Petroleo Brasileiro SA secured a $10 billion loan from China Development Bank, as the beleaguered state-owned oil producer endures the worst crude market in a generation and faces more than double that amount in maturities over the next two years.
The lifeline is part of a deal to supply crude to the Asian country, Rio de Janeiro-based Petrobras said in a filing. The amount of crude that will be supplied was not disclosed, Bloomberg reported.
China has invested in oil-rich nations to ensure supplies to the world’s biggest crude market after the US. Similar deals have helped Venezuela fund its ballooning debt.
Petrobras has been mired in Brazil’s worst-ever corruption scandal just as the Latin American nation goes through a recession, reducing domestic demand, and oil prices are 70% lower than in mid-2014.
“This is a relief for Petrobras,” said Edmar Almeida, a professor at the Federal University of Rio de Janeiro who studies the oil industry.
“This kind of oil-for-money contract has a cheaper financial cost for Petrobras than accessing the international bond market, especially after the company was downgraded to junk.”
The Brazilian oil company has been forced to sell assets and slash spending by about half, putting off investments in giant new offshore discoveries and helping fuel Brazil's worst economic downturn in more than a century.
The loan stems from accords signed between Brazil and China last year, Petrobras said in the statement.
"The loan increases China's commitment to Petrobras and will go a long way to pay the $12 billion coming due this year," a source involved in debt talks told Reuters.
This is the latest major deal between Petrobras and China in seven years. In 2009, a $10 billion arrangement with China included a commitment to export as many as 150,000 barrels a day of oil in the first year and 200,000 bpd over the subsequent nine years.
In May, Petrobras announced a $10 billion agreement with three Chinese banks that included $5 billion in loans from CDB.
Petrobras chief financial officer, Ivan Monteiro, said in November the oil industry’s most indebted major producer was studying ways of borrowing against future crude exports as part of efforts to cut its dependence on international capital markets.
