Repsol, Sinopec in deal to tap vast Brazilian oilfields

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Spanish energy giant Repsol Friday announced a 7.1-billion-dollar alliance with China's Sinopec, a major international player, to help develop Brazil's massive offshore oil reserves.

Sinopec, which as part of China's drive to secure energy supplies for its booming economy already has Brazilian interests, will take a 40-percent stake in Repsol's Brazil affiliate.

The deal will make Repsol Brazil "one of the largest private energy groups in Latin America," Repsol said in a statement.

"Respol Brazil will make a capital increase of more than 7.1 billion dollars (5.2 billion euros) that will be fully subscribed by Sinopec, resulting in a company with a value of 17.8 billion dollars," it said.

Repsol would then hold 60 percent of the capital of the company and Sinopec, one of China's top oil companies, 40 percent.

It said the operation will allow Repsol Brazil "to meet the total investment needed for the development of assets in Brazil, including some of the biggest discoveries the world, such as those obtained in the blocks of Guara and Carioca."

Repsol, Spain's largest oil group, and Sinopec will continue with expansion plans in Brazil and "participate, jointly or separately, in future rounds of tenders in the country."

The announcement comes days after Brazil's state-run Petrobras became the world's third-biggest oil firm by market capitalisation as it completed a record share issue expected to bring in around 70 billion dollars.

Petrobras is to use the proceeds to explore the offshore oil fields, which are so big they could make Brazil one of the world's top exporters.

"Brazil's offshore boasts one of the world's fastest-growing oil and gas reserves," Repsol said.

"The deal (with Sinopec) highlights the enormous international interest in this historic moment for Brazil, and particularly for the Santos Basin pre-salt activity led by Petrobras." Pre-salt refers to an oil-rich range of rock lying beneath an extensive layer of salt off the Brazilian coast.

Repsol shares closed up 4.95 percent at 19.83 euros on the Madrid stock market following the announcement to 19.93 euros. Shares in construction group Sacyr, which holds 20 percent of Repsol, rocketed 12.98 percent to close at 4.96 euros.

Sinopec is among the largest petroleum and petrochemical companies in China and its biggest refiner. It is involved in exploration and production in more than 20 countries, Repsol said.

Sinopec, along with other major Chinese companies, is seeking overseas investments in oil and gas resources to meet China's soaring demand for energy and commodities.

China's energy consumption has become the world's second largest on the back of years of double-digit economic growth.

The head of the Sao Paulo stock exchange, Edemir Pinto, told AFP this week that the capitalization of Petrobas has opened the door to foreign oil companies looking to tap Brazil's expanding market.

He said a Repsol request to be listed on the exchange was being considered by Brazil's Equities Commission (CVM).

Repsol chairman Antonio Brufau said the Sinopec agreement "highlights the success of the exploration activities made by Repsol in recent years."

"We are delighted to share the development of Repsol's Brazilian projects with a such prestigious partner in the sector as Sinopec."

Repsol said it is "one of the largest independent upstream operators in Brazil and the country's third-largest oil producer in 2009."

© 2010 AFP

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