Petrobras, Sinopec to Team Up in Deepwater Blocks

BEIJING (Dow Jones), Apr. 16, 2010

Brazil state oil company Petroleo Brasileiro SA (PBR), or Petrobras, has signed a broad strategic cooperation agreement with China Petrochemical Corp., or Sinopec Group, regarding oil supply contracts and exploration in two deepwater blocks, Petrobras said.

The preliminary agreement builds on a previous oil-for-loan pact the two companies signed last May, under which Petrobras will supply crude oil to Sinopec for 10 years and receive a $10 billion loan from the China Development Bank.

The two companies will cooperate in a wide variety of operations, including exploration and production, petrochemical and fertilizers as well as services and procurement, Petrobras said in a statement on its official Web site Thursday.

Sinopec Group spokesman Huang Wensheng Friday confirmed an agreement that provides for new crude supply and upstream cooperation had been signed.

The agreement includes provisions that Petrobras may sell to Sinopec part of its interest in blocks BM-PAMA-3 and BM-PAMA-8, located in the Para-Maranhao Basin offshore northern Brazil, Petrobras said.

The two companies will also assess cooperation in the Comperj petrochemical complex in Rio de Janeiro, it said.

The China Development Bank may provide further financing to Petrobras, it added, without elaborating.

Sinopec has been granted rights to develop two oil blocks off the coast of northern Brazil, Brazil's foreign ministry said in a separate statement.

In May last year, Petrobras agreed to supply 150,000 barrels of crude oil a day to Sinopec for the first year of a 10-year contract and 200,000 barrels a day for the remaining nine years.

In the first two months of 2010, China imported an average of 186,000 barrels a day of crude oil from Brazil, according to Chinese government data.

Petrobras has been seeking financing from China to support oil exploration and development in the subsalt oil area off Brazil's southeastern coast, where major oil reserves have been discovered. Petrobras officials visited Beijing last month, meeting officials from the China Development Bank and two major Chinese oil companies.

The state-owned CDB has been involved in several oil-for-loan agreements that Chinese oil companies have signed with different countries in the past year.

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