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Petrobras, China’s CNPC deepening oil ties

04 Jul 2017 15:19 (+01:00 GMT)
Petrobras, China's CNPC deepening oil ties

Rio de Janeiro, 4 July (Argus) — Brazil's state-controlled Petrobras and Chinese state-owned CNPC signed a memorandum of understanding to negotiate a deepening of oil and gas ties in Brazil and abroad.

The agreement signed today in Beijing by Petrobras chief executive Pedro Parente and CNPC vice president Wang Dongjin is the latest international partnership agreement for Petrobras aimed at sharing risk and boosting investment. Other partners include Portugal's Galp, France's Total and Norway's Statoil.

Under the new accord, "the companies undertake to jointly evaluate opportunities in Brazil and abroad in key areas of mutual interest, taking advantage of capabilities and experience in all segments of the oil and gas chain, including potential structured financing," Petrobras said.

Petrobras and CNPC are already partnered in the development of the 8bn-12b bl Libra sub-salt field.

Petrobras holds a 40pc operating stake in Libra and CNPC a 10pc working interest. Another Chinese state-owned firm, CNOOC, holds another 10pc. Shell and Total each hold 20pc. The field is expected to start producing 27°API crude through early well tests later this month.

"For CNPC, the partnership with Petrobras reinforces its interest in investing and increasing its activities in Brazil," Petrobras said in a note.

In December 2016, Petrobras concluded a $5bn loan agreement with China Development Bank backed by crude exports to three Chinese state-owned oil companies including Chinaoil, the trading arm of CNPC. ZhenHua, the oil arm of state-owned arms manufacturer Norinco and agro-petrochemical conglomerate Chemchina Petrochemical are the other two beneficiaries under the 10-year agreement.

Crude flows under the agreement have already started to flow to China, the primary destination for Brazilian crude.

CNPC is expected to participate in upcoming sub-salt auction Brazil and is among the firms eyeing Brazilian refineries that Petrobras is looking to offload as part of $21bn 2017-18 divestment plan. In 2014, Petrobras sold its Peruvian subsidiary to CNPC for $2.2bn.