The Next Deepwater Duo

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Last month I looked at Petrobras' (NYSE: PBR) partnership with Japanese trading house Mitsui (Nasdaq: MITSY). The pair of companies is investing in everything from an extended deepwater date with Transocean (NYSE: RIG) to Brazilian biofuels.

Now it looks as though Petrobras may be close to vaulting its way into an even more profitable partnership, this time with Chinese offshore ace CNOOC (NYSE: CEO).

CNOOC is achieving strong results in places like Bohai (to which Ultra Petroleum (NYSE: UPL) said bye-bye), where a new wildcat well just flow-tested at around 1,000 barrels of oil per day. But to get at China's true prize, CNOOC needs to go further offshore.

Just as with the Gulf of Mexico and offshore West Africa and Brazil, China's deepwater basins hold tremendous hydrocarbon deposits. The technical challenges of deepwater exploitation demand expertise that CNOOC simply doesn't have today. The company needs a partner, and Petrobras fits the part.

CNOOC is reportedly set to offer Petrobras access to some of China's offshore bounty -- so long as Brazil is willing to reciprocate. Both countries keep a fairly tight lid on foreign participation, so a mutual opening-up of meaningful size would mark a major new chapter in the oil story.

Whether we decide to lift our domestic drilling constraints, an accelerated exploitation of China's riches, with the help of a proven developer like Petrobras, would indicate that drillers like Noble (NYSE: NE) and Atwood Oceanics (NYSE: ATW) -- which just optioned a new ultra-deepwater rig -- may in the not-so-distant future be even busier than we presently believe.

Related Foolishness:

• Did you catch China's rig jig?
• You can still make a killing in drilling.
• Dividends in the deepwater? Who knew?