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Monday, December 8, 2008

Official: China wants to put $10B in Brazil oil

I think this is a smart move. China needs to diversify its oil import. Also, it's good time to make oil deals as the price of oil just dropped below $40 per barrel.

Official: China wants to put $10B in Brazil oil


BRASILIA, Brazil (AP) — China wants to loan Brazil's state oil company $10 billion to help develop massive new oil fields in deep water off the coast of Rio de Janeiro, Brazil's top energy official said in comments published Monday.

Mines and Energy Minister Edison Lobao also told the Folha de S. Paulo newspaper that the United Arab Emirates has offered to finance field development, but he did not specify a price tag.

Lobao said Chinese officials contacted his ministry to propose a loan and Petrobras then negotiated directly with the Chinese. He gave no details on the status of talks, and any deal would have to be approved by his ministry.

Petrobras, in an e-mailed statement to The Associated Press, didn't confirm a China deal, but said the company has historically searched for "varied sources of financing" and that recent deals will be included in its new investment plan, expected in the coming weeks.

Lobao told the privately run Agencia Estado news agency other countries also wanted to participate: "It's not just China. It's a range of opportunities that Petrobras has."

Lobao said the ministry has talked with a Japanese consortium, Canadian banks and various foreign oil service companies who want to invest in or work on offshore finds. He offered no other details.

Brazil also is ready to tap its foreign reserves to offer a credit line for exploration by Petroleo Brasileiro SA if needed, he added. Lobao's ministry confirmed the comments, but a spokesman did so only on condition of anonymity in keeping with department policy.

Lobao spoke as many Brazilian companies are being cut off from international credit, which has tightened in the global financial crisis. The minister and other top government officials have repeatedly said the crisis will not effect the exploration of the offshore oil reserves, which could hold up to 80 billion barrels of oil.

Petrobras says it has discovered 50 billion to 80 billion barrels of reserves over the past year and is gearing up to spend hundreds of billions of dollars during the next 30 years to extract the light crude.

Lobao said investment would not be hurt as long as oil prices stay above $30 per barrel. But other officials have put the price from $35 to $60 a barrel for deep-water exploration to remain viable.

Light, sweet crude for January delivery was up $2.89 to $43.70 a barrel in electronic trading Monday on the New York Mercantile Exchange.

Petrobras' American depository shares were up 7.8 percent Monday in New York, or $1.40 to $19.34.

AP Business Writer Alan Clendenning contributed from Sao Paulo and AP writer Bradley Brooks contributed from Rio de Janeiro.

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