China signs $10-billion 'oil-for-loan' deal with Brazil

Asia's largest crude refiner, China's state-owned Sinopec and China Development Bank (CDB) have signed a $10-billion 'oil-for-loan' trilateral agreement with Brazilian oil giant, Petrobras – finalising an accord agreed in February 2009 during China's vice president Xi Jinping visit to Brazil. (See: China to lend Petrobras $10 billion to secure future oil supplies) 

Under the three-party agreements signed this week, the state-owned China Development Bank would lend $10-billion at low-interest rates to the Brazilian state-run oil company in return for a guaranteed supply of 7 million metric tonnes of crude oil in 2010, to Sinopec, which would increase to 10 million tonnes from 2011 to 2020.

This 'oil-for-loan' deal will be the fifth such deal signed by China since February 2010 totalling $45 billion, according to a Securities Journal report yesterday.

China Development Bank had agreed to a similar deal in February 2009 and cemented this year with Russian oil companies, where Russia would supply 300,000 barrels a day for the next 20 years in return for $25 billion loan at 6 per cent interest. (See: China, Russia sign $25-billion loan-for-oil deal)

Petrobras and Sinopec have also signed a memorandum of understanding on exploration, equipment and service supply. Sinopec said that it is negotiating with Petrobras to invest in their upstream projects.

Sergio Gabrielli, CEO of Petrobras, said that the $10 billion loan from China Development Bank, and other Brazilian banks would reach $30 billion, which would be used to explore offshore oil at Tupi basin in Brazil that is expected to cost $174 billion by 2013. (See: Petrobras to make $174.4-billion oil investments by 2013)