EFE | 06 Nov, 2009
Brazilian state-controlled energy giant Petrobras said that it has signed a contract finalising a 10-year, $10 billion loan from China Development Bank (CDB) Corp, the biggest-ever financing deal between a Chinese entity and a Brazilian firm.

"This funding is relevant not only due to the amounts involved, but also because it represents a new phase of relationship between developing countries," Petrobras CFO Almir Barbassa said in a statement Wednesday.

The executive represented Petrobras at the signing ceremony Tuesday in Beijing, the statement read.

Negotiators had been hammering out the terms of the financing deal since May, when it was first announced during President Luiz Inacio Lula da Silva's visit to China.

Petrobras said it will give preference to Chinese companies in using the loan for the purchase of goods and services and also announced it will pay back part of the loan with proceeds from the sale of oil to China.

The Brazilian oil firm will increase its sale of crude to Unipec Asia, a unit of Chinese state oil company Sinopec, to 150,000 barrels per day (bpd) in the first year of the agreement and up to 200,000 bpd during the subsequent nine years.

When Petrobras makes the first disbursement of funds from the loan, the long-term agreement on oil exports to Unipec Asia also will go into effect, the Brazilian oil giant said.

The company said that even though the loan is a "trigger" for the export agreement the two deals are independent and Brazil's oil should not be considered as collateral for the financing arrangement.

Petrobras also said the CDB funds will be used to fund part of its $174.4 billion export plan for the 2009-13 period, an amount that is 55.2 percent higher than that of the five-year plan ending in 2012 and the largest in the company's history.

The 2009-13 plan includes roughly $29 billion for the first phase of development in the pre-salt region, a massive new, offshore oil frontier that is so-named because the estimated 80 billion barrels of oil equivalent it may contain are located deep below the ocean floor under an unstable layer of salt.

If the most optimistic estimates prove correct, the pre-salt deposits could translate into a nearly six-fold increase in Brazil's current proven reserves of 14 billion barrels and transform the South American nation into a major oil power.

But accessing them will be very costly and pose an enormous technical challenge because, among other things, it will require boring through a shifting layer of salt that is as much as a mile thick in some places.