HONG KONG (Bloomberg) -- China Petroleum & Chemical Corp., Asia’s biggest refiner, will benefit from guaranteed supplies of crude under a $10-billion loans-for-oil agreement with Brazil as the company’s reserves decline, analysts said.

Agreements signed by Chinese President Hu Jintao and Brazil’s Luiz Inacio Lula da Silva in Beijing on Tuesday include the loan to Petroleo Brasileiro SA, in exchange for oil supplies to China Petroleum, known as Sinopec.
The deal will help “guarantee” supply for Sinopec, which produces only 20 percent of the oil it needs, said Lawrence Lu, director of corporate ratings at Standard & Poor’s in Hong Kong. “A lot of Sinopec’s oilfields are quite old and this is a problem for PetroChina Co. as well.”
China is securing energy resources to power its economy, the world’s third-largest, by offering loans to oil-producing countries including Russia, Venezuela and Kazakhstan. The funds will help Brazil finance development of the Tupi field, the largest crude discovery in the Americas in more than 30 years.
Beijing-based Sinopec posted a 6.1 percent decline in proven reserves to 2.8 billion barrels last year, the company’s annual report shows. PetroChina, the country’s biggest energy company, said in its annual report its oil reserves fell 4.1 percent to 11.2 billion barrels last year.
Sinopec will get 150,000 barrels of oil a day this year from Petrobras, as the Brazilian state oil company is known, and 200,000 barrels a day between 2010 and 2019, Chief Executive Officer Jose Sergio Gabrielli said in Beijing on Tuesday.
Sinopec has declined 10 percent in Hong Kong trading over the past year, while the benchmark Hang Seng Index dropped 31 percent. The refiner rose as much as 3.5 percent on Wednesday and was at HK$6.54 at 2:34 p.m. The Hang Seng Index fell 0.4 percent.
------------’Win-win deal’
Petrobras needs to find alternative sources of financing after crude-oil prices plunged about 60 percent from a record $147.27 a barrel in July last year. The Rio de Janeiro-based company plans to spend $174.4 billion over a five-year period, including on oilfield exploration.
“This is a win-win deal for China and Brazil,” said Gordon Kwan, an analyst at Mirae Asset Securities in Hong Kong. “China can enhance its national energy security by mitigating dependence on the Middle East, while Brazil has now got the money to ensure proper development of its deepwater oil resources,” he said in e-mailed comments.
Petrobras announced in November 2007 the discovery of the Tupi field, which may hold up to 8 billion barrels of oil, making it the largest find in the Americas since Mexico’s Cantarell.
------------Chinese oil demand
China agreed on Feb. 17 to provide Russia with $25 billion of loans in return for 300,000 barrels a day of oil for 20 years. Venezuela’s Petroleos de Venezuela, known as PDVSA, will provide 200,000 barrels a day to the Asian country to pay down a $4 billion loan from China Development Bank Corp. China imports about half its oil.
“We increasingly see Chinese oil companies going abroad to secure supply,” Standard & Poor’s Lu said. “ This will definitely continue.”
China PetroChemical Corp., Sinopec’s parent, will also explore for oil in two areas in Brazil, Zhang Guobao, the head of the National Energy Administration, said before Tuesday’s signing ceremony.
China plans to boost its refining capacity by 18 percent by 2011 to meet future domestic demand for oil products, the government said on May 18.
The country consumed 360 million tons of oil last year, or 7.3 million barrels a day. Imports reached 178.9 million tons, or 3.6 million barrels a day.