Chinese Eyeing Increased Involvement in Brazilian O&G and Shipbuilding

New Wave Media

Chinese companies such as Sinopec, Sinochem, CNOOC, CSSC are actively pursuing partnerships worldwide, in Brazil this effort is particularly noticeable through recent partnerships with O&G players such as Petrobras, Statoil and Repsol.

In the shipbuilding business news of some form of partnership between CSSC and local builders is expected for the near future as the local shipbuilding capabilities expand.

In the O&G industry, Sinopec just recently announced its partnership agreement with Spanish operator Repsol. The agreement represented a capital increase of around 7 billion for Repsol Brasil, increasing Repsol Brasil´s total capital to around 17.8 billion. With this agreement 60% of Repsol Brasil still belongs to Repsol, while 40% now belongs to Sinopec. This capital increase will be vital for the development of some major discoveries, such as the Guará and Carioca fields in the Santos Basin and also signifies only the third Chinese participation in the Brazilian O&G industry. However it´s important to note that this Chinese entrance in the Brazilian offshore is very recent, as the first participation deal was only secured in early 2010.

In mid 2010 Chinese petrochemical giant Sinochem Corp. won a bidding process for a 3.07 billion stake in Statoil´s Peregrino oilfield in Brazil,four Chinese companies were originally involved in the bidding process.Peregrino is located in just over 100 metres of water 85 km off Rio de Janeiro, it is Statoil´s largest international fields. A total of 30 horizontal oil producing wells and seven injection wells are due to be drilled on Peregrino from two platforms, with a ship placed between them to receive and process the heavy oil. Because it’s so heavy and viscous, oil will flow less easily than water through the Peregrino reservoir. The oil will therefore contain a high proportion of water, with substantial treatment capacity needed to deal with it, hence the need by Statoil to forgo its 100% stakes and bring in Sinochem´s capital, allowing the Chinese to have 40% of the field.

Sinopec, which did not conclude the deal with Statoil, is already present in Brazil, in April 2010, it received rights to develop two oil blocks off Brazil's northern coast under an agreement signed with Petrobras.

Coming after BP and Transocean, Macondo tragedy in the GOM, many analysts did not believe the Chinese would want to face the high risks of deepwater E&P but the opposite proved to be true, with strong investments coming from Chinese companies wanting to enter the deepwater O&G market in Brazil and WA. Sinopec will be dealing with some serious deepwater plays in its partnership with Repsol.

The Chinese involvement in Brazil is new and exciting as it is well known that massive amounts of capital will be needed to develop recent discoveries and discoveries still forthcoming in Brazil. As the world´s second largest economy, the Chinese dragon is more than welcome in Brazil. It is hoped that this involvement in O&G will lead to Chinese involvement in the growing shipbuilding industry, as negotiations are underway for CSSC´s entry in partnership with Brazilian shipbuilders as the Korean giants such as HHI, SHI have already done.

 

Claudio Paschoa