As most Fools who follow energy closely know well, Brazil's Petroleo Brasileiro
The challenge for the Brazilian government now is to produce the newly discovered crude in an atmosphere of depressed oil prices. The government has apparently approached countries with excess cash, and it appears negotiations have advanced the furthest with China, which has a growing need for oil, along with other commodities, including iron ore and soybeans, that are now abundant in Brazil. The agreement with China, if finalized, may provide up to $10 billion in financing for Petrobras.
And so it appears to be ideal that, on the one hand, amid a worldwide decline in spending by oil companies, Brazil intends to increase its energy spending by about half (to a total of about $174 billion), with about $28 billion going to deepwater projects over the next several years. And on the other hand, China, despite its own economic slowdown, continues to have both a voracious need for resources and $2 trillion in foreign exchange reserves to use to get them.
In addition to whatever agreement might come from the months-long conversations between the two countries, China Petroleum & Chemical
Brazil President Luiz Inacio Lula da Silva plans to visit China in May. It's entirely possible that a preliminary agreement between the two nations could be forged at that time. In the meantime, U.S.-based companies such as Transocean
All this only serves to increase my interest in Petrobras. Goodness only knows how much crude lies off Brazil's coast; current estimates say in excess of 30 billion barrels. I'm convinced that, before we know it, our world will again be thirsty for black gold. With funding to back its production efforts, Petrobras could easily slip into the catbird's seat.
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