Reuters reported Friday that Chinese firm, Sinopec Group and CNOOC Ltd are bidding for stakes in assets controlled by OGX SA, a Brazilian oil and gas start up firm. Quoting sources privy to the talks, Reuters reiterated that the two firms may be keen on an investment on the Brazilian firm pegged at a potential $7 billion. The Brazilian start up, OGX SA is part of the larger EBX industrial group that is owned by Eike Batista, the Brazilian billionaire.

OGX SA is currently mulling the sale of stakes in certain of its controlled oil blocks after making a number of hydrocarbon discoveries in recent months. The firm undertakes exploration operations in 29 blocks in Brazil and is mainly focused on shallow water exploration. According to Reuters, sources close to the deal disclosed that Morgan Stanley was advising Sinopec, but the structure of the bid was not available.

On the other hand, it was also disclosed that Bank of America-Merrill Lynch was advising CNOOC on the investment. Further to that, Reuters quoted sources close to the deal as hinting that the two firms are preparing a joint bid for the Brazilian start up, even though the valuation of any deal is still being debated. However, the sources revealed that the deal was still in the preliminary stages.

Speculation has been mounting lately in China amidst media reports that Sinopec and CNOOC have already held talks with the Brazilian firm for a 20% stake in an offshore oil field in the Campos basin, Brazil. Even so, the sources, according to Reuters, affirmed that the deal might as well be inclusive of an OGX SA equity component, but it remains unknown if OGX SA will forge ahead with the stock sale.

A source was quoted by Reuters saying the proposed deal has different components and does not end at the asset level, adding that there might be an equity stake that OGX SA is keen on selling. Morgan Stanley and Bank of America-Merrill Lynch declined to comment when contacted by Reuters over these reports. On the other hand, Sinopec could also not be reached for comment, Reuters reported. Other potential bidders mentioned in Brazilian media reports include Chevron Corp, Statoil ASA, and Exxon Mobil Corp.

12 Sep 2010.