Sinopec Tipped for BG Santos Stake

The winner could pay $20 billion or more for the BG stake, based on previous purchases in the area, analysts said.

Britain's BG will announce the sale of part of its Brazilian oil unit in the coming weeks, and Sinopec, China's second-largest oil company, is the leading candidate, a source with knowledge of the talks told Reuters.

Sinopec's ability to muscle out Brazil's state-led Petrobras , which has expressed interest in the fields, shows how the Rio de Janeiro-based company's $225 billion business plan has crimped its ability to challenge rivals for a bigger share of the "filet mignon" of Brazil's offshore, the source said.

"They (BG) are demanding a high price for a share in pre-salt," he said. "Petrobras' cash-flow is already under (too much) pressure from its business plan to be able to fight for this under these conditions."

If Sinopec wins, the Beijing-based company will own part of all the "super-giant" offshore oilfields in an area known as "the Santos pre-salt pole", the centre of an area believed to contain 50 billion barrels of oil, enough to supply all China's needs at current consumption levels for more than 15 years.

Petrobras is BG's main Brazilian partner in the Santos pre-salt area and the operator and main shareholder of the fields owned by BG's Brazil unit.

Beijing-based Sinopec has already paid $12.3 billion to buy shares in the Santos pre-salt area owned by Spain's Repsol and Portugal's Galp. The BG holding includes stakes in the super-giant fields known as Lula (formerly known as Tupi), Iara, Guara and Carioca.

The way BG is structuring the sale also reduces the influence of Petrobras. If BG were to try and sell its minority stakes in the actual concessions, Petrobras would have right of first refusal on any sale and the sale would require approval from Brazil's energy regulator, the ANP.

As BG is only selling shares in its local operating company, the legal entity that actually holds the concession rights, Petrobras has less leverage to slow or block a sale, Petrobras Chief Executive Jose Sergio Gabrielli told Reuters.

"In these circumstances we don't have the right of first refusal," Gabrielli said in an e-mailed response to questions through the company's press office.

Galp and Repsol, also Petrobras partners in the Santos pre-salt, recently sold their stakes in their Brazilian operating companies to Sinopec, transactions that did not give Petrobras preference in any sale.

Gabrielli has said that Petrobras is interested in buying a share in BG's offshore oil holdings if BG puts them up for sale. Before the Repsol and Galp sales he said Petrobras was interested in buying their holdings too.

Gabrielli said he does not know what BG is doing with regard to a sale.

Companies besides Sinopec have also sought to buy a share in BG's Brazilian unit.

BG says that it has as much as 8 billion barrels of oil and natural gas equivalent reserves in the Santos pre-salt pole. Assuming it plans to sell only a minority stake, the sale could net the company as much as $27 billion, an analyst said.

The estimate is based on the sale of 49% of BG's Brazilian unit and values its reserves at $7 a barrel, a price considered reasonable.

Sinopec declined to comment when sought out by Reuters. BG also declined to comment.

(upstreamonline.com)