera Entre Lomas S.A.
    
    
    
    
    
    
    14.56
    
    
    Oil and Gas Exploration and ProductionPetroquímica Cuyo S.A.
    
    
    
    
    
    
    30.33
    
    
    PetrochemicalRefinería del Norte S.A.
    
    
    
    
    
    
    21.61
    
    
    Refining and DistributionUrugua-í S.A.
    
    
    
    
    
    
    22.24
    
    
    Gas and EnergyYacylec S.A.
    
    
    
    
    
    
    16.85
    
    
    Gas and EnergyPetroven-Bras S.A.
    
    
    
    
    
    
    26.15
    
    
    Oil and Gas Exploration and ProductionPetrokariña S.A.
    
    
    
    
    
    
    26.15
    
    
    Oil and Gas Exploration and ProductionPetrowayu S.A.
    
    
    
    
    
    
    27.30
    
    
    Oil and Gas Exploration and ProductionPetroritupano S.A.
    
    
    
    
    
    
    16.68
    
    
    Oil and Gas Exploration and ProductionOther subsidiariesHidroneuquén S.A. (see Note 25)
    
    
    
    
    
    
    6.97
    
    
    Gas and EnergyTernoélectrica
José de San Martín S.A.
    
    
    
    
    
    
    6.07
    
    
    Gas and EnergyTernoeléctrica Manuel Belgrano S.A.
    
    
    
    
    
    
    6.07
    
    
    Gas and Energy
  F-103




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##### Table of Contents



WORKING
    
    
    
    
    DURATIONNAME
    
    LOCATION
    
    INTEREST (2)
    
    
    OPERATOR
    
    THROUGHProductionArgentina25 de Mayo  Medanito S.E.
    
    La Pampa and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2016Jagiiel de los Machos
    
    La Pampa and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2015Puesto
Hernández
    
    Mendoza and Neuquén
    
    
    38.45
    %
    
    Petrobras Energía
    
    2016Bajada del Palo  La Amarga Chica
    
    Neuquén
    
    
    80.00
    %
    
    Petrobras Energía
    
    2015Santa Cruz II
    
    Santa Cruz
    
    
    100.00
    %
    
    Petrobras Energía
    
    2017 / 2024Río Neuquén
    
    Neuquén and Río Negro
    
    
    100.00
    %
    
    Petrobras Energía
    
    2017Entre Lomas
    
    Neuquén and Río Negro
    
    
    17.90
    %
    
    Petrolera Entre Lomas
    
    2016Aguada de la Arena
    
    Neuquén
    
    
    80.00
    %
    
    Petrobras Energía
    
    2022Veta
Escondida y Rincón de Aranda
    
    Neuquén
    
    
    55.00
    %
    
    Petrobras Energía
    
    2016Santa Cruz I
    
    Santa Cruz
    
    
    71.00
    %
    
    Petrobras Energía
    
    2016 / 2023Sierra Chata (7)
    
    Neuquén
    
    
    19.89
    %
    
    Petrobras Energía
    
    2022El Mangrullo
    
    Neuquén
    
    
    100.00
    %
    
    Petrobras Energía
    
    2025Atuel Norte
    
    Mendoza
    
    
    33.33
    %
    
    Tecpetrol
    
    2016La Tapera  Puesto Quiroga
    
    Chubut
    
    
    21.95
    %
    
    Tecpetrol
    
    2016El Tordillo
    
    Chubut
    
    
    21.95
    %
    
    Tecpetrol
    
    2016Aguaragiie
    
    Salta
    
    
    15.00
    %
    
    Tecpetrol
    
    2017/2021ForeignColpa  Caranda
    
    Bolivia
    
    
    100.00
    %
    
    Petrobras Energía
    
    2029Oritupano  Leona
    
    Venezuela
    
    
    22.00
    %
    
    PDVSA (5)
    
    2025Acema
    
    Venezuela
    
    
    34.49
    %
    
    PDVSA (5)
    
    2025La
Concepción
    
    Venezuela
    
    
    36.00
    %
    
    PDVSA (5)
    
    2025Mata
    
    Venezuela
    
    
    34.49
    %
    
    PDVSA (5)
    
    2025Lote X
    
    Perú
    
    
    100.00
    %
    
    Petrobras Energía Perú
    
    2024Block 18 (4)
    
    Ecuador
    
    
    70.00
    %
    
    Ecuadortlc
    
    2022Block 31 (4)
    
    Ecuador
    
    
    100.00
    %
    
    Petrobras Energía Ecuador
    
    2024ExplorationArgentinaGlencross
    
    Santa Cruz
    
    
    87.00
    %
    
    Petrobras Energía
    
    (1)Agua Fresca
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Puesto Oliverio
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Cerrito Oeste
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)El Campamento
    
    Santa Cruz
    
    
    50.00
    %
    
    Petrobras Energía
    
    (1)Cerro Hamaca
    
    Mendoza
    
    
    39.64
    %
    
    Petrobras Energía
    
    (1)Gobernardor Ayala
    
    La Pampa
    
    
    22.51
    %
    
    Petrobras Energía
    
    (1)Cañadón del Puma
    
    Neuquén
    
    
    50.00
    %
    
    Chevron San Jorge
    
    2008Parva Negra (7)
    
    Neuquén
    
    
    47.63
    %
    
    Petrobras Energía
    
    (1)Cerro Manrique (3)
    
    Rio Negro
    
    
    50.00
    %
    
    Petrobras Energía
    
    Estancia
Chiripá
    
    Santa Cruz
    
    
    87.00
    %
    
    Petrobras Energía
    
    (1)Enarsa 1 (El)
    
    Argentine continental shelf
    
    
    25.00
    %
    
    YPF
    
    Enarsa 3 (E3)
    
    Argentine continental shelf
    
    
    35.00
    %
    
    Petrobras Energía
    
    Chirete (6)
    
    Salta
    
    
    100.00
    %
    
    Petrobras Energía
    
    2010Hickmann (6)
    
    Salta
    
    
    50.00
    %
    
    Tecpetrol
    
    2011ForeignTinaco
    
    Venezuela
    
    
    50.00
    %
    
    Petrobras Energía Venezuela
    
    2007Lot 57
    
    Perú
    
    
    35.15
    %
    
    Petrobras Energía Perú
    
    2008Lot 58
    
    Perú
    
    
    100.00
    %
    
    Petrobras Energía Perú
    
    2007Lot 103
    
    Perú
    
    
    30.00
    %
    
    Petrobras Energía Perú
    
    2008Lot 110
    
    Perú
    
    
    100.00
    %
    
    Petrobras Energía Perú
    
    2007Lot 112
    
    Perú
    
    
    100.00
    %
    
    Petrobras Energía Perú
    
    2007Lot 117
    
    Perú
    
    
    100.00
    %
    
    Petrobras Energía Perú
    
    2008
 (1)
    
    The granting of the concession is under progress and the term will be 25 years from such granting.(2)
    
    Indirect interest through
Petrobras Energía and its subsidiaries.(3)
    
    The granting of the lots exploitation concession is under progress.(4)
    
    See Note 6  Operations in Ecuador.(5)
    
    See Note 6  Operations in Venezuela.(6)
    
    See Note 25 a.(7)
    
    See Note 25 e.
  F-104




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##### Table of Contents



2006
    
    
    2005Assets and liabilitiesCurrent assets
    
    
    647
    
    
    
    708Non-current assets
    
    
    1,656
    
    
    
    3,722Total assets
    
    
    2,303
    
    
    
    4,430Current liabilities
    
    
    724
    
    
    
    909Non-current liabilities
    
    
    65
    
    
    
    84Total liabilities
    
    
    789
    
    
    
    993
 2006
    
    
    2005
    
    
    2004Statement of incomeNet sales
    
    
    1,686
    
    
    
    2,105
    
    
    
    1,437Costs of sales
    
    
    (634
    )
    
    
    (878
    )
    
    
    (746
    )Gross profit
    
    
    1,052
    
    
    
    1,227
    
    
    
    691Administrative and selling expenses
    
    
    (102
    )
    
    
    (92
    )
    
    
    (93
    )Exploration expenses
    
    
    (42
    )
    
    
    (20
    )
    
    
    (9
    )Other operating (expenses) income
    
    
    (93
    )
    
    
    (219
    )
    
    
    (111
    )Financial (expenses) income and holding
(losses) gains
    
    
    (49
    )
    
    
    (160
    )
    
    
    91Income tax provision
    
    
    (146
    )
    
    
    (98
    )
    
    
    (22
    )Net income
    
    
    620
    
    
    
    638
    
    
    
    547
  F-105




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##### Table of Contents



REFINERÍA DEL NORTE S.A
 STATEMENTS OF INCOME
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
  Unaudited2005
    
    2004
    
    2003NET SALES (Note 3.h)
    
    
    1,429,111
    
    
    
    1,090,540
    
    
    
    881,680COST OF SALES (Note 3.i)
    
    
    (1,068,411
    )
    
    
    (766,726
    )
    
    
    (617,883
    )Gross profit
    
    
    360,700
    
    
    
    323,814
    
    
    
    263,797ADMINISTRATIVE EXPENSES (Exhibit II)
    
    
    (35,984
    )
    
    
    (31,364
    )
    
    
    (28,202
    )SELLING EXPENSES (Exhibit II)
    
    
    (78,911
    )
    
    
    (72,816
    )
    
    
    (65,057
    )OTHER EXPENSES
    
    
    (1,152
    )
    
    
    (3,464
    )
    
    
    (3,215
    )FINANCIAL INCOME (EXPENSE) AND
HOLDING GAINS (LOSSES) (Note 3.j)
    
    
    6,694
    
    
    
    4,739
    
    
    
    (9,803
    )OTHER INCOME, NET (Note 3.k)
    
    
    4,094
    
    
    
    2,828
    
    
    
    3,019Income before income tax
    
    
    255,441
    
    
    
    223,737
    
    
    
    160,539INCOME TAX (Note 3.l)
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )Net income for the year
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927
   F-106




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004
 Unaudited2005
    
    2004ASSETSCURRENT ASSETSCash
    
    
    2,301
    
    
    
    1,438Investments (Note 3.a)
    
    
    4,444
    
    
    
    55,696Trade receivables (Note 3.b)
    
    
    175,509
    
    
    
    131,640Other receivables (Note 3.c)
    
    
    65,983
    
    
    
    29,014Inventories (Note 3.d)
    
    
    105,037
    
    
    
    94,826Total current assets
    
    
    353,274
    
    
    
    312,614NONCURRENT ASSETSInvestments (Note 2.III.a)
    
    
    3
    
    
    
    Trade receivables
    
    
    3,292
    
    
    
    3,438Other receivables (Note 3.c)
    
    
    9,876
    
    
    
    8,847Materials and spare parts
    
    
    18,574
    
    
    
    13,725Property, plant and equipment (Exhibit I)
    
    
    371,323
    
    
    
    362,624Intangible assets
    
    
    2,392
    
    
    
    2,215Total noncurrent assets
    
    
    405,460
    
    
    
    390,849Total assets
    
    
    758,734
    
    
    
    703,463LIABILITIESCURRENT LIABILITIESAccounts payable (Note 3.e)
    
    
    224,904
    
    
    
    190,674Loans (Note 3.f)
    
    
    79,568
    
    
    
    77,291Payroll and social security taxes
    
    
    6,584
    
    
    
    4,604Taxes payable (Note 3.g)
    
    
    31,518
    
    
    
    40,820Total current liabilities
    
    
    342,574
    
    
    
    313,389NONCURRENT LIABILITIESOther liabilities (Exhibit V)
    
    
    11,652
    
    
    
    10,429Total noncurrent liabilities
    
    
    11,652
    
    
    
    10,429Total liabilities
    
    
    354,226
    
    
    
    323,818SHAREHOLDERS EQUITY(as per related statements)
    
    
    404,508
    
    
    
    379,645758,734
    
    
    
    703,463
   F-107




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
 
 STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
  Unaudited2005
    
    2004
    
    2003Shareholderscontributions
    
    Retained earningsAdjustment
    
    
    
    
    
    
    
    
    
    UnappropriatedCapital
    
    to capital
    
    Legal
    
    Voluntary
    
    retainedstock
    
    stock
    
    reserve
    
    reserve
    
    earnings
    
    Total
    
    Total
    
    TotalBalances at beginning of
the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    15,436
    
    
    
    44,937
    
    
    
    97,475
    
    
    
    379,645
    
    
    
    354,324
    
    
    
    311,410Decisions of the Regular
Shareholders Meetings of
March 24, 2003, December
15, 2003, April 1, 2004,
April 15, 2005, and
December 15, 2005:- Earnings distribution:to cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,937
    )
    
    
    (90,440
    )
    
    
    (135,377
    )
    
    
    (115,381
    )
    
    
    (55,013
    )to legal reserve
    
    
    
    
    
    
    
    
    
    
    7,035
    
    
    
    
    
    
    
    (7,035
    )
    
    
    
    
    
    
    
    
    
    
    Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,240
    
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927Balances at end of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    22,471
    
    
    
    
    
    
    
    160,240
    
    
    
    404,508
    
    
    
    379,645
    
    
    
    354,324
   F-108




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REFINERÍA DEL NORTE S.A.
STATEMENTS OF CASH FLOWS (1)
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 Unaudited2005
    
    2004
    
    2003Cash provided by operations:Net income for the year
    
    
    160,240
    
    
    
    140,702
    
    
    
    97,927Adjustments to reconcile the net income for the year
to the cash provided by operations:Income tax accrued
    
    
    95,201
    
    
    
    83,035
    
    
    
    62,612Income tax paid
    
    
    (89,151
    )
    
    
    (95,486
    )
    
    
    (15,549
    )Depreciation of property, plant and equipment
    
    
    33,978
    
    
    
    32,878
    
    
    
    28,192Property, plant and equipment retirements
    
    
    190
    
    
    
    2,781
    
    
    
    1,190Intangible assets amortization
    
    
    922
    
    
    
    872
    
    
    
    890Reestimation of provisions and reserves
    
    
    3,954
    
    
    
    (3,222
    )
    
    
    (1,847
    )Interest accrued
    
    
    4,436
    
    
    
    4,743
    
    
    
    9,237Interest paid
    
    
    (2,388
    )
    
    
    (5,135
    )
    
    
    (12,389
    )Inventory holding (gains) losses
    
    
    (14,388
    )
    
    
    (11,060
    )
    
    
    5,706Consumption of materials and spare parts
    
    
    6,189
    
    
    
    6,465
    
    
    
    4,843Compensation for contractual breach
    
    
    (8,519
    )
    
    
    
    
    
    
    Other financial income, net
    
    
    1,243
    
    
    
    2,021
    
    
    
    13,824Changes in assets and liabilitiesTrade receivables
    
    
    (43,735
    )
    
    
    (35,040
    )
    
    
    12,182Other receivables
    
    
    (29,479
    )
    
    
    (13,300
    )
    
    
    8,289Inventories
    
    
    (6,861
    )
    
    
    12,739
    
    
    
    (31,781
    )Accounts payable
    
    
    34,230
    
    
    
    67,615
    
    
    
    (24,683
    )Payroll and social security taxes and taxes payable
    
    
    (16,478
    )
    
    
    3,690
    
    
    
    (9,338
    )Other liabilities
    
    
    (1,655
    )
    
    
    992
    
    
    
    7,749Cash provided by operations
    
    
    127,929
    
    
    
    195,290
    
    
    
    157,054Cash used in investing activities:Acquisition of property, plant and equipment
    
    
    (43,153
    )
    
    
    (46,750
    )
    
    
    (44,338
    )Investments other than cash
    
    
    (191
    )
    
    
    
    
    
    
    Sale of property, plant and equipment
    
    
    286
    
    
    
    
    
    
    
    Increase in intangible assets
    
    
    (1,099
    )
    
    
    (1,048
    )
    
    
    (254
    )Cash used in investing activities
    
    
    (44,157
    )
    
    
    (47,798
    )
    
    
    (44,592
    )Cash used in financing activities:Net short-term loans obtained (paid)
    
    
    1,410
    
    
    
    (26,762
    )
    
    
    (66,978
    )Dividends paid
    
    
    (135,377
    )
    
    
    (144,031
    )
    
    
    (31,100
    )Cash used in financing activities
    
    
    (133,967
    )
    
    
    (170,793
    )
    
    
    (98,078
    )Effect of inflation and devaluation on cash
    
    
    
    
    
    
    (1,047
    )
    
    
    (8,270
    )(Decrease) increase in cash
    
    
    (50,195
    )
    
    
    (24,348
    )
    
    
    6,114Cash and cash equivalents at beginning of the year (1)
    
    
    56,940
    
    
    
    81,288
    
    
    
    75,174Cash and cash equivalents at end of the year (1)
    
    
    6,745
    
    
    
    56,940
    
    
    
    81,288
 
  F-109




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REFINERÍA DEL NORTE S.A.
 
 NOTES TO THE FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2005
  1. COMPANY INCORPORATION AND ACTIVITY
   2. SIGNIFICANT ACCOUNTING POLICIES
 I. Generally accepted accounting principles
         F-110




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II. Restatement into constant currency
   Valuation methods
               F-111




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F-112




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F-113




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3. BREAKDOWN OF MAIN ACCOUNTS
  Unaudited2005
    
    
    2004a) Investments:Current:Certificates of deposit
    
    
    3,094
    
    
    
    3,293Mutual funds
    
    
    1,350
    
    
    
    52,082Government securities
    
    
    
    
    
    
    3214,444
    
    
    
    55,696b) Trade receivables:Current:Common receivables
    
    
    27,329
    
    
    
    24,831Receivables under litigation
    
    
    7,331
    
    
    
    7,823Shareholder companies:· Petrobras Energía S.A.
    
    
    40,760
    
    
    
    17,291· YPF S.A.
    
    
    26,343
    
    
    
    29,996· Pluspetrol S.A.
    
    
    13,851
    
    
    
    4,525Related companies:· Repsol YPF Trading y Transporte S.A.
    
    
    44,908
    
    
    
    37,542· Petrobras Bolivia Distribución S.A.
    
    
    21,400
    
    
    
    16,027· Pluspetrol Energy S.A.
    
    
    43
    
    
    
    49181,965
    
    
    
    138,084Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (6,456
    )
    
    
    (6,444
    )175,509
    
    
    
    131,640c) Other receivables:Current:VAT credit
    
    
    54,171
    
    
    
    17,931Tax on diesel oil transfer or import credit
    
    
    2,292
    
    
    
    Prepaid insurance
    
    
    1,799
    
    
    
    2,761Advances to suppliers
    
    
    760
    
    
    
    2,125Court deposit
    
    
    660
    
    
    
    3,594Loans and advances to personnel
    
    
    335
    
    
    
    417Turnover tax credit
    
    
    296
    
    
    
    383Prepaid expenses
    
    
    88
    
    
    
    314Notes receivable
    
    
    899
    
    
    
    447Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (404
    )
    
    
    (442
    )Shareholder company  Pluspetrol S.A. (Note 3.k.2)
    
    
    2,981
    
    
    
    Other
    
    
    2,106
    
    
    
    1,48465,983
    
    
    
    29,014
  F-114




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Unaudited2005
    
    
    2004Noncurrent:Deferred tax assets (Note 3.I)
    
    
    2,956
    
    
    
    5,157Turnover tax credit
    
    
    2,739
    
    
    
    897Notes receivable
    
    
    1,111
    
    
    
    2,284Shareholder company  Pluspetrol S.A. (Note 3.k.2)
    
    
    2,629
    
    
    
    Other
    
    
    441
    
    
    
    5099,876
    
    
    
    8,847d) Inventories:Refined products
    
    
    63,627
    
    
    
    60,818Materials and spare parts
    
    
    20,961
    
    
    
    22,175Allowance for materials impairment (Exhibit V)
    
    
    (4,218
    )
    
    
    (4,218
    )Crude oil
    
    
    23,611
    
    
    
    14,901Advances to suppliers
    
    
    138
    
    
    
    248Other
    
    
    918
    
    
    
    902105,037
    
    
    
    94,826e) Accounts payable:Common suppliers
    
    
    120,822
    
    
    
    96,861Shareholder companies:· YPF S.A.
    
    
    74,983
    
    
    
    74,218. Petrobras Energía S.A.
    
    
    22,944
    
    
    
    15,164· Pluspetrol S.A.
    
    
    4,496
    
    
    
    3,341Related companies:· Pluspetrol Energy S.A.
    
    
    1,633
    
    
    
    1,076· Pluspetrol Bolivia Corporation S.A.
    
    
    26
    
    
    
    14224,904
    
    
    
    190,674f) Loans:Short-term bank loans
    
    
    77,303
    
    
    
    75,893Interest payable
    
    
    2,265
    
    
    
    1,39879,568
    
    
    
    77,291g) Taxes payable:Income tax, net of prepayments and withholdings
    
    
    25,402
    
    
    
    32,080Tax on fuel transfers
    
    
    812
    
    
    
    2,801Other withholdings
    
    
    5,012
    
    
    
    4,629Tax on diesel oil transfer or import
    
    
    
    
    
    
    776Other
    
    
    292
    
    
    
    53431,518
    
    
    
    40,820
  F-115




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Income (Loss)Unaudited2005
    
    2004
    
    2003h) Net sales:Gross sales (1)
    
    
    1,462,820
    
    
    
    1,115,978
    
    
    
    901,772Withholdings on exports (2)
    
    
    (33,709
    )
    
    
    (25,438
    )
    
    
    (20,092
    )1,429,111
    
    
    
    1,090,540
    
    
    
    881,680
 (1)
    
    Sales for the fiscal year ended December 31, 2005, made mainly to Repsol YPF Trading y Transporte S.A.,
YPF S.A., Petrobras Energía S.A., Petrobras Bolivia Distribución S.A., and Compañía Petrolera Nacional
Ltda. (Bolivia), represented about 37%, 12%, 7%, 9%, and 8%, respectively, of total gross sales.(2)
    
    The Argentine Government implemented a withholding on exports system amounting to 5% of hydrocarbons
by-products and 20% of LPG exports.
 Unaudited2005
    
    2004
    
    2003i) Cost of sales:Inventories in stock at beginning of year
    
    
    108,551
    
    
    
    120,330
    
    
    
    99,098Purchase of goods and services
    
    
    993,035
    
    
    
    685,218
    
    
    
    598,350Operating expenses (Exhibit II)
    
    
    76,725
    
    
    
    59,352
    
    
    
    48,496Inventory holding gains (losses) (Note 3.j)
    
    
    14,388
    
    
    
    11,060
    
    
    
    (5,706
    )Plant idle capacity
    
    
    (677
    )
    
    
    (683
    )
    
    
    (2,025
    )Less: Inventories in stock at end of year
    
    
    (123,611
    )
    
    
    (108,551
    )
    
    
    (120,330
    )1,068,411
    
    
    
    766,726
    
    
    
    617,883
 Income (Loss)Unaudited2005
    
    2004
    
    2003j) Financial income (expense) and holding
gains (losses):From assets:Due to foreign exchange differences
    
    
    420
    
    
    
    (14,779
    )
    
    
    (33,219
    )Inventory holding gains (losses)
    
    
    14,388
    
    
    
    11,060
    
    
    
    (5,706
    )Loss due to inflation exposure
    
    
    
    
    
    
    
    
    
    
    (1,955
    )Interest accrued
    
    
    3,118
    
    
    
    3,594
    
    
    
    1,054Other
    
    
    335
    
    
    
    (16
    )
    
    
    668Subtotal from assets
    
    
    18,261
    
    
    
    (141
    )
    
    
    (39,158
    )From liabilities:Due to foreign exchange differences
    
    
    (2,918
    )
    
    
    14,883
    
    
    
    39,679Interest accrued
    
    
    (7,554
    )
    
    
    (8,337
    )
    
    
    (10,291
    )Commissions and other bank expenses
    
    
    (1,095
    )
    
    
    (1,666
    )
    
    
    (2,824
    )Gain due to inflation exposure
    
    
    
    
    
    
    
    
    
    
    2,791Subtotal from liabilities
    
    
    (11,567
    )
    
    
    4,880
    
    
    
    29,355Total
    
    
    6,694
    
    
    
    4,739
    
    
    
    (9,803
    )
  F-116




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Income (Loss)Unaudited2005
    
    2004
    
    2003k) Other income, net:Reestimation of provisions and reserves
    
    
    (3,954
    )
    
    
    3,222
    
    
    
    1,847Reversal of insurance  Lavallen claim (1)
    
    
    
    
    
    
    
    
    
    
    2,377Reversal of doubtful accounts accrual
    
    
    
    
    
    
    
    
    
    
    462Compensation for contractual breach (2)
    
    
    8,519
    
    
    
    
    
    
    
    Other
    
    
    (471
    )
    
    
    (394
    )
    
    
    (1,667
    )Total
    
    
    4,094
    
    
    
    2,828
    
    
    
    3,019
 (1)
    
    Corresponds to the amount recognized by the assurance company for the remediation
made because of a spilling of hydrocarbons.(2)
    
    The shareholder company Pluspetrol S.A. breached certain contractual commitments
related to rich gas supply to the Company. On April 14, 2005, both companies signed
an agreement whereby Pluspetrol S.A. recognized that the Company carried a USD 2,950
receivable in this regard, which is settled by offsetting it with the obligations
resulting from rich gas purchases by Refinor S.A. to the abovementioned company over a
maximum 36-month term. Noncompensated differences, if any, are assessed and paid in
cash in the periods established in the agreement.
   Income (Loss)Unaudited2005
    
    2004
    
    2003Estimated tax payable
    
    
    (92,731
    )
    
    
    (80,458
    )
    
    
    (61,871
    )Changes in nominal deferred tax
    
    
    (2,470
    )
    
    
    (2,577
    )
    
    
    (741
    )Total income tax
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )Income for the year before income tax
    
    
    255,441
    
    
    
    223,737
    
    
    
    160,539Effective tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %(89,404
    )
    
    
    (78,308
    )
    
    
    (56,189
    )Permanent differences at tax rate:- Restatement into constant pesos
    
    
    (4,288
    )
    
    
    (5,350
    )
    
    
    (5,913
    )- Other
    
    
    (1,509
    )
    
    
    623
    
    
    
    510Total income tax
    
    
    (95,201
    )
    
    
    (83,035
    )
    
    
    (62,612
    )
  F-117




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Unaudited2005

    
    2004Asset differences- Deferred foreign exchange difference
    
    
    1,848
    
    
    
    6,407- Non-deductible allowances
    
    
    3,125
    
    
    
    2,651- Other, not individually significant
    
    
    2,971
    
    
    
    1,512Liability differences- Valuation of inventories
    
    
    (4,988
    )
    
    
    (5,413
    )2,956
    
    
    
    5,157
 4. MAIN COMMITMENTS ASSUMED BY THE COMPANY AND CONTINGENCIES
 Commitments
  Millions of Argentine pesosNatural gasCondensed and crude oil

    
    by-products2006
    
    
    241
    
    
    
    832007
    
    
    93
    
    
    
    822008
    
    
    82
    
    
    
    722009
    
    
    80
    
    
    
    712010 and subsequent
years
    
    
    38
    
    
    
    180534
    
    
    
    488
  Millions of Argentine pesosVirgin

    
    
    
    
    
    Natural gasYear
    
    gasoline

    
    Diesel Oil

    
    by-products2006
    
    
    418
    
    
    
    260
    
    
    
    1702007
    
    
    134
    
    
    
    243
    
    
    
    1702008
    
    
    
    
    
    
    54
    
    
    
    42552
    
    
    
    557
    
    
    
    382
   F-118




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Lawsuits
         F-119




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5. TRANSACTIONS WITH SHAREHOLDER COMPANIES AND RELATED COMPANIES
  Unaudited2005
    
    
    2004
    
    
    2003Sale of products and services:Shareholder companies:· YPF S.A.
    
    
    167,713
    
    
    
    152,317
    
    
    
    124,870· Pluspetrol S.A.
    
    
    40,171
    
    
    
    32,156
    
    
    
    20,880· Petrobras Energía S.A.
    
    
    122,338
    
    
    
    77,384
    
    
    
    57,339Related companies:· Repsol YPF Trading y Transporte S.A.
    
    
    528,254
    
    
    
    380,716
    
    
    
    287,265· Petrobras Bolivia Distribución S.A.
    
    
    118,834
    
    
    
    57,411
    
    
    
    49,731· Pluspetrol Energy S.A.
    
    
    448
    
    
    
    396
    
    
    
    413· Pluspetrol Bolivia Corporation S.A.
    
    
    24
    
    
    
    45
    
    
    
    · Repsol Gas S.A.
    
    
    
    
    
    
    111
    
    
    
    3,468977,782
    
    
    
    700,536
    
    
    
    543,966Purchases of products and services:Shareholder companies:· YPF S.A.
    
    
    315,059
    
    
    
    286,730
    
    
    
    269,838· Petrobras Energía S.A.
    
    
    78,838
    
    
    
    43,080
    
    
    
    39,879· Pluspetrol S.A.
    
    
    37,746
    
    
    
    35,859
    
    
    
    20,595· Petrobras Energía S.A  Fees to the operator (1)
    
    
    3,031
    
    
    
    2,974
    
    
    
    2,933Related companies:· Empresa Petrolera Andina S.A.
    
    
    151,182
    
    
    
    30,024
    
    
    
    · Pluspetrol Bolivia Corporation S.A.
    
    
    8,681
    
    
    
    5,353
    
    
    
    1,312· Pluspetrol Energy S.A.
    
    
    11,776
    
    
    
    11,060
    
    
    
    13,638606,313
    
    
    
    415,080
    
    
    
    348,195
 The Company is committed to recognizing technical operation assistance fees equivalent to 5% of
gross earnings, up to an accumulated cap of USD 1,000,000 per fiscal year.
 Unaudited2005
    
    
    2004
    
    
    2003Other transactions:Shareholder company  Pluspetrol S.A.:Compensation for contractual breach
    
    
    8,519
    
    
    
    
    
    
    
    8,519
    
    
    
    
    
    
    
    
 6. CAPITAL STOCK BREAKDOWN AND RETAINED EARNINGS RESTRICTION
  SharesClass
    
    NumberPetrobras Energía S.A.
    
    
    A
    
    
    
    26,108,078Pluspetrol S.A.
    
    
    A
    
    
    
    19,695,577YPF S.A.
    
    
    B
    
    
    
    45,803,655Total
    
    
    
    
    
    
    91,607,310
  F-120




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AGREEMENT WITH OIL AND GAS COMPANIES
   8.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND
US GAAP
         F-121




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F-122




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EXHIBIT I
 REFINERÍA DEL NORTE S.A.
CHANGES IN PROPERTY, PLANT AND EQUIPMENT AS OF DECEMBER 31, 2005, 2004 AND 2003
 2005Original costMain account
    
    At beginning
    
    
    Additions
    
    
    Transfers
    
    
    Decreases
    
    
    At endGas stations
    
    
    18,077
    
    
    
    
    
    
    
    1,380
    
    
    
    
    
    
    
    19,457Buildings and construction
    
    
    16,429
    
    
    
    
    
    
    
    1,750
    
    
    
    (506
    )
    
    
    17,673Compression plant equipment and facilities
    
    
    2,895
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    2,918Pumping stations equipment and facilities
    
    
    23,748
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    23,831Multiple pipeline equipment and facilities
    
    
    127,552
    
    
    
    
    
    
    
    6,926
    
    
    
    (309
    )
    
    
    134,169Refinery equipment and facilities
    
    
    316,154
    
    
    
    
    
    
    
    25,159
    
    
    
    
    
    
    
    341,313Tools
    
    
    3,922
    
    
    
    104
    
    
    
    
    
    
    
    (4
    )
    
    
    4,022Software
    
    
    14,937
    
    
    
    989
    
    
    
    
    
    
    
    (42
    )
    
    
    15,884Furniture and office supplies
    
    
    5,073
    
    
    
    451
    
    
    
    
    
    
    
    (7
    )
    
    
    5,517Vehicles
    
    
    5,178
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    5,028Storage and dispatch units
    
    
    44,355
    
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    44,548Works in process
    
    
    20,458
    
    
    
    28,063
    
    
    
    (22,155
    )
    
    
    
    
    
    
    26,366Plots of land
    
    
    3,705
    
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    3,649Advances to suppliers
    
    
    1,557
    
    
    
    4,371
    
    
    
    (3,989
    )
    
    
    
    
    
    
    1,939Materials and spare parts
    
    
    5,123
    
    
    
    9,175
    
    
    
    (9,370
    )
    
    
    
    
    
    
    4,928Total as of 12/31/2005
    
    
    609,163
    
    
    
    43,153
    
    
    
    
    
    
    
    (1,074
    )
    
    
    651,242Total as of 12/31/2004 (Unaudited)
    
    
    569,695
    
    
    
    46,750
    
    
    
    
    
    
    
    (7,282
    )
    
    
    609,163Total as of 12/31/2003 (Unaudited)
    
    
    538,466
    
    
    
    44,338
    
    
    
    
    
    
    
    (13,109
    )
    
    
    569,695
  F-123




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##### Table of Contents



2004
    
    
    20032005
    
    
    (Unaudited)
    
    
    (Unaudited)Accumulated depreciationFor the yearNet book
    
    
    Net book
    
    
    Net bookMain account
    
    At beginning
    
    
    Rate %
    
    
    Amount
    
    
    Decreases
    
    
    At end
    
    
    Value
    
    
    value
    
    
    valueGas stations
    
    
    7,930
    
    
    
    4 to 7
    
    
    
    1,333
    
    
    
    
    
    
    
    9,263
    
    
    
    10,194
    
    
    
    10,147
    
    
    
    10,640Buildings and construction
    
    
    5,308
    
    
    
    2 to 10
    
    
    
    828
    
    
    
    (206
    )
    
    
    5,930
    
    
    
    11,743
    
    
    
    11,121
    
    
    
    12,912Compression plant equipment
and facilities
    
    
    52
    
    
    
    3 to 7
    
    
    
    117
    
    
    
    
    
    
    
    169
    
    
    
    2,749
    
    
    
    2,843
    
    
    
    Pumping stations equipment
and facilities
    
    
    8,462
    
    
    
    4 to 6
    
    
    
    1,056
    
    
    
    
    
    
    
    9,518
    
    
    
    14,313
    
    
    
    15,286
    
    
    
    16,214Multiple pipeline equipment
and facilities
    
    
    50,022
    
    
    
    2 to 6
    
    
    
    4,764
    
    
    
    (245
    )
    
    
    54,541
    
    
    
    79,628
    
    
    
    77,530
    
    
    
    74,385Refinery equipment and
facilities
    
    
    138,409
    
    
    
    4 to 10
    
    
    
    21,738
    
    
    
    
    
    
    
    160,147
    
    
    
    181,166
    
    
    
    177,745
    
    
    
    188,894Tools
    
    
    3,474
    
    
    
    9 to 20
    
    
    
    200
    
    
    
    (4
    )
    
    
    3,670
    
    
    
    352
    
    
    
    448
    
    
    
    559Software
    
    
    11,316
    
    
    
    10 a 33
    
    
    
    1,445
    
    
    
    (28
    )
    
    
    12,733
    
    
    
    3,151
    
    
    
    3,621
    
    
    
    4,077Furniture and office supplies
    
    
    4,741
    
    
    
    10 to 20
    
    
    
    224
    
    
    
    (6
    )
    
    
    4,959
    
    
    
    558
    
    
    
    332
    
    
    
    620Vehicles
    
    
    3,976
    
    
    
    20
    
    
    
    404
    
    
    
    (109
    )
    
    
    4,271
    
    
    
    757
    
    
    
    1,202
    
    
    
    1,608Storage and dispatch units
    
    
    12,849
    
    
    
    4 to 10
    
    
    
    1,869
    
    
    
    
    
    
    
    14,718
    
    
    
    29,830
    
    
    
    31,506
    
    
    
    29,239Works in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,366
    
    
    
    20,458
    
    
    
    3,943Plots of land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,649
    
    
    
    3,705
    
    
    
    3,800Advances to suppliers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,939
    
    
    
    1,557
    
    
    
    82Materials and spare parts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,928
    
    
    
    5,123
    
    
    
    4,560Total as of 12/31/2005
    
    
    246,539
    
    
    
    
    
    
    
    33,978
    
    
    
    (598
    )
    
    
    279,919
    
    
    
    371,323Total as of 12/31/2004
(Unaudited)
    
    
    218,162
    
    
    
    
    
    
    
    32,878
    
    
    
    (4,501
    )
    
    
    246,539
    
    
    
    
    
    
    
    362,624Total as of 12/31/2003
(Unaudited)
    
    
    195,867
    
    
    
    
    
    
    
    28,192
    
    
    
    (5,897
    )
    
    
    218,162
    
    
    
    
    
    
    
    
    
    
    
    351,533
  F-124




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##### Table of Contents



EXHIBIT II
 REFINERÍA DEL NORTE S.A.
 INFORMATION REQUIRED UNDER SECTION 64(1)b OF LAW No. 19,550
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 Unaudited2003



    2004

    
    
    2005Operating
    
    
    Administrative
    
    
    SellingAccounts
    
    Total
    
    
    Total
    
    
    Total
    
    
    expenses
    
    
    expenses
    
    
    expensesPayroll and social security taxes
    
    
    17,264
    
    
    
    20,367
    
    
    
    27,548
    
    
    
    4,604
    
    
    
    11,568
    
    
    
    11,376Other employee benefits
    
    
    3,320
    
    
    
    4,051
    
    
    
    3,730
    
    
    
    479
    
    
    
    1,897
    
    
    
    1,354Taxes, charges and contributions
    
    
    14,179
    
    
    
    14,737
    
    
    
    15,785
    
    
    
    366
    
    
    
    8,576
    
    
    
    6,843Depreciation of property, plant and
equipment
    
    
    28,192
    
    
    
    32,878
    
    
    
    33,978
    
    
    
    23,214
    
    
    
    925
    
    
    
    9,839Intangible assets amortization
    
    
    890
    
    
    
    872
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    922Maintenance expenses
    
    
    12,834
    
    
    
    8,859
    
    
    
    12,246
    
    
    
    5,753
    
    
    
    791
    
    
    
    5,702Transportation and storage expenses
    
    
    18,457
    
    
    
    22,226
    
    
    
    25,909
    
    
    
    
    
    
    
    
    
    
    
    25,909Electric power, fuels and lubricants
and other
    
    
    10,767
    
    
    
    19,638
    
    
    
    30,994
    
    
    
    28,945
    
    
    
    66
    
    
    
    1,983Consumption of materials and spare parts
    
    
    4,843
    
    
    
    6,465
    
    
    
    6,189
    
    
    
    3,792
    
    
    
    427
    
    
    
    1,970Insurance
    
    
    7,210
    
    
    
    5,142
    
    
    
    5,771
    
    
    
    4,770
    
    
    
    834
    
    
    
    167Works and other services contracted
    
    
    8,550
    
    
    
    11,198
    
    
    
    12,778
    
    
    
    4,467
    
    
    
    3,315
    
    
    
    4,996Communications
    
    
    2,048
    
    
    
    2,148
    
    
    
    2,215
    
    
    
    135
    
    
    
    623
    
    
    
    1,457Traveling and living expenses
    
    
    901
    
    
    
    1,254
    
    
    
    1,180
    
    
    
    47
    
    
    
    641
    
    
    
    492Advertising
    
    
    2,736
    
    
    
    2,904
    
    
    
    2,563
    
    
    
    
    
    
    
    
    
    
    
    2,563Professional fees
    
    
    4,321
    
    
    
    4,730
    
    
    
    4,802
    
    
    
    55
    
    
    
    4,507
    
    
    
    240Other
    
    
    5,243
    
    
    
    6,063
    
    
    
    5,010
    
    
    
    98
    
    
    
    1,814
    
    
    
    3,098Total 2005
    
    
    
    
    
    
    
    
    
    
    191,620
    
    
    
    76,725
    
    
    
    35,984
    
    
    
    78,911Total 2004 (Unaudited)
    
    
    
    
    
    
    163,532
    
    
    
    
    
    
    
    59,352
    
    
    
    31,364
    
    
    
    72,816Total 2003 (Unaudited)
    
    
    141,755
    
    
    
    
    
    
    
    
    
    
    
    48,496
    
    
    
    28,202
    
    
    
    65,057
  F-125




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##### Table of Contents



EXHIBIT III
 REFINERÍA DEL NORTE S.A.
 ASSETS AND LIABILITIES IN FOREIGN CURRENCY
AS OF DECEMBER 31, 2005 AND 2004
 2004 (Unaudited)
    
    
    2005Effective
    
    
    Booked amountCurrency and
    
    
    Currency and
    
    
    exchange
    
    
    in thousands ofItem
    
    amount
    
    
    amount
    
    
    rate
    
    
    Argentine pesosCURRENT ASSETSCash
    
    USD
    
    
    2
    
    
    USD
    
    
    3
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    9Investments
    
    USD
    
    
    16,312
    
    
    USD
    
    
    1,021
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    3,094Other receivables
    
    
    
    
    
    
    
    
    
    USD
    
    
    1,088
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    3,299Trade receivables
    
    USD
    
    
    10,447
    
    
    USD
    
    
    28,256
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    85,657Inventories  Advances to suppliers
    
    USD
    
    
    83
    
    
    USD
    
    
    45
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    138Total current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,197NONCURRENT ASSETSOther receivables
    
    
    
    
    
    
    
    
    
    USD
    
    
    867
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    2,629Total noncurrent assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,629Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,826CURRENT LIABILITIESAccounts payable
    
    USD
    
    
    21,528
    
    
    USD
    
    
    30,880
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    93,612Loans
    
    USD
    
    
    25,991
    
    
    USD
    
    
    26,247
    
    
    
    (a
    )
    
    
    3.0315
    
    
    
    79,568Total current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,180
 (a)
    
    Benchmark exchange rate of the BCRA (Central Bank of Argentina).
  F-126




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##### Table of Contents



EXHIBIT IV
 REFINERÍA DEL NORTE S.A.
 BREAKDOWN OF CURRENT INVESTMENTS, RECEIVABLES, LOANS AND OTHER
LIABILITIES
AS OF DECEMBER 31, 2005
  Assets
    
    
    LiabilitiesCurrent
    
    
    
    
    
    
    
    
    
    
    OtherTerm
    
    investments
    
    
    Receivables
    
    
    Loans
    
    
    liabilitiesWith no maturity
    
    
    
    
    
    
    5,695
    (5)
    
    
    
    
    
    
    81,247
    (6)With maturityMatured:- Up to 3 months
    
    
    
    
    
    
    65,745
    
    
    
    
    
    
    
    19,720- From 3 to 6 months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    418- From 6 to 9 months
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    164- From 9 to 12 months
    
    
    
    
    
    
    439
    
    
    
    
    
    
    
    433- From 1 to 2 years
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    349- Over 2 years
    
    
    
    
    
    
    12,931
    
    
    
    
    
    
    
    760Total matured
    
    
    
    
    
    
    79,393
    
    
    
    
    
    
    
    21,844To mature:- Up to 3 months
    
    
    4,444
    
    
    
    165,891
    
    
    
    78,436
    
    
    
    143,135- From 3 to 6 months
    
    
    
    
    
    
    206
    
    
    
    453
    
    
    
    28,432- From 6 to 9 months
    
    
    
    
    
    
    44
    
    
    
    679
    
    
    
    - From 9 to 12 months
    
    
    
    
    
    
    2,818
    
    
    
    
    
    
    
    - From 1 to 2 years
    
    
    
    
    
    
    3,332
    
    
    
    
    
    
    
    - Over 2 years
    
    
    
    
    
    
    4,141
    
    
    
    
    
    
    
    Total to mature
    
    
    4,444
    
    
    
    176,432
    
    
    
    79,568
    
    
    
    171,567Total with maturity
    
    
    4,444
    
    
    
    255,825
    
    
    
    79,568
    
    
    
    193,411Total
    
    
    4,444
    (1)
    
    
    261,520
    (2)
    
    
    79,568
    (3)
    
    
    274,658
    (4)
 (1)
    
    Accruing interest at a variable rate of about 3.76% per annum.(2)
    
    Receivables are disclosed excluding the allowance for doubtful accounts. Approximately 94%
does not accrue interest, accruing the rest, interest at a fixed rate. The average
weighted rate is approximately 6% per annum.(3)
    
    Loans accrue interest at a variable rate. The average weighted rate, including taxes
on interest, is approximately 4.24% per annum.(4)
    
    Not accruing interest, except for the accrual for purchase of raw material under the
agreement with oil & gas producing companies amounting to 69,595, accruing interest at
LIBOR.(5)
    
    Related to the balances of social contributions credit, turnover tax credit, and deferred tax
assets.(6)
    
    Related to reserves for contingencies and accrual for purchase of raw material under the
agreement with oil & gas producing companies.
  F-127




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##### Table of Contents



EXHIBIT V
 REFINERÍA DEL NORTE S.A.
 CHANGES IN ALLOWANCES AND RESERVES AS OF DECEMBER 31, 2005 AND 2004
  2005Balances atbeginning
    
    
    
    
    
    
    
    
    
    
    Balances atItem
    
    of year
    
    
    Increases
    
    
    Decreases
    
    
    end of yearDeducted from assets:- Allowance for doubtful accounts
    
    
    6,886
    
    
    
    
    
    
    
    26
    
    
    
    6,860- Allowance for materials impairment
    
    
    4,218
    
    
    
    
    
    
    
    
    
    
    
    4,218Total 2005
    
    
    11,104
    
    
    
    
    
    
    
    26
    (1)
    
    
    11,078Total 2004 (Unaudited)
    
    
    8,931
    
    
    
    2,173
    
    
    
    
    
    
    
    11,104Total 2003 (Unaudited)
    
    
    12,243
    
    
    
    
    
    
    
    3,312
    
    
    
    8,931Included in liabilities:- Noncurrent  Reserve for contingencies
    
    
    10,429
    
    
    
    2,878
    
    
    
    1,655
    
    
    
    11,652Total 2005
    
    
    10,429
    
    
    
    2,878
    (2)
    
    
    1,655
    (3)
    
    
    11,652Total 2004 (Unaudited)
    
    
    13,072
    
    
    
    9,625
    
    
    
    12,268
    
    
    
    10,429Total 2003 (Unaudited)
    
    
    5,557
    
    
    
    7,796
    
    
    
    281
    
    
    
    13,072
 (1)
    
    Used over the year.(2)
    
    Charge for the year allocated to Other income, net account in the statement of income.(3)
    
    Used over the year.
  F-128




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##### Table of Contents



REFINERÍA DEL NORTE S.A. STATEMENT OF INCOME
(Unaudited) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 (Figures stated in thousands of Argentine pesos  Note 2.II.) NET SALES (Note 3.i)
    
    
    1,516,420COST OF SALES (Note 3.j)
    
    
    (1,180,701
    )Gross profit
    
    
    335,719ADMINISTRATIVE EXPENSES (Exhibit II)
    
    
    (43,294
    )SELLING EXPENSES (Exhibit II)
    
    
    (90,380
    )OTHER EXPENSES
    
    
    (5,884
    )FINANCIAL INCOME (EXPENSE) AND HOLDING GAINS (LOSSES)
(Note 3.k)
    
    
    (16,494
    )OTHER EXPENSES, NET (Note 3.l)
    
    
    (35,523
    )Income before income tax
    
    
    144,144INCOME TAX (Note 3.m)
    
    
    (54,952
    )Net income for the year
    
    
    89,192
 The accompanying notes 1 through 7 and supplementary statements (Exhibits I through V)
are an integral part of these statements. F-129  1




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
(Unaudited)
BALANCE SHEETS AS OF DECEMBER 31, 2006
(Figures stated in thousands of Argentine pesos  Note 2.II.) ASSETSCURRENT ASSETSCash
    
    
    6,044Investments (Note 3.a)
    
    
    47,005Trade receivables (Note 3.b)
    
    
    118,680Other receivables (Note 3.c)
    
    
    153,202Inventories (Note 3.d)
    
    
    112,238Total current assets
    
    
    437,169NONCURRENT ASSETSInvestments
    
    
    3Trade receivables
    
    
    2,564Other receivables (Note 3.c)
    
    
    17,993Materials and spare parts
    
    
    18,537Property, plant and equipment (Exhibit I)
    
    
    400,752Intangible assets
    
    
    3,229Total noncurrent assets
    
    
    443,078Total assets
    
    
    880,247LIABILITIESCURRENT LIABILITIESAccounts payable (Note 3.e)
    
    
    258,684Loans (Note 3.f)
    
    
    79,848Payroll and social security taxes
    
    
    6,188Taxes payable (Note 3.g)
    
    
    3,456Other Liabilities (Note 3.h)
    
    
    29,369Dividends to be pay
    
    
    35,605Total current liabilities
    
    
    413,150NONCURRENT LIABILITIESOther liabilities (Note 3.h)
    
    
    9,002Total noncurrent liabilities
    
    
    9,002Total liabilities
    
    
    422,152SHAREHOLDERS EQUITY(as per related statements)
    
    
    458,095880,247
 The accompanying notes 1 through 7 and supplementary statements (Exhibits I through V)
are an integral part of these statements. F-130  2




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
(Unaudited) (Figures stated in thousands of Argentine pesos  Note 2.II.) Shareholders contributions
    
    Retained earningsAdjustment
    
    
    
    
    
    
    
    
    
    
    Unappropriatedto capital
    
    
    Legal
    
    
    Voluntary
    
    
    retainedCapital stock
    
    
    stock
    
    
    reserve
    
    
    reserve
    
    
    earnings
    
    
    TotalBalances at beginning of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    22,471
    
    
    
    
    
    
    
    160,240
    
    
    
    404,508Decisions of the Regular Shareholders Meetings of April 14, 2006:- Earnings distribution:to cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,605
    )
    
    
    (35,605
    )to legal reserve
    
    
    
    
    
    
    
    
    
    
    8,012
    
    
    
    
    
    
    
    (8,012
    )
    
    
    to voluntary reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,623
    
    
    
    (116,623
    )
    
    
    Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,192
    
    
    
    89,192Balances at end of the year
    
    
    91,607
    
    
    
    130,190
    
    
    
    30,483
    
    
    
    116,623
    
    
    
    89,192
    
    
    
    458,095
 The accompanying notes 1 through 7 and supplementary statements (Exhibits I through V)
are an integral part of these statements. F-131  3




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##### Table of Contents



REFINERÍA DEL NORTE S.A.
STATEMENT OF CASH FLOWS (1)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
(Unaudited)
(Figures stated in thousands of Argentine pesos  Note 2.II.) Cash provided by operations:Net income for the year
    
    
    89,192Adjustments to reconcile the net income for the year to the
cash provided by operations:Income tax accrued
    
    
    54,952Income tax paid
    
    
    (85,498
    )Depreciation of property, plant and equipment
    
    
    37,641DGR Salta Agreement
    
    
    29,369Property, plant and equipment retirementsIntangible assets amortizationReestimation of provisions and reserves
    
    
    (3,374
    )Interest accrued
    
    
    4,053Interest paid
    
    
    (4,208
    )Inventory holding (gains) losses
    
    
    9,757Consumption of materials and spare parts
    
    
    7,372Compensation for contractual breach
    
    
    Other financial income, net
    
    
    1,735Changes in assets and liabilitiesTrade receivables
    
    
    56,496Other receivables
    
    
    (95,336
    )Inventories
    
    
    (24,293
    )Accounts payable
    
    
    33,780Payroll and social security taxes and taxes payable
    
    
    2,263Other liabilities
    
    
    548Cash provided by operations
    
    
    114,449Cash used in investing activities:Acquisition of property, plant and equipment
    
    
    (67,279
    )Investments other than cash
    
    
    Sale of property, plant and equipment
    
    
    (155
    )Increase in intangible assets
    
    
    (1,680
    )Cash used in investing activities
    
    
    (69,114
    )Cash used in financing activities:Net short-term loans obtained (paid)
    
    
    969Dividends paid
    
    
    Cash used in financing activities
    
    
    969Effect of inflation and devaluation on cash
    
    
    (Decrease) increase in cash
    
    
    46,304Cash and cash equivalents at beginning of the year (1)
    
    
    6,745Cash and cash equivalents at end of the year (1)
    
    
    53,049
  (1)
    
    Cash plus current investments with original maturities of three months or less. The accompanying notes 1 through 7 and supplementary statements (Exhibits I through V) are an integral part of these
statements.  F-132  4




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REFINERÍA DEL NORTE S.A. NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2006
(Unaudited)
(Figures stated in thousands of Argentine pesos  Note 2.II., unless otherwise indicated) 1. COMPANY INCORPORATION AND ACTIVITY Refinería del Norte S.A. (the Company or Refinor) was organized to engage in the industrialization of liquid
and/or gas hydrocarbons and the direct and indirect by-products thereof through the commercial exploitation of the
Campo Durán business unit, which includes the Campo Durán distillery, the Campo Durán-Montecristo multiple pipeline,
the Güemes and Tucumán storage plants, as well as the retail distribution of its products through a service center
network. According to the by-laws, the holders of class A shares, owning 50% of the capital stock, are in charge of the
operation of the Companys assets through 2018, being jointly and severally liable for the related obligations. 2. SIGNIFICANT ACCOUNTING POLICIES  I.
    
    Generally accepted accounting principles Refinors financial statements have been prepared in accordance with valid professional accounting standards in
the city of Buenos Aires, Argentine Republic. On August 10, 2005, through Resolution 93/2005, the Economic Science Professional Council of Buenos Aires
(Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires -CPCECABA) approved certain
amendments for current accounting standards, in the process of unification of the existing accounting standards
in Argentina. Such resolution has general validity in the city of Buenos Aires for the fiscal years starting
January 1, 2006, considering a transition regime that extends the mandatory validity of certain amendments for
the fiscal years started January 1, 2008. The most relevant amendments for the Company are detailed below:  a)
    
    The difference between the carrying value adjusted by inflation of property, plant and equipment
(and further non monetary assets) and their tax basis is a temporary difference that would result in the
recognition of a deferred liability, but it can still be considered as a permanent difference in which
case, it is necessary to disclose additional information. The Company has chosen to still consider this
difference as permanent, and the requirement of disclosing additional information has been extended through
January 1, 2008, due to the above-mentioned transition regime.  b)
    
    For the purpose of comparison of the book value of property, plant, and equipment and certain
intangible assets and their recoverable values the comparison with undiscounted expected net cash flow is
eliminated and a an impairment must be recorded as long as the expected present value of the free cash flow
(and the net value of realization) are lower than the carrying value. Likewise, the comparison must be made
at each asset level, or, in case of impossibility based on objective reasons, at of each cash-generating
activity level. The CPCECABA extended the effective date of this amendment through January 1, 2008.  c)
    
    The exemption of Resolution 87/03 of CPCECABA that allowed not to discount, at the closing of the
fiscal year, the current balances of non commercial and non financial receivables and liabilities in the
context of stability, was eliminated.  d)
    
    For issues not provided in the particular or general accounting standards, and which cannot be
solved through using the Conceptual Framework of the accounting standards, the International Standards of
Financial Information and Interpretations, approved by the International Accounting Standard Board, shall
apply as a supplement, which are in force in the year on which such supplement is applicable. Additionally, on August 23, 2005, IGJ (Argentine Regulatory Agency of Companys) issued the General Resolution N°
7/05 through which it approved a new Revised Text whose most relevant amendment for the Company is the
measurement based on nominal value of the deferred tax assets and liabilities. This resolution is effective as
from February 21, 2006. The adoption of new valuation criteria has not had any significant effects on the results of this fiscal year or
in the results of previous years. II. Restatement into constant currency F-133  5




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Generally accepted accounting principles in Argentina establish that the financial statements should be stated
in constant currency. Within a monetary stability context, the nominal currency is used as constant currency;
however, during inflationary or deflationary periods, financial statements are required to be restated into
constant currency recognizing the variations in the domestic wholesale price index, in conformity with the
restatement method established by the Argentine Federation of Professional Councils in Economic Sciences
Technical Resolution No 6. These financial statements recognize the effects of the changes in Argentine peso purchasing power through
February 28, 2003, as required by Presidential Decree No. 664/2003 and IGJ (Argentine regulatory agency of
business associations) General Resolution No. 4/2003.  III.
    
    Valuation methods The main valuation methods used to prepare these financial statements are: a) Cash and investments:   Cash and certificates of deposit in local currency: at nominal value.   Cash and certificates of deposit in foreign currency: at nominal value, converted at the
prevailing exchange rates at each year-end. Foreign exchange differences were charged to the statement
of income for each year.   Mutual funds: at market prices as of each year-end. Current investments include financial income (expense) accrued as of each year-end. Noncurrent investment in subsidiary: it includes the 100% interest in the capital stock of Refinor Internacional S.A.,
a company organized in Bolivia and acquired by Refinor in October, 2005, by the holding of 6 registered shares of
common stock, face value USD 166 per share. This company closes its fiscal year on December 31, 2006, and it has not
been engaged in any transactions since its acquisition in October 2005. As of December 31, 2006, its shareholders
equity amounted to 3. This investment was valued by the equity method using Management information available as of
year-end. The Companys Management decided not to file consolidated financial statements considering the scarce
significance of the amounts involved. The management of the Company decided not to issue consolidated financial
statements, considering the non significance of this investment. b) Trade receivables and accounts payable: Trade receivables and accounts payable were valued at the estimated price used in spot transactions upon
each transaction plus the relevant portion of accrued financial income (expense). Receivables and payables in foreign currency were converted into Argentine pesos at the prevailing exchange
rates at each year-end for the settlement of these transactions. Trade receivables were valued net of an allowance for doubtful accounts. Upon estimating the amounts the
Companys Management considered the likelihood of occurrence based on the judgment elements available and
the legal counsels opinion. c) Loans: Loans were valued according to the amount of money received, including the relevant portion of financial
expense accrued. Payables in foreign currency were converted into Argentine pesos at the prevailing
exchange rates at each year-end for the settlement of these transactions. d) Other receivables and payables (except contingencies): Receivables from and payables to third parties, except for those indicated in sections (b) and (c) above,
were valued on the basis of the amount to be collected and paid, respectively, discounted in the relevant
cases. Receivables from and payables to related companies were valued at nominal value plus accrued
financial income (expense) accrued. Deferred income tax balances have been value at it nominal value. . The amounts in foreign currency were converted at the prevailing exchange rates at year end for the
settlement of these transactions. e) Inventories: F-134  6




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##### Table of Contents



Crude oil and refined products: at replacement or reproduction cost, as applicable. Materials and spare parts: at replacement cost, net of an allowance for obsolesence. Advances to suppliers: valued on the basis of the amounts of money delivered. The amounts in foreign
currency were converted at the prevailing exchange rates at year-end for the settlement of these
transactions. The value of inventories, thus obtained, does not exceed its recoverable value. f) Property, plant and equipment: Transferred assets: The total value was assessed on the basis of the price effectively paid for the
majority shareholding under competitive bidding (70% of capital stock), restated as indicated in note 2.II.
Such value was pro-rated among the different assets obtained on the basis of the technical residual value
thereof estimated by independent experts. The amounts thus assessed are net of the related accumulated
depreciation calculated by the straight-line method on the basis of the remaining useful life estimated by
the experts mentioned above. Additions subsequent to the transfer date: valued at acquisition cost restated as indicated in note 2.II including, if
applicable, the cost related to the financing thereof less the related accumulated depreciation calculated by the
straight-line method on the basis of the estimated useful life. The valuation of property, plant and equipment does not exceed the related recoverable value. g) Intangible assets: Related to disbursements made to gas stations owners in connection with agreements of branding of gas
stations. They were valued on the basis of the amount of money delivered restated as mentioned in note 2.II
less the related accumulated amortization, calculated considering a five-year useful life, which is the
term of the agreements. The valuation of intangible assets does not exceed the related recoverable value. h) Income tax, minimum presumed income tax and VAT: The Company recognized the income tax charge based on the deferred tax method, thus recognizing the
temporary differences between the book- and tax-purposes measurements of assets and liabilities. The tax
rate expected to be effective upon the reversal or use of deferred assets and liabilities was applied on
the temporary differences identified in order to determine such assets and liabilities, considering current
legal regulations issued as of the date of issuance of these financial statements. As of December 31, 2006, the Company recognized deferred tax assets since the future recoverability thereof
has been evaluated as probable. In addition, the Company determines minimum presumed income tax by applying the effective 1% rate to the
computable assets at year-end. This tax is supplementary to income tax. The Companys tax obligation for
each tax year shall be the higher of these two taxes. However, should minimum presumed income tax exceed
income tax in a given tax year, such excess may be computed as payment on account of any income tax excess
over minimum presumed income tax that could occur in any of the ten subsequent years. As of December 31, 2006, the income tax amount calculated exceeded minimum presumed income tax. Note 3.m to
these financial statements discloses the changes and breakdown of income tax and deferred tax accounts. The Companys sales on the domestic market are subject to valued added tax (VAT) at the general 21% rate.
However, as provided for in Law No. 26,020, effective April 17, 2005, propane, butane, and LPG sales on the
domestic market were subject to a differential 10.5% rate. i) Contingencies: Certain conditions may exist as of the date of financial statements which may result in a loss to the
Company, but which will only be resolved when one or more future events occur or fail to occur. Such
contingent liabilities are assessed by the Companys management based on the opinion of its legal counsel
and the available evidence. F-135  7




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##### Table of Contents



Such contingencies include outstanding lawsuits or claims for possible damages to third parties in the
ordinary course of the Companys business, as well as third party claims arising from disputes concerning
the interpretation of legislation. If the assessment of a contingency indicates that it is probable that a loss has been incurred and the
amount of the loss can be estimated, a liability is accrued in the Other liabilities account, in the line
of Reserves. If the assessment indicates that a potential loss contingency is not probable, but is
reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability,
together with an estimate of the possibility of occurrence, is disclosed in a note to the financial
statements. Loss contingencies considered remote are not disclosed unless they involve guarantees, in which
case the nature of the guarantee is disclosed. j) Shareholders equity accounts: These accounts have been restated as mentioned in Note 2.II, except for the Capital stock account, which
has been kept at original value. The adjustment resulting from such restatement is disclosed under the
caption Adjustment to capital stock. k) Statement of income accounts: Restated into constant currency according to Note 2.ll, considering the following:   The charges for consumption of nonmonetary assets were determined based on the restated
values of such assets.   Financial income (expense) and holding gains (losses) are broken down between those
generated by assets and those generated by liabilities and they include nominal financial income and
expense, foreign exchange differences, the effects of inflation on monetary assets and liabilities and
other holding gains (losses). 3. BREAKDOWN OF MAIN ACCOUNTS The main accounts break down as follows: 2006a) Investments:Current:Certificates of deposit
    
    
    5,155Mutual funds
    
    
    41,85047,005b) Trade receivables:Current:Common receivables
    
    
    12,609Receivables under litigation
    
    
    5,742Shareholder companies: Petrobras Energía S.A.
    
    
    16,012 YPF S.A.
    
    
    11,034 Pluspetrol S.A.
    
    
    2,864Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    75,811 Pluspetrol Energy S.A.
    
    
    3124,075Less: Allowance for doubtful accounts (Exhibit V)
    
    
    (5,395
    )118,680
 F-136  8




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##### Table of Contents



2006c) Other receivables:Current:VAT credit
    
    
    138,499Income Tax Credit
    
    
    6,918Tax on diesel oil transfer or import credit
    
    
    1,451Prepaid insurance
    
    
    2,505Advances to suppliers
    
    
    1,277Court deposit
    
    
    709Notes receivable
    
    
    865Allowance for doubtful accounts (Exhibit V)
    
    
    (393
    )Other
    
    
    1,371153,202Noncurrent:Deferred tax assets (Note 3.m)
    
    
    13,440Turnover tax credit
    
    
    3,053Notes receivable
    
    
    1,430Other
    
    
    7017,993d) Inventories:Refined products
    
    
    69,171Crude oil
    
    
    21,956Materials and spare parts
    
    
    24,642Allowance for materials  ́ impairment (Exhibit V)
    
    
    (4,206
    )Other
    
    
    675112,238
 e) Accounts payable:Common suppliers
    
    
    140,118Shareholder companies: YPF S.A.
    
    
    85,781. Petrobras Energía S.A.
    
    
    10,782 Pluspetrol S.A.
    
    
    2,807Related companies: Petrobras Bolivia S.A.
    
    
    12,472 Pluspetrol Energy S.A.
    
    
    3,780 Petrobras Energía S.A. Suc. Bolivia
    
    
    2,934 Pluspetrol Bolivia Corporation S.A.
    
    
    10258,684f) Loans:Short-term bank loans
    
    
    78,272Interest payable
    
    
    1,57679,848
 F-137  9




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##### Table of Contents



2006g) Taxes payable:Other withholdings
    
    
    3,371Other
    
    
    853,456h) Other liabilitiesCurrent:Allowances (Exhibit V)
    
    
    29,36929,369Noncurrent:Servitudes
    
    
    1,427Allowances (Exhibit V)
    
    
    7,5759,002
 F-138  10




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##### Table of Contents



2006Income (loss)i) Net sales:Gross sales (1)
    
    
    1,547,099Withholdings on exports (2)
    
    
    (30,679
    )1,516,420
 (1) Sales for the fiscal year ended December 31, 2006, made mainly to Repsol YPF Trading y Transporte S.A.,
YPF S.A., Petrobras Energía S.A.,
Petrobras Bolivia Distribución S.A., represented about 43%, 10%, 9% and 4%, respectively, of total gross sales. (2) The Argentine Government implemented a withholding on exports system amounting to 5% of hydrocarbons
by-products and 20% of LPG exports. j) Cost of sales:Inventories in stock at beginning of year
    
    
    123,611Purchase of goods and services
    
    
    1,106,142Operating expenses (Exhibit II)
    
    
    97,364Inventory holding gains (losses) (Note 3.k)
    
    
    (9,757
    )Plant idle capacity
    
    
    (5,884
    )Less: Inventories in stock at end of year
    
    
    (130,775
    )1,180,701k) Financial income (expense) and holding gains (losses):From assets:Due to foreign exchange differences
    
    
    718Inventory holding losses
    
    
    (9,757
    )Interest accrued
    
    
    3,964Assets discounts
    
    
    (1,477
    )Other
    
    
    29Subtotal from assets
    
    
    (6,523
    )From liabilities:Due to foreign exchange differences
    
    
    (1,457
    )Interest accrued
    
    
    (8,017
    )Liabilities discounts
    
    
    548Commissions and other bank expenses
    
    
    (1,045
    )Subtotal from liabilities
    
    
    (9,971
    )Total
    
    
    (16,494
    )l) Other expense, net:Allowance for DGR Salta Agreement (Note 4)
    
    
    (37,200
    )Reestimation of provisions and reserves
    
    
    3,374Others
    
    
    (1,697
    )Total
    
    
    (35,523
    )
 F-139  11




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##### Table of Contents



2006Estimated tax payable
    
    
    (65,436
    )Changes in nominal deferred tax
    
    
    10,484Total income tax
    
    
    (54,952
    )Income for the year before income tax
    
    
    144,144Effective tax rate
    
    
    35
    %(50,450
    )Permanent differences at tax rate:- Restatement into constant pesos
    
    
    (4,119
    )- Other
    
    
    (383
    )Total income tax
    
    
    (54,952
    )
 Deferred tax net assets as of December 31, 2006 and 2005, break down as follows: Asset differences- Deferred foreign exchange difference
    
    
    - Non-deductible allowances
    
    
    15,393- Foreign Investments Differencer
    
    
    2,615- Other, not individually significant
    
    
    575Liability differences- Valuation of inventories
    
    
    (5,143
    )13,440
 4. MAIN COMMITMENTS ASSUMED BY THE COMPANY AND CONTINGENCIES Commitments The Company has assumed different commitments for the purchase of crude oil, condensed oil, natural gas derivatives,
catalytic gasoline, and MTBE (methyl tert-butyl ether) at prices adjusted depending on a variable scale based on the
WTI international price (regularly revised according to the evolution of domestic market) for crude and condensed
oil, for the purchase price agreed with each manufacturer for the derivatives of natural gas, for Unlead 87
international quotation for catalytic gasoline, and for the international quotation for MTBE. The amounts, volumes,
and estimated prices of the purchase obligations for the next years are provided below: Condensed and crude oil
    
    Natural gas by-productsVolume
    
    
    Price/
    
    
    Millions
    
    
    Volume
    
    
    Price/ M
    
    
    MillionsYear
    
    M Bbl
    
    
    M Bbl
    
    
    $
    
    
    M MMBTU
    
    
    MMBTU
    
    
    $2007
    
    
    1,603
    
    
    
    0.116
    
    
    
    186
    
    
    
    18,872
    
    
    
    0.0078
    
    
    
    1472008
    
    
    1,348
    
    
    
    0.115
    
    
    
    155
    
    
    
    17,282
    
    
    
    0.0078
    
    
    
    1352009
    
    
    1,002
    
    
    
    0.111
    
    
    
    111
    
    
    
    16,883
    
    
    
    0.0078
    
    
    
    1322010
    
    
    485
    
    
    
    0.103
    
    
    
    50
    
    
    
    12,381
    
    
    
    0.0077
    
    
    
    952011 and subsequent
years
    
    
    
    
    
    
    -
    
    
    
    
    
    
    
    24,204
    
    
    
    0.0074
    
    
    
    179Total
    
    
    4.438
    
    
    
    
    
    
    
    502
    
    
    
    89,622
    
    
    
    
    
    
    
    688
 Catalític Gasoline
    
    MTBEVolume
    
    
    Price/
    
    
    Millions
    
    
    Volume
    
    
    Price /
    
    
    MillionsYear
    
    M M3
    
    
    M M3
    
    
    $
    
    
    M Tn
    
    
    M Tn
    
    
    $2007
    
    
    18.05
    
    
    
    1.303
    
    
    
    24
    
    
    
    6.34
    
    
    
    1.83
    
    
    
    122008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.80
    
    
    
    1.78
    
    
    
    10Total
    
    
    18.05
    
    
    
    
    
    
    
    24
    
    
    
    12.14
    
    
    
    
    
    
    
    22
 F-140  12




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##### Table of Contents



The Company assumed different sales commitments of virgin gasoline, diesel oil, virgin gasoline-butane interface and
natural gas by-products, fuel oil and motonaftas. The amounts of sale obligations, calculated on the basis of future
estimated prices and the expected volumes for the coming years are: Virgin gasoline
    
    Natural gas by-productsVolume
    
    
    Price/
    
    
    Millions
    
    
    Volume
    
    
    Price/
    
    
    MillionsYear
    
    M Tn
    
    
    M Tn
    
    
    $
    
    
    M M3
    
    
    M M3
    
    
    $2007
    
    
    138
    
    
    
    1.53
    
    
    
    211
    
    
    
    63
    
    
    
    0.844
    
    
    
    532008
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    15
    
    
    
    0.807
    
    
    
    12Total
    
    
    138
    
    
    
    
    
    
    
    211
    
    
    
    78
    
    
    
    
    
    
    
    65
 Interface
    
    LPGVolume
    
    
    Price /
    
    
    Millions
    
    
    Volumen
    
    
    Price /
    
    
    MillionsYear
    
    M Tn
    
    
    M Tn
    
    
    $
    
    
    M Tn
    
    
    M Tn
    
    
    $2007
    
    
    17
    
    
    
    1.27
    
    
    
    22
    
    
    
    256
    
    
    
    0.737
    
    
    
    1892008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    0.733
    
    
    
    47Total
    
    
    17
    
    
    
    
    
    
    
    22
    
    
    
    320
    
    
    
    
    
    
    
    236
 Fuel Oil
    
    GasolinesVolumen
    
    
    Precio
    
    
    Millions
    
    
    Volumen
    
    
    Price /
    
    
    MillionsYear
    
    M M3
    
    
    / M M3
    
    
    $
    
    
    M M3
    
    
    M Tn
    
    
    $2007
    
    
    6
    
    
    
    0.699
    
    
    
    4
    
    
    
    15
    
    
    
    0.795
    
    
    
    122008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    0.795
    
    
    
    3Total
    
    
    6
    
    
    
    
    
    
    
    4
    
    
    
    19
    
    
    
    
    
    
    
    15
 A total amount of 58% and 98% of the purchase and sale commitments, respectively, mentioned above were executed with
shareholders and related companies. The Company has assumed a commitment with TGS (Transportadora de Gas del Sur) for provision of gas compression
service. It shall be valid through May 31, 2012 and the amount is of 12.73 million pesos to that date. The Secretary of Energy, through Resolutions 1679/2004 and 1338/2006, requires, among other issues, that the market
agents record all export operations of gas oil, gasoline, fuel oil and their combinations, diesel oil, air-kerosene
or jet-fuel, lubes, asphalt, coke, and derivatives for petro-chemical use for their prior approval, having to proof
that the demand of the entire business chain, both retail and wholesale, whether identified as a flag or refinery,
or not, is duly satisfied or that the internal demand has been given the chance of purchasing the product in
question. This evidence must be made through a declaration affidavit. To the date of issuance of these financial
statements, the Direction of the Company obtained the corresponding authorizations to perform the mentioned exports
and is assessing the commercial operations to be used in order to comply with the existing agreements. The fuel market of Bolivia, historically a gas oil deficit country, was and still is a natural market for Refinor,
since the distillery is located a few kilometers far from the limit. The Company exported in the 2003-2005 period
about 42% of its production, which equals 60% of imported gas oil in such country. This way, the needs of the
neighbor country were met. As from this year, the private importers of Bolivia, Refinors clients, were left outside the market when the
Bolivian Government decided on the direct import by the State and the situation in Bolivia complicated from the
point of view of its crude and condensed oil exports. This turning point commercially damaged Refinor, since, on
one hand, less purchases of Bolivian condensed oil were made and, on the other hand, it caused a stop in the
deliveries of gas oil to the neighbor country. However, and considering the deficit of fuel and competitiveness of Refinor as regards supply, it can be assumed
that in the next few months, the situation will tend to be equal to the one existing before the political changes
made by the new government. F-141  13




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##### Table of Contents



Litigations and claims Gasoline Sales to Paraguay

The Company is a party to a criminal trial, arisen in a claim brought against it, with the National Customs Office
for sale operations of gasoline made to Paraguay in 1996 and, for this reason, it is investigating such operations,
specially two clients of the Company and a carrier company, hired by the clients. On March 13, 2006, the Federal
Court of Appeal of Tucuman revoked the appealed resolution providing the lack of grounds for the action of a former
employee of Refinor, providing his prosecution. Against such resolution, an appeal for reversal was filed before the
National Chamber of Criminal Appeals which was rejected by the Federal Chamber of Appeals in a divided sentence, and
a complaint was filed before the Court of Appeal. To this date, such resource is under study. Based on the acting in
good faith of the Company and in the opinion of our legal advisors, a favorable resolution for the interests thereof
can be expected. On September 20, 2001, and in connection to the criminal trial for gasoline sale operations made to Paraguay as
mentioned in the above paragraph, the Internal Revenue Office (Dirección General Impositiva -DGI) served notice in
the process of determining on the courts own motion for the amounts of the fuel transfer tax and value added tax
allegedly omitted in such transactions for about 1,400 and incidental fines and interests. Having the Company filed
its defense before the DGI on October 17, 2001, the entity on December 14, 2001, made a decision stating its desire
to receive the money. On February 15, 2002, an appeal was filed before the Tax Court of the Nation. To the date of
filing of these financial statements, all the offered evidence has been produced. In the opinion of the legal
advisors of the Company, a favorable resolution can be expected in this suit. Claims and DGR-Salta Agreement

On September 1, 2005, the Salta General Revenues Office notified the Company about the Resolution 828/05 for which
on the courts own motion it determined about 7,429, between capital and interests, for alleged difference in the
tax schedule of the activity carried out by the Company. It filed an answer and on June 27, 2006, the rejection of
the filed claim was received. On the other hand, on July 14, 2006, the same Office notified its Resolutions 993 and 994, in which the way of
distribution of profits in the gross income tax in the different jurisdictions, was questioned. The demanded amount
was of 51,016, plus incidental interests and fines. In the opinion of this Company, such determinations are not
aware of the rules of the Multilateral Agreement and existing case law. Finally, through Resolutions 783 of November 5, 2005 and 992, of July 14, 2006, of the mentioned Revenues office in
Salta, the sales prices of LPG (Liquefied Petroleum Gas) to certain clients were objected, since there were
considered as not matching the market values. Therefore, a difference of 5,350 plus incidental interests and fines,
was determined. In both cases, the Company filed its answer arguing that the sale prices used were correct since
the agreements with such clients have, among others, the following characteristics: they are long term agreements,
with special conditions of shipment of the products under the take or pay modality and they are carried out with
wholesale clients instead of retailers. In connection to the three abovementioned claims, it is worth mentioning that, after the closing of the fiscal year,
the Company raised a proposal in accordance with the General Revenues Office of the province of Salta, by virtue of
which the Company agrees to pay to such entity the amount of 37,200 and both parties waive the legal actions and/or
administrative actions brought in due course, and the determinations made by the General Revenues Office are not
valid. This proposal was accepted in January 2007, by Resolution 19/2007 of the Ministry of Taxes and Public Works
of Salta and ratified by Executive order 267/07 of the governor of Salta, published in the Official Gazette on
January 19, 2007. Consequently, the Company acknowledged a liability of 29,369 in these financial statements, to reflect the effects
of such agreement, considered as part of payment of the agreed amount paid by these claims in prior stages. DGR-Jujuy Claim The General Revenue Office of Jujuy filed a claim to the Company for a modification in the gross income tax,
amounting to 504 plus incidental interests and fines, based on the fact that the activity should have been
classified under Assets production instead of Manufacturing of Oil Refinery products applied by the Company. It
filed an answer that was rejected by the General Revenue Office of Jujuy on January 6, 2006, for this reason, on
January 27, 2006, an appeal was filed. In the opinion of the legal advisors of the Company, a favorable resolution
to this suit can be expected. Other Claims

Additionally, to the date of issuance of these financial statements, other legal actions are in process, related to
the operations of the Company. The Company management, based on the opinion of the legal and tax advisors,
estimates that the final result of the mentioned suits will have no adverse effects in the financial position or the
results of the Companys operations. F-142  14




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5. TRANSACTIONS WITH SHAREHOLDER COMPANIES AND RELATED COMPANIES During the fiscal years ended December 31, 2006, the Company engaged in transactions with the shareholder companies
and related companies as follows: 2006Sale of products and services:Shareholder companies: YPF S.A.
    
    
    155,709 Pluspetrol S.A.
    
    
    50,432 Petrobras Energía S.A.
    
    
    142,635Related companies: Repsol YPF Trading y Transporte S.A.
    
    
    661,827 Petrobras Bolivia Distribución S.A.
    
    
    60,435 Pluspetrol Energy S.A.
    
    
    212 Pluspetrol Bolivia Corporation S.A.
    
    
    271,071,277Purchases of products and services:Shareholder companies: YPF S.A.
    
    
    391,959 Petrobras Energía S.A.
    
    
    98,736 Pluspetrol S.A.
    
    
    52,373 Petrobras Energía S.A  Fees to the operator (1)
    
    
    3,079Related companies:. Petrobras Bolivia S.A.
    
    
    42,128 Empresa Petrolera Andina S.A.
    
    
    31,138 Pluspetrol Bolivia Corporation S.A.
    
    
    10,974. Petrobras Energia Suc.Bolivia S.A.
    
    
    12,520 Pluspetrol Energy S.A.
    
    
    31,749674,656
  (1)
    
    The Company is committed to recognizing technical operation assistance fees equivalent to 5% of
gross earnings, up to an accumulated cap of USD 1,000,000 per fiscal year.  6.
    
    CAPITAL STOCK BREAKDOWN AND RETAINED EARNINGS RESTRICTION The capital stock was fixed at 91,607 represented by 91,607,310 book-entry shares of common stock, with Argentine
peso 1 face value each, entitled to one vote per share, and broken down into class A and B shares, as detailed
below: SharesClass
    
    
    NumberPetrobras Energía S.A.
    
    
    A
    
    
    
    26,108,078Pluspetrol S.A.
    
    
    A
    
    
    
    19,695,577YPF S.A.
    
    
    B
    
    
    
    45,803,655Total
    
    
    
    
    
    
    91,607,310
 Under Argentine Business Associations Law No. 19,550, 5% of net income for the year should be appropriated to
increase the legal reserve until such reserve is equal to 20% of the capital stock. Under Law No. 25,063, dividends to be distributed in cash or in kind in excess of taxable income accumulated as of
the date of payment or distribution shall be subject to a 35% income tax withholding as single and definitive
payment. F-143  15




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##### Table of Contents



7.
    
    AGREEMENT WITH OIL AND GAS COMPANIES The agreement signed on January 1, 2003, by oil and gas producers and refineries related to the stability of
the price of fuels on the domestic market expired on April 30, 2004. The accumulated balance accrued by the
Company in favor of oil and gas producers amounting to 74,854 and booked as current accounts payable as of
December 31, 2006, will be paid over to them when the WTI value of crude oil is under USD 28.5 per barrel,
under the mechanism provided for in such agreement. As from May 1, 2004, producers and refiners independently executed agreements whereby the price of crude oil
purchases paid by local refineries (including the Company) to producers is fixed considering a variable scale
of the adjustment factor based on the WTI reviewed periodically on the basis of market changes. F-144  16




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EXHIBIT I REFINERÍA DEL NORTE S.A.
CHANGES IN PROPERTY, PLANT AND EQUIPMENT AS OF DECEMBER 31, 2006
(Figures stated in thousands of Argentine pesos  Note 2.II.)
(Unaudited) 2006Original costAtMain account
    
    beginning
    
    Additions
    
    
    
    
    
    Transfers
    
    
    
    
    
    Decreases
    
    
    
    
    
    At endGas stations
    
    
    19,457
    
    
    
    
    
    
    
    
    
    
    
    996
    
    
    
    
    
    
    
    (442
    )
    
    
    
    
    
    
    20,011Buildings and construction
    
    
    17,673
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,847Compression plant equipment and facilities
    
    
    2,918
    
    
    
    
    
    
    
    
    
    
    
    7,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,089Pumping stations equipment and facilities
    
    
    23,831
    
    
    
    
    
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,294Multiple pipeline equipment and facilities
    
    
    134,169
    
    
    
    
    
    
    
    
    
    
    
    5,381
    
    
    
    
    
    
    
    (322
    )
    
    
    
    
    
    
    139,228Refinery equipment and facilities
    
    
    341,313
    
    
    
    
    
    
    
    
    
    
    
    23,793
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    365,106Tools
    
    
    4,022
    
    
    
    460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    4,478Software
    
    
    15,884
    
    
    
    1,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,980Furniture and office supplies
    
    
    5,517
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,532Vehicles
    
    
    5,028
    
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    5,385Storage and dispatch units
    
    
    44,548
    
    
    
    
    
    
    
    
    
    
    
    1,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,913Works in process
    
    
    26,366
    
    
    
    30,600
    
    
    
    
    
    
    
    (4,969
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,997Plots of land
    
    
    3,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,649Advances to suppliers
    
    
    1,939
    
    
    
    2,195
    
    
    
    
    
    
    
    (2,951
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183Materials and spare parts
    
    
    4,928
    
    
    
    32,526
    
    
    
    
    
    
    
    (31,423
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,031Total as of 12/31/2006 (Unaudited)
    
    
    651,242
    
    
    
    67,279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (798
    )
    
    
    
    
    
    
    717,723
 2006Accumulated depreciationFor the yearAt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net bookMain account
    
    beginning
    
    Rate %
    
    Amount
    
    Decreases
    
    At end
    
    ValueGas stations
    
    
    9,263
    
    
    
    4 to 7
    
    
    
    1,786
    
    
    
    (282
    )
    
    
    10,767
    
    
    
    9,244Buildings and construction
    
    
    5,930
    
    
    
    2 to 10
    
    
    
    957
    
    
    
    
    
    
    
    6,887
    
    
    
    10,960Compression plant equipment and facilities
    
    
    169
    
    
    
    3 to 7
    
    
    
    141
    
    
    
    
    
    
    
    310
    
    
    
    9,779Pumping stations equipment and facilities
    
    
    9,518
    
    
    
    4 to 6
    
    
    
    1069
    
    
    
    
    
    
    
    10,587
    
    
    
    13,707Multiple pipeline equipment and facilities
    
    
    54,541
    
    
    
    2 to 6
    
    
    
    4,924
    
    
    
    (287
    )
    
    
    59,178
    
    
    
    80,050Refinery equipment and facilities
    
    
    160,147
    
    
    
    4 to 10
    
    
    
    24,919
    
    
    
    
    
    
    
    185,066
    
    
    
    180,040Tools
    
    
    3,670
    
    
    
    9 to 20
    
    
    
    166
    
    
    
    (4
    )
    
    
    3,832
    
    
    
    646Software
    
    
    12,733
    
    
    
    10 a 33
    
    
    
    1,221
    
    
    
    
    
    
    
    13,954
    
    
    
    3,026Furniture and office supplies
    
    
    4,959
    
    
    
    10 to 20
    
    
    
    188
    
    
    
    
    
    
    
    5,147
    
    
    
    385Vehicles
    
    
    4,271
    
    
    
    20
    
    
    
    373
    
    
    
    (16
    )
    
    
    4,628
    
    
    
    757Storage and dispatch units
    
    
    14,718
    
    
    
    4 to 10
    
    
    
    1,897
    
    
    
    
    
    
    
    16,615
    
    
    
    29,298Works in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,997Plots of land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,649Advances to suppliers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183Materials and spare parts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,031Total as of 12/31/2006 (Unaudited)
    
    
    279,919
    
    
    
    
    
    
    
    37,641
    
    
    
    (589
    )
    
    
    316,971
    
    
    
    400,752
  F-145  17




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EXHIBIT II REFINERÍA DEL NORTE S.A. INFORMATION REQUIRED UNDER SECTION 64(1)b OF LAW No. 19,550
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
(Figures stated in thousands of Argentine pesos  Note 2.II.)
(Unaudited) 2006Operating
    
    Administrative
    
    SellingAccounts
    
    Total
    
    expenses
    
    expenses
    
    expensesPayroll and social security taxes
    
    
    32,693
    
    
    
    5,441
    
    
    
    13,098
    
    
    
    14,154Other employee benefits
    
    
    4,688
    
    
    
    491
    
    
    
    2,631
    
    
    
    1,566Taxes, charges and contributions
    
    
    19,848
    
    
    
    1,084
    
    
    
    10,231
    
    
    
    8,533Depreciation of property, plant and equipment
    
    
    37,641
    
    
    
    26,391
    
    
    
    982
    
    
    
    10,268Intangible assets amortization
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    842Maintenance expenses
    
    
    16,092
    
    
    
    8,129
    
    
    
    908
    
    
    
    7,055Transportation and storage expenses
    
    
    26,798
    
    
    
    
    
    
    
    
    
    
    
    26,798Electric power, fuels and lubricants and other
    
    
    43,623
    
    
    
    41,045
    
    
    
    73
    
    
    
    2,505Consumption of materials and spare parts
    
    
    7,372
    
    
    
    5,111
    
    
    
    581
    
    
    
    1,680Insurance
    
    
    6,042
    
    
    
    4,156
    
    
    
    460
    
    
    
    1,426Works and other services contracted
    
    
    16,986
    
    
    
    4,991
    
    
    
    5,449
    
    
    
    6,546Communications
    
    
    2,493
    
    
    
    144
    
    
    
    714
    
    
    
    1,635Traveling and living expenses
    
    
    1,296
    
    
    
    51
    
    
    
    769
    
    
    
    476Advertising
    
    
    2,997
    
    
    
    
    
    
    
    
    
    
    
    2,997Professional fees
    
    
    5,702
    
    
    
    154
    
    
    
    5,397
    
    
    
    151Other
    
    
    5,925
    
    
    
    176
    
    
    
    2,001
    
    
    
    3,748Total 2006 (Unaudited)
    
    
    231,038
    
    
    
    97,364
    
    
    
    43,294
    
    
    
    90,380
  F-146  18




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EXHIBIT III REFINERÍA DEL NORTE S.A. ASSETS AND LIABILITIES IN FOREIGN CURRENCY
AS OF DECEMBER 31, 2006
(Figures stated in thousands)
(Unaudited) 2006Effective
    
    Booked amount inCurrency and
    
    exchange
    
    thousands ofItem
    
    amount
    
    rate
    
    Argentine pesosCURRENT ASSETSCash
    
    USD
    
    
    7
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    21Investments
    
    USD
    
    
    14,630
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    44,907Trade receivables
    
    USD
    
    
    23,529
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    72,222Other receivables
    
    USD
    
    
    86
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    264Inventories  Advances to suppliers
    
    USD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total current assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,414NONCURRENT ASSETSOther receivables
    
    USD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total noncurrent assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,414CURRENT LIABILITIESAccounts payable
    
    USD
    
    
    30,261
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    92,886Accounts payable
    
    EUR
    
    
    502
    
    
    
    (b)
    
    
    
    4,0391
    
    
    
    2,028Loans
    
    USD
    
    
    25,984
    
    
    
    (a)
    
    
    
    3,0695
    
    
    
    79,758Total current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,672
 (a) Benchmark exchange rate of the BCRA (Central Bank of Argentina).

(b) As quoted by Banco de la Nacíon Argentina as of year end.  F-147  19




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EXHIBIT IV REFINERÍA DEL NORTE S.A. BREAKDOWN OF CURRENT INVESTMENTS, RECEIVABLES, LOANS AND OTHER LIABILITIES
AS OF DECEMBER 31, 2006 (Figures stated in thousands of Argentine pesos  Note 2.II.)
(Unaudited) Assets
    
    LiabilitiesCurrent
    
    
    
    
    
    
    
    
    
    
    OtherTerm
    
    investments
    
    
    Receivables
    
    
    Loans
    
    
    liabilitiesWith no maturity
    
    
    
    
    
    
    153,680
    (5)
    
    
    
    
    
    
    83,857
    (6)With maturityMatured:- Up to 3 months
    
    
    
    
    
    
    29,066
    
    
    
    
    
    
    
    39,150- From 3 to 6 months
    
    
    
    
    
    
    339
    
    
    
    
    
    
    
    621- From 9 to 12 months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    554- From 1 to 2 years
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    - Over 2 years
    
    
    
    
    
    
    9,864
    
    
    
    
    
    
    
    703Total matured
    
    
    
    
    
    
    39,307
    
    
    
    
    
    
    
    41,028To mature:- Up to 3 months
    
    
    47,005
    
    
    
    99,908
    
    
    
    
    
    
    
    139,953- From 3 to 6 months
    
    
    
    
    
    
    345
    
    
    
    79,848
    
    
    
    66,068- From 6 to 9 months
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    5,239- From 9 to 12 months
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    6,159- From 1 to 2 years
    
    
    
    
    
    
    715
    
    
    
    
    
    
    
    - Over 2 years
    
    
    
    
    
    
    3,606
    
    
    
    
    
    
    
    Total to mature
    
    
    47,005
    
    
    
    105,240
    
    
    
    
    
    
    
    217,419Total with maturity
    
    
    47,005
    
    
    
    144,547
    
    
    
    79,848
    
    
    
    258,447Total
    
    
    47,005
    (1)
    
    
    298,227
    (2)
    
    
    79,848
    (3)
    
    
    342,304
    (4)
  (1)
    
    Accruing interest at a variable rate of about 4,95% per annum.  (2)
    
    Receivables are disclosed excluding the allowance for doubtful accounts. Approximately 94% does not accrue
interest, accruing the rest, interest at a fixed rate. The average weighted rate is approximately 6% per annum.  (3)
    
    Loans accrue interest at a fixed variable rate. The average weighted rate, including taxes on interest, is
approximately 4.51% per annum.  (4)
    
    Not accruing interest, except for the accrual for purchase of raw material under the agreement with oil & gas
producing companies amounting to 74,854, accruing interest at LIBOR.  (5)
    
    Related to the balances of social contributions credit, and deferred tax assets.  (6)
    
    Related to reserves for contingencies and accrual for purchase of raw material under the agreement with oil & gas
producing companies. F-148  20




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EXHIBIT V REFINERÍA DEL NORTE S.A. CHANGES IN ALLOWANCES AND RESERVES AS OF DECEMBER 31, 2006
(Figures stated in thousands of Argentine pesos  Note 2.II.) (Unaudited) 2006Item
    
    Balances at
Beginning of
year
    
    Increases
    
    
    Decreases
    
    
    Balances at
end of yearDeducted from assets:- Allowance for doubtful accounts
    
    6,860
    
    
    635
    
    
    
    (1,707
    )
    
    
    5,788- Allowance for materials  ́ impairment
    
    4,218
    
    
    -
    
    
    
    (12
    )
    
    
    4,206Total 2006 (Unaudited)
    
    11,078
    
    
    635
    (1)
    
    
    (1,719
    )(2)
    
    
    9,994Included in liabilities:- Noncurrent  Allowance for contingencies
    
    10,070
    
    
    38,596
    
    
    
    (11,722
    )
    
    
    36,944Total 2006
    
    10,070
    
    
    38,596
    (1)
    
    
    (11,722
    )(3)
    
    
    36,944
  (1)
    
    Charge for the year allocated to Other income, net account in the statement of income.  (2)
    
    Used over the year.  (3)
    
    Includes 7,614 used over the year and 4,108 received due to modification of the likelihood of
occurrence.  F-149  21