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Saturday, May 23, 2009

China grants Brazil $10B financing in exchange for oil

As a result of negotiations with China's government by Brazil's President Luiz Inacio Lula da Silva who was in China from May 18 to May 20, state-owned oil company Petrobras informed that it has concluded negotiations with China Development Bank (CDB) for a bilateral loan of $10 billion for 10 years.

China does not receive any stake in any Brazilian oil field or any contracts for providing services in the oil fields. The loan carries an interest rate of 6.5% and will be repaid in cash, not oil. Sinopec will end up paying for the oil in cash too.

The loan will be used to finance the Petrobras' $174.4 billion 2009-2013 investment plan and includes financing goods and services bought from China.
Within the scope of the contract signed with China Development Bank (CDB), it was agreed an increment on the actual crude oil export volumes from Brazil to China, said Petrobras.

Amongst the documents signed it was a long term export agreement between Petrobras and UNIPEC ASIA was inked. Unipec is a wholly-owned subsidiary of SINOPEC, which provides for export volumes of 150,000 barrels of oil per day for the first year and 200,000 barrels of oil per day on the 9 subsequent years, from Brazil's enormous pre-salt discoveries.

It was also signed between Petrobras and Sinopec a MOU - Memorandum of Understanding which covers for the cooperation in several areas of mutual interest comprising exploration, refining, petrochemical and the supply of goods and services.

"The US has a problem," Sergio Gabrielli, Petrobras' CEO, said recently when asked about the loan talks. "There isn't someone in the US government that we can sit down with and have the kinds of discussions we're having with the Chinese."

Gabrielli was referring to the fact that Chinese government banks are willing to extend huge foreign loans to further China's long-term energy-security goals: ensuring diverse global supplies and winning entree into competitive regions for its oil companies. A string of recent oil loans to Russia, Kazakhstan and others has pushed China's total commitments to more than $45 billion.

"In 2009, China became Brazil's first trading partner. Now we still face the challenge of exploring the full potential of investments that our economies can offer to each other," China's Xinhua news agency quoted Lula as saying.

China for the first time displaced the US as Brazil's top trading partner in April, a trend that is expected to continue as the resources-hungry Asian economy and the major agriculture and minerals producer expand commerce, say trade analysts.

"This visit will create new opportunities for the development of bilateral relations between China and Brazil," Chinese President Hu Jintao said at the Great Hall of the People where the two nations signed 13 accords. The agreements included the loan that the China Development Bank will provide to Petrobras and another $800 million the bank will provide to Brazil's development bank. The cooperative agreements include oil, equipment, financing, loan, science, space, law, port, agricultural products, among others.

The Petrobras loan is very welcome because the oil company needs to find alternative sources of financing after crude prices plunged about 60 percent from a record $147.27 a barrel last year, say analysts.$10B-financing-in-exchange-for-oil-/

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