MercoPress. South Atlantic News Agency

Chinese oil group Sinopec buys 40% of Repsol-YPF Brazil operations

Repsol has stakes in blocks in Brazil’s Santos and Espirito Santo basins

China’s Sinopec group, the country’s second-largest oil and gas producer, will invest 7.1 billion US dollars in Repsol-YPF’s Brazilian unit as the Spanish oil company raises funds to develop offshore projects.

The Chinese company will buy new shares in the Brazilian unit and will hold 40% of that division after the capital increase, Madrid-based Repsol said Friday in a statement. Shares in Repsol, which previously planned an initial public offering of the unit, jumped to a two-year high.

The acquisition is the second-largest overseas purchase by a Chinese company as the world’s biggest energy consumer snaps up fields to meet surging demand. Repsol has stakes in blocks in Brazil’s Santos and Espirito Santo basins and plans to invest as much as 14 billion USD there through 2019. It estimates the Guara and Carioca fields may hold as much as 3 billion barrels.

Repsol climbed 5% to close at 19.83 Euros in Madrid, a two-year high, giving the company a market value of 24 billion Euros.

Sinopec investment in Repsol Brazilian unit is China’s largest overseas oil deal since the 8 billion USD purchase of Canada’s Addax Petroleum Corp. The group bought Addax last year to gain oil reserves in Iraq’s Kurdistan and West Africa.

Meantime Cnooc Ltd, China’s biggest offshore oil explorer, agreed in March to buy a 50% stake in Argentine producer Bridas Corp. for 3.1 billion USD to meet demand in the world’s fastest- growing major economy. PetroChina in December won approval from the Canadian government to buy a stake in two Alberta oil- sands projects for 1.9 billion Canadian dollars. Statoil ASA, Norway’s largest oil and natural gas company in May agreed to sell a 40% stake in the Brazilian offshore Peregrino field to China’s Sinochem Group for 3.07 billion USD in cash.

“For us, Brazil was way too large” Repsol’s Chief Operating Officer Miguel Martínez admitted in a recent interview with Bloomberg. “Obtaining a partner was a move that was necessary.” Repsol and Sinopec may work together in other areas in the future, he said.

Since 2007, Repsol and partners BG Group Pls and Brazil’s Petrobras have found hydrocarbons in the offshore Carioca, Guara and Iguacu fields in the Santos Basin’s BM-S-9 block. They are ultra-deep deposits beneath a salt layer under the seabed.

Oil and gas production at Repsol’s upstream division, which doesn’t include Argentine unit YPF, was unchanged from a year earlier at 340,000 barrels of oil equivalent a day in the second quarter. Output from Buenos Aires-based YPF, of which Repsol owns 84% fell 7% to 556,000 barrels a day as fields matured.