Repsol, Sinopec in deal to tap vast Brazilian oilfields
Oil prices surge on strong China manufacturing dataNew York (AFP) Oct 1, 2010 - World oil prices leaped Friday, extending the prior day's gains as strong Chinese manufacturing data spurred hopes of strengthening global energy demand. New York's main contract, light sweet crude for November delivery, climbed 1.61 dollars to close at 81.58 dollars a barrel. The New York benchmark futures contract crossed 80 dollars for the first time in a month and a half on Thursday. On Friday, it shot up to 81.66 dollars in intraday trade, its highest level since August 9. In London, Brent North Sea crude for November delivery gained 1.44 dollars to settle at 83.75 dollars a barrel. Brent crossed 83 dollars for the first time since early May. The oil market climbed "in common with the other commodities, following the release of a better-than-expected Chinese PMI survey," JPMorgan Chase analysts said in a client note.
"The re-acceleration of growth into the fourth quarter is supportive of regional demand growth," they said. Financial markets welcomed the latest Chinese manufacturing data, showing a pick-up in activity in September. The China Federation of Logistics and Purchasing (CFLP) said its purchasing managers index (PMI) rose to 53.8 in September from 51.7 in August. A separate PMI, compiled by the London-based bank HSBC, also showed Chinese manufacturing growth accelerated in September. The energy market appeared to set aside weaker-than-expected US manufacturing data to focus on the upbeat news from China. Oil also drew strength from a weaker US currency, which makes dollar-priced commodities cheaper for buyers using stronger currencies and so tends to stimulate demand and prices.
The euro climbed Friday to more than 1.37 dollars, its strongest rate since March. "Upside momentum is gathering pace in the oil market driven by a combination of improving macro sentiment and constructive oil data releases," Barclays Capital analysts said in a statement. "Unexpectedly robust economic data from the US, following two strong oil market reports on Wednesday, helped create the condition for the push higher," they added. Oil prices soared on the back of a sharp drop in US crude stockpiles, which signaled rising demand, and a modest upgrade to economic growth in the key energy-consuming nation. The market leapt on Wednesday after the US government revealed that crude oil inventories tumbled 475,000 barrels in the week ending September 24, more than forecast by most analysts. Gasoline stocks fell 3.47 million barrels, while experts had expected a rise of 500,000 barrels. Distillate stocks fell 1.27 million barrels. burs-vs/fgf
The deal will make Repsol Brazil "one of the largest private energy groups in Latin America," Repsol said in a statement.
"Respol Brazil will make a capital increase of more than 7.1 billion dollars (5.2 billion euros) that will be fully subscribed by Sinopec, resulting in a company with a value of 17.8 billion dollars," it said.
Repsol would then hold 60 percent of the capital of the company and Sinopec, one of China's top oil companies, 40 percent.
It said the operation will allow Repsol Brazil "to meet the total investment needed for the development of assets in Brazil, including some of the biggest discoveries the world, such as those obtained in the blocks of Guara and Carioca."
Repsol, Spain's largest oil group, and Sinopec will continue with expansion plans in Brazil and "participate, jointly or separately, in future rounds of tenders in the country."
The announcement comes days after Brazil's state-run Petrobras became the world's third-biggest oil firm by market capitalisation as it completed a record share issue expected to bring in around 70 billion dollars.
Petrobras is to use the proceeds to explore the offshore oil fields, which are so big they could make Brazil one of the world's top exporters.
"Brazil's offshore boasts one of the world's fastest-growing oil and gas reserves," Repsol said.
"The deal (with Sinopec) highlights the enormous international interest in this historic moment for Brazil, and particularly for the Santos Basin pre-salt activity led by Petrobras." Pre-salt refers to an oil-rich range of rock lying beneath an extensive layer of salt off the Brazilian coast.
Repsol shares closed up 4.95 percent at 19.83 euros on the Madrid stock market following the announcement to 19.93 euros. Shares in construction group Sacyr, which holds 20 percent of Repsol, rocketed 12.98 percent to close at 4.96 euros.
Sinopec is among the largest petroleum and petrochemical companies in China and its biggest refiner. It is involved in exploration and production in more than 20 countries, Repsol said.
Sinopec, along with other major Chinese companies, is seeking overseas investments in oil and gas resources to meet China's soaring demand for energy and commodities.
China's energy consumption has become the world's second largest on the back of years of double-digit economic growth.
The head of the Sao Paulo stock exchange, Edemir Pinto, told AFP this week that the capitalization of Petrobas has opened the door to foreign oil companies looking to tap Brazil's expanding market.
He said a Repsol request to be listed on the exchange was being considered by Brazil's Equities Commission (CVM).
Repsol chairman Antonio Brufau said the Sinopec agreement "highlights the success of the exploration activities made by Repsol in recent years."
"We are delighted to share the development of Repsol's Brazilian projects with a such prestigious partner in the sector as Sinopec."
Repsol said it is "one of the largest independent upstream operators in Brazil and the country's third-largest oil producer in 2009."