The Brazilian government signed an agreement to supply China with 100,000 to 160,000 barrels of oil per day at market prices in exchange for a loan from the China Development Bank to help develop its huge oil reserves.
The agreement signed Thursday and which will take effect immediately, was announced at Brazil's foreign ministry after Brazilian President Luiz Inácio Lula da Silva met with Vice President Xi Jinping in the capital city of Brasília.
Brazil's government controlled oil and gas multinational Petrobras signed a memorandum of understanding to secure long-term financing from the Chinese Development Bank and hopes to begin receiving funds as early as May. The funds are to help extract massive, newly found oil reserves deep beneath the ocean floor off Brazil's southern coast.
"We'll settle it by the time president Lula visits China in May," Petrobras CEO José Sérgio Gabrielli told reporters after meeting with Chinese officials.
The understanding confirms the interest of both countries: Brazil needs funds to develop the new fields and China is determined to ensure long term supplies of natural resources such as oil, minerals and agriculture commodities.
This is the purpose of Vice-president Xi Latinamerican tour which so far has included Mexico, Colombia, Venezuela and now Brazil.
Brazilian Foreign Minister Celso Amorim hailed the deals as proof of growing cooperation between two large emerging markets. "This is the most important South-South relationship," he underlined.
On Tuesday, China Development Bank signed a US$ 25 billion financial deal with Russia's state oil champion Rosneft and pipeline monopoly Transneft in exchange for oil from the huge new East Siberian fields for the next two decades.
Petrobras is to supply the oil to China's government owned Sinopec. Brazil has discovered high grade light oil and natural gas deposits in the Santos Basin, and further south which is estimated to hold 60 billion barrels of oil.
CEO Gabrielli recently announced a five-year investment developing plan totaling US$ 175 billion.
Brazil has been talking with China about the loan since last year. The company has been seeking alternatives to international bank lending and bonds to finance its spending plan in the face of an international credit crunch.