•  rio de janeiro
• Thursday, May 24, 2012
• Inter Press Service

China's voracious demand for energy has prompted it to embrace Brazil as a major oil partner, fuelling the dramatic expansion of Chinese companies in this South American country. But while some see this as a boost to the Brazilian economy, others fear that it poses a risk to this country’s future self- sufficiency.

China has been Brazil's principal oil investor in the last three years, through China Petrochemical Corporation (Sinopec) and Sinochem Corporation (Sinochem), energy expert Adriano Pires told IPS. The Asian giant, which is now Brazil's main trading partner, has invested some 15 billion dollars, especially in purchases of assets in companies already operating in Brazil in offshore oil exploration and production.

'China's strategy is to secure oil reserves to guarantee its supply,' said Pires, the director of the Brazilian Centre for Infrastructure (CBIE). It is following the same plan in other Latin American countries, such as Argentina and Venezuela, and in other regions, like Africa, he added. The Brazilian Export Promotion Agency (APEX) reported that China intends to increase its strategic oil reserves by 60 percent, and is willing to go anywhere in the world to do this.

According to CBIE, China’s involvement in Brazil’s oil industry started in 2010 when Sinochem bought 40 percent of the shares of Norwegian company Statoil in the Peregrino field, in the Atlantic ocean off the southern port city of Santos, in a deal worth 3.1 billion dollars. The same year, Sinopec invested 7.1 billion dollars to take over 40 percent of the Brazilian subsidiary of the Spanish transnational Repsol.

In March this year, Sinopec acquired a 30 percent stake in Petrogal Brasil, which is responsible for the oil and gas exploration and production activities of Portugal’s Galp Energia in Brazil, for 4.8 billion dollars. Chinese capital also teamed up with Brazilian state oil giant Petrobras to develop offshore areas in the northern Pará-Maranhão basin, and with Anglo-French oil company Perenco in the southeastern Espirito Santo basin.

Pires said the Chinese firms are also interested in acquiring shares in OGX, an oil company owned by Brazilian millionaire Eike Batista, who already has Chinese partners in his mining and metal businesses. 'Brazil is a source of oil and gas, which are strategic resources for sustainable growth in China, but we are also very interested in the Brazilian market,' Tang Wei, the head of the Brazilian-Chinese Chamber for Economic Development (CBCDE), told local media.

Pires said this interest is due to China's need to supply its rising demand for fuel, partly to fill the tanks of the cars driven by the growing middle class. As he said, the Asian giant is today the world's second largest oil consumer, at 9.5 million barrels per day (bpd), following the United States, which uses between 18 and 20 million bpd. In a few years time, China is expected to take the lead. In parallel with its economic activities in Brazil, China's oil purchases have also grown.

© Inter Press Service (2012) — All Rights Reserved. Original source: Inter Press Service

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