Petrobras Seeks to Increase $10 Billion China Loan


By Laura Price and Joao Oliveira

May 20 (Bloomberg) — Petroleo Brasileiro SA, Brazil’s state-controlled oil company, is seeking additional loans from China after it signed a contract to receive $10 billion from the Asian nation.

Brazil Mines and Energy Minister Edison Lobao said today that the South American nation has been approached by countries including China and the United Arab Emirates to discuss possible financing. Petrobras, as the Rio de Janeiro-based company is known, needs to secure financing for a $174.4 billion investment plan to develop its so-called pre-salt offshore oil fields.

“Petrobras is investing $130 billion to purchase platforms and drill ships,” Lobao said in a Bloomberg TV interview in London today. “It needs financing from abroad, and the more the better. It’s negotiating further loans with China.”

Chinese President Hu Jintao and his Brazilian counterpart Luiz Inacio Lula da Silva yesterday signed 13 accords, including a loan from China Development Bank for Petrobras and another $800 million the bank will provide to Brazil’s development bank.

Financing talks with other countries may be affected by a congressional probe into Petrobras’s tax payments, Lobao said. O Globo newspaper said May 11 that Petrobras faces a federal investigation on tax accounting changes.

The company said May 14 it was entitled to 1.14 billion reais ($563 million) in tax savings after it adopted new accounting rules for foreign currency fluctuations.

Oil Prices

Petrobras said earlier this year its investment plan is viable providing international oil prices are at least $37 a barrel this year. Lobao said today he expects oil prices to stabilize at about $60 a barrel by the end of the year, and to rise to around $70 to $80 in a year’s time.

Crude oil for July delivery rose 96 cents, or 1.6 percent, to $61.06 a barrel at 9:02 a.m. on the New York Mercantile Exchange. Oil is up 37 percent this year.

Lobao also said he expects Brazil within two months to devise new oil regulations for Lula to approve. Lobao said it is a “pretty big possibility” they will create a state-controlled company that would own the entire pre-salt oil area and auction licenses to operate the blocks. He supports the proposal that would be financed by Brazil’s treasury.

Petrobras is producing 30,000 barrels of oil a day from Tupi, an offshore field that started output this year and which may contain an estimated 5 billion to 8 billion barrels of crude. Tupi, discovered in November 2007, is the largest find in the Americas since Mexico’s Cantarell.

PDVSA Refinery

Lobao said Petrobras is willing to build a refinery in Brazil’s Northeast by itself if it doesn’t reach an agreement with Petroleos de Venezuela SA, the country’s state oil company. Venezuela and Brazil don’t agree on who will receive fuel from the Abreu e Lima refinery, or at what price it will be sold, he said.

Brazil’s Finance and Energy Ministries are also studying the possibility of reducing domestic fuel pump prices, Lobao said.

“When there was a peak in oil prices, we didn’t raise pump prices, like in the U.S.,” he said. “We’re going to examine new prices, whether it be to raise them or cut them.”

Brazil hasn’t decided yet whether to apply for membership in the Organization of Petroleum Exporting Countries, or OPEC, the minister said. Lobao said it will wait until Brazil is an oil exporter to decide.

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