CDB provides $3.5 billion loan tranche to Petrobras for oil exploration and extraction activities (Linked to Record ID#52918)

Project narrative

On April 1, 2015, Petroleo Brasileiro S.A. (Petrobras) signed an agreement with China Development Bank (CDB) for a loan (with two tranches) worth $5 billion that would support oil exploration and extraction activities. The loan carried a 12-year maturity (final maturity date: 2027). Its interest rate is unknown. The loan was not collateralized. However, as a condition of the loan agreement, Petrobras assumed a preferential supply obligation of 100,000 barrels/day to three Chinese companies [China National United Oil Corporation (a subsidiary of CNPC), China Zhenhua Oil Co. Ltd., and Chemchina Petrochemical Co. Ltd (a subsidiary of ChemChina)]. The first, $3.5 billion tranche of the loan was fully disbursed in April 2015 (as captured via Record ID#38170). The second, $1.5 billion tranche of the loan was authorized by CDB on May 19, 2015 and fully disbursed on June 12, 2015 (as captured via Record ID#52918). On December 16, 2019, Petrobras made full prepayment of the $5 billion CDB loan, effectively terminating its obligation to supply a total volume of 100,000 barrels of oil equivalent per day to Chinese companies on a preferential basis. This loan agreement was a source of controversy in Brazil. Leaked information — published by a Brazilian newspaper — revealed that the 60% of the CDB loan proceeds were to be used to buy Chinese equipment. The ‘local content’ clause in the loan agreement also provoked disagreements between Petrobras and ANP, the government entity that oversees Brazil’s oil sector. Complying with a request from the Securities and Exchange Commission of Brazil, Petrobras made a public statement about the issue. It clarified that, due to previous agreements, the local content condition was already fulfilled so there was no need for it to acquire additional Chinese equipment.