Sinopec Completes Deal To Buy 30% Of Galp Energia's Brazil Assets

China Petrochemical Corp., known as Sinopec Group, said Thursday it completed a deal to buy a 30% stake in the Brazilian unit of Portuguese oil company Galp Energia SA (GALP.LB) for $5.16 billion.

The pact is the latest in China's drive to buy into Brazil's still lightly exploited but huge oil and gas reserves, and comes after Sinopec's 2010 purchase of 40% of Spanish oil major Repsol's Brazilian unit for $7.1 billion.

Under the deal, valued at $5.16 billion, Sinopec will gain 21,300 barrels of oil equivalent a day by 2015, a figure that will reach 112,500 barrels a day by 2024, Sinopec said in a statement.

The move follows a wave of foreign investments by Chinese oil majors as they seek to compete in scale with major Western oil companies and offset their domestic refining losses. Sinopec has said its refining business booked a loss of CNY35.8 billion (US$5.7 billion) in 2011 due to high crude oil prices, which it was unable to pass on to customers due to government caps on domestic fuel prices.

Galp said last November that Sinopec would inject $4.8 billion into its Brazilian subsidiary Petrogal Brasil and make a shareholder loan of about $390 million to the unit, valuing the deal at $5.19 billion. At the time, it said there would be a "possibility for both parties to pursue, jointly or separately, further expansion in that region."

Galp said its Brazilian assets at the end of 2010 included combined proven, probable and possible reserves of 554 million barrels oil equivalent. Its unit had contingent resources of 2.135 billion barrels of oil equivalent and risked prospective resources of 188 million BOE.

Although Sinopec produced 321.73 million barrels of crude oil in 2011, less than 6% of its output came from overseas projects, the company has said.