China signs $10 billion loan for Brazil

May 19, 2009

China, the world’s second-biggest energy user, and Brazil signed 13 accords, including a $10 billion loan and agreements on oil exploration and crude trade.

China PetroChemical Corp., the nation’s largest refiner, will explore for oil in two areas in Brazil, Zhang Guobao, the head of the National Energy Administration, said before a signing ceremony to be attended by Brazilian President Luiz Inacio Lula da Silva and his Chinese counterpart Hu Jintao. Petroleo Brasileiro SA and China Development Bank agreed to a $10 billion loan agreement.

Petrobras, as Brazil’s state-owned company is known, has been in talks with China about a loan since last year. The company has sought alternatives to international bank lending and bonds to finance its spending plan amid the global credit crunch. China is securing energy resources to power its economy, the world’s third-largest, by offering loans to oil-producing countries including Russia, Venezuela and Kazakhstan.

Petrobras will supply 150,000 barrels of crude oil a day to China this year and 200,000 barrels in 2010 under one of the agreements signed today, Chief Executive Officer Jose Sergio Gabrielli said in Beijing, without giving details.

Rio de Janeiro-based Petrobras requires funding on oil exploration. The Brazilian oil producer plans to spend $111 billion through 2020 to produce 1.8 million barrels of oil a day at so-called pre-salt oil fields, Gabrielli said last month.

The company announced in November 2007 the discovery of the Tupi offshore field, which may hold up to 8 billion barrels of oil beneath as much as 3,000 meters of water and 7,000 meters of seabed, making it the largest find in the Americas since Mexico’s Cantarell.

Chinese Oil Demand

China, the world’s second-biggest energy consumer, agreed on April 16 to lend $10 billion to Kazakhstan. In return, PetroChina Co. was allowed to buy a 50 percent stake in an oil producer in the Central Asian country.

In the same month, China boosted crude-oil imports by 14 percent from a year earlier after the government announced plans to boost stockpiles of the fuel, according to official data.

China agreed on Feb. 17 to provide Russia with $25 billion of loans in return for 300,000 barrels a day of oil for 20 years. Venezuela’s Petroleos de Venezuela, known as PDVSA, will provide 200,000 barrels a day to the Asian country to pay down a $4 billion loan from China Development Bank Corp.

China consumed 360 million tons of oil last year, or 7.3 million barrels a day. Imports reached 178.9 million tons, or 3.6 million barrels a day.

By John Liu
Source: Bloomberg (www.bloomberg.com)