[Drawn down amount] China Development Bank provides $10 billion line of credit for oil exploration in the Santos Basin (Linked to Project ID#36737)

On November 3, 2009, the China Development Bank (CDB) issued a $10 billion line of credit to Petroleo Brasileiro S.A.(Petrobras) for the exploration of the Santos Basin pre-salt oil fields (captured in Project ID#36737). All borrowings under the line of credit carried the following terms: a 10-year maturity and an annual interest rate of LIBOR + a 2.8% margin (6-month USD LIBOR + 2.8 = 0.517+2.8=3.317%). As a source of collateral, Petrobras signed a ten-year oil-supply contract with Sinopec’s (subsidiary) trading company, UNIPEC Asia, and agreed to provide 150,000 barrels per day in the first year (2009) and 200,000 barrels per day for the following nine years (2010-2019). Sinopec agreed to pay market prices for Petrobras’ oil and deposit payments for the oil in Petrobras’ CDB account, and the borrower (Petrobras) agreed to maintain a minimum account balance equivalent to six months of interest payments. As of December 31, 2009, $3 billion of the $10 billion credit line had been utilized (i.e. drawn down) by the borrower. Then, on February 10, 2010, Petrobras withdrew an additional $2 billion from the credit line. The borrower ultimately drew down $7 billion in total from the credit line (as captured via Project ID#38420). It was originally envisaged that $3 billion from the credit line would be utilized to purchase Chinese equipment. However, Petrobras ultimately decided not to do so. The loan proceeds were to be used by the borrower for oil exploration activities in the Santos Basin, which was part of a larger effort to upgrade the refinery capabilities of Petrobras. Sinopec — a Chinese state-owned oil company — and Petrobras were jointly responsible for implementing the project. In January 2018, Petrobras pre-paid the residual balance of the oil supply contract, effectively ending its oil sales commitment to Sinopec.

Additional details

1. Most of China’s oil-backed loan agreements involve a bank, an oil company, and a trading firm. An oil company in the borrower country must sell a certain number of barrels during a specific period, and payments for the oil are sent directly to the bank. Therefore, the borrower uses the proceeds of oil sales to meet its loan repayment obligations. 2. One source (https://www.ipea.gov.br/revistas/index.php/rtm/article/download/258/257) suggests that Petrobras contracted an additional $3 billion CDB loan with a 10-year maturity in 2014. However, AidData has not yet independently corroborated the existence of such a loan. This issue requires further investigation. More research is also needed to determine if the 2014 loan served as a ‘replacement’ for the $3 billion that Petrobras chose not to utilize under the $10 billion line of credit from 2009. 3. The account charge agreements and assignment of receivables agreement that underpin the borrowing arrangement between Petrobras and CDB can be accessed via https://www.dropbox.com/s/fb82y6zn1cwn6ym/3%20November%202009%20Petrobras%20CDB%20Account%20Charge%20Agreement%201.pdf?dl=0 and https://www.dropbox.com/s/0gat12162p7wnnt/3%20November%202009%20Petrobras%20CDB%20Account%20Charge%20Agreement%202.pdf?dl=0 and https://www.dropbox.com/s/pnsito7jq20vsi2/Assignment%20of%20receivables%20agreement%20for%20Petrobras%20CDB%20loan.pdf?dl=0. 4. On April 1, 2015, the China Development Bank issued another $5 billion loan to Petrobras for oil exploration activities (captured via Project ID#38170 and ID#52918). 5. Some sources indicate that the term facility agreements (subsidiary loan agreements) -- issued through the $10 billion line of credit -- were signed on May 19, 2009. This issue warrants further investigation.

Number of official sources

12

Number of total sources

44