China National Petroleum Corp. (CNPZ), China’s largest oil producer, is in talks to acquire Barra Energia Petroleo e Gas, a Brazilian oil startup, for about $2 billion, people with knowledge of the matter said.
The negotiations are under way and a deal could be reached as soon as this month, said the people, who asked not to be identified because the discussions are private. First Reserve Corp. and Riverstone Holdings LLC have invested a combined $1 billion in the Rio de Janeiro-based company, in addition to $200 million in pledged investments from other funds, according to Barra’s website.
China’s overseas oil and gas acquisitions reached a record last year as the government said it would boost funding for energy investment to secure long-term supply. Barra has stakes in two projects near Brazil’s largest offshore discoveries, both in the Santos Basin that holds Brazil’s largest oil field.
“It looks like CNPC can gain access to one of the largest offshore reserves in the world through the deal, and build a foundation for long-term development in South America,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Buying up assets from South America has long been part of CNPC’s global strategy to build up exploration and refining portfolios in different continents.”
The talks highlight Asian interest in Brazilian oil assets. Petroliam Nasional Bhd., the state-owned Malaysian energy company known as Petronas, announced today it will pay $850 million for a 40 percent stake in a field owned by OGX Petroleo e Gas Participacoes SA in Brazil’s Campos Basin.
Li Runsheng, CNPC’s Beijing-based spokesman, did not answer two calls to his office seeking comment. Mao Zefeng, spokesman of CNPC’s publicly traded arm PetroChina Co., said the company doesn’t comment on market rumors. Representatives for Barra, First Reserve and Riverstone declined to comment.
PetroChina gained as much as 2.3 percent to HK$10.20 and traded at HK$10.16 as of 11:25 a.m. in Hong Kong.
Both of Barra’s blocks are in the so-called pre-salt region, an area the size of Florida off the coast of Rio and Sao Paulo, that holds at least 50 billion barrels of oil trapped under a layer of salt. Geologists call the region the picanha azul, or blue steak, because it appears on energy maps as a long blue area shaped like Brazil’s traditional beef cut.
CNPC and PetroChina have announced in the past six months they will spend about $7 billion on overseas oil and gas assets from Mozambique to Australia, according to data compiled by Bloomberg. In March, CNPC said it would buy a 20 percent stake in Mozambique’s Area 4 for $4.2 billion, where 75 trillion cubic feet of gas, or more than Norway’s existing reserves, has been found.
PetroChina this year agreed to buy a 20 percent stake in the Poseidon natural gas discovery off the northwest coast of Australia and a 29 percent interest in the Goldwyer shale project in the onshore Canning Basin in Western Australia from Houston-based ConocoPhillips. (COP) The company last year agreed to pay BHP Billiton Ltd. (BHP) $1.63 billion for a stake in the proposed Browse liquefied natural gas venture, also in Western Australia.
The publicly traded unit plans to invest at least $60 billion this decade in global oil and natural gas assets to increase the share of overseas output to half of its total, former Chairman Jiang Jiemin said in 2010.
Billionaire Eike Batista, Rio de Janeiro-based OGX’s founder and controlling stakeholder, is selling assets and reshuffling management in his commodities and logistics companies to bolster investor confidence amid concern over missed financial and production targets. OGX started to pump oil last year and reached its highest offshore production in January with 13,200 barrels a day.
The acquisition marks Petronas’ first entry into exploration and production in Brazil and follows a C$5.2 billion ($5.17 billion) deal last year to take over Canadian producer Progress Energy Resources Corp.
OGX fell 1 percent to 1.95 reais at the close of trading in Sao Paulo, before the announcement of the deal.
To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at firstname.lastname@example.org; Zijing Wu in Hong Kong at email@example.com; Peter Millard in Rio de Janeiro at firstname.lastname@example.org