By Jaylan Boyle, Senior Reporter
RIO DE JANEIRO – An agreement has been signed between Brazilian state-owned petroleum giant Petrobras and the Chinese Development Bank, finalizing the details of a finance package of US$10 billion over 10 years.
The agreement was initially signed in May during a visit to Beijing by Brazilian President Luis Inacio ‘Lula’ da Silva, since when the two parties have been working out the finer details, a process which was completed earlier this month.
The loan by the Chinese Development Bank, a ‘state-owned enterprise’ will be used by Petrobras to facilitate it’s business plans from 2009-2013.
“This funding is relevant not only due to the amounts involved, but also because it represents a new phase of relationship between developing countries” said Petrobras’ representative at the signing ceremony, Chief Financial Officer Almir Barbassa, who made sure to stress also that the agreement between the organizations does not in any way form a ‘securitization’ pact.
The loan will be delivered to Petrobras in several stages throughout the 2009-2013 period, and representatives have more specifically said that the funds will be used to finance it’s export plan, which will total US$174.4 billion in petroleum products, a five year plan over 55 percent more ambitious than that for the period ending 2012, and the largest in the company’s history.
Petrobras has said that it will give preference to purchasing goods and services from Chinese companies with the funding provided by the Chinese Development Bank, and that part of the loan is to be paid back from oil sales to China.
It was also announced recently that Petrobras has signed a supply agreement with a subsidiary of the China Petroleum and Chemical Corporation, the oil refinery specialists known as Sinopec. The contract details the intended supply of 150,000 barrels of oil in the first year of the specified period of delivery, and 200,000 barrels per day thereafter for the remaining nine years of service.
The agreement comes as part of a concerted effort in recent times from the major Chinese state-owned energy companies to acquire resources overseas. The problem for Beijing is that oil demand in China is increasing at an alarming rate, while domestic supply sources are stagnant.
The push to lock up resources had been causing alarm in some quarters prior to the recent global economic crisis, as evidenced by the blocking by the US government on national security grounds of an attempt to acquire American oil company Unocal.
China is again reportedly attempting to enter into oil procurement in US territory, with the news that Beijing may be trying to cut a deal with Norwegian-owned concessions in the Gulf of Mexico. However, many commentators have predicted that the deal, if it turns out to be credible, will not meet with the same resistance as the Unocal deal did; uncertain economic times may mean that the US sees cooperation between the two countries as paramount.