Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 19 -- Brazil's Petroleo Brazileiro SA (Petrobras) completed negotiations with the China Development Bank (CDB) for a 10-year, $10 billion bilateral credit line.

"The $10 billion is going to be used in our strategic plan that needs [the investment of] $174.4 billion from now until 2013," said Petrobras Chief Executive Jose Sergio Gabrielli de Azevedo.

The 10-year loan agreement was signed on the second day of a 3-day visit to Beijing by Brazil's President Luiz Inacio Lula da Silva between state visits to Saudi Arabia and Turkey.

The Brazilian firm said the loan, which includes funding for the purchase of goods and services from Chinese companies, also includes an increase in oil exports from Brazil to China.

"A long-term export agreement between Petrobras and Unipec Asia, a Sinopec subsidiary, was also foreseen," the Brazilian firm said. "The agreement calls for a sales volume of 150,000 b/d of oil during the first year and 200,000 b/d in the following 9 years.

The loan was not tied to the oil supply agreement or any other cooperation between Petrobras and Chinese refiners, Gabrielli said. He added that China would pay market prices for the oil shipments, and the $10 billion loan would be repaid in US dollars at an interest rate of less than 6.5%.

Petrobras and Sinopec also signed a memorandum of understanding for cooperation in several segments of mutual interest, including exploration, refining, petrochemicals, and the supply of goods and services.

Referring to the MOU, Sinopec chairman Su Shulin said his firm and Petrobras will cooperate in "upstream, midstream, and downstream" operations.

The $10 billion loan agreement with Brazil is the latest of several similar arrangements that China has made with suppliers of oil, including a $10 billion oil-for-loan deal with Kazakhstan, and $25 billion to Russian oil and pipeline companies.