Spanish energy company Repsol said on Tuesday it had completed a capital hike of $7.1 billion subscribed by China's Sinopec in order for the Asian giant to acquire 40 per cent of a joint venture in Brazil. In a regulatory announcement, Repsol added it would book capital gains of $3.757 billion from the deal, which was originally agreed on Oct. 1.

Its release noted that Repsol and Sinopec Tuesday successfully closed the agreement reached in October to jointly develop the exploration and production of its Brazil offshore assets and to create one of the Latin America’s largest private energy companies.

After obtaining the necessary authorizations from the authorities of the People’s Republic of China, Sinopec has subscribed in its entirety for a capital increase of Repsol Brazil of $7.1 billion, which has resulted in a company valued at $17.8 billion. After completing this transaction in the shareholders' meeting held Thursday in Rio de Janeiro, Repsol holds 60% of the shares of Repsol Brazil while Sinopec holds the remaining 40%.

These shareholdings are reflected in the composition of the Board of Directors of the company, made up by 10 members and chaired by Nemesio Fernandez-Cuesta, Repsol YPF’s Executive Managing Director of Upstream, said the release.

Both companies have signed a shareholders’ agreement to jointly develop the current exploration and production businesses in Brazil, bringing together the necessary resources and sharing certain operational and financial strategic decisions.

Repsol has made a capital gain of $3.8 billion corresponding to 40% of the value assigned to Repsol's assets in Brazil, after reducing their book value. The injection of funds by Sinopec in this transaction will allow Repsol Sinopec Brazil to fully develop all of its current projects, which include some of the world’s largest exploratory discoveries in recent years.

Brazil’s Offshore boasts one of the world’s fastest-growing oil and gas reserves. The agreement between Repsol and Sinopec highlights the enormous international interest in the pre-salt exploration and production activity led by Petrobras, where Repsol Brazil has a very high profile due to the quality of its assets in that area, said the firm.

Both Repsol and Sinopec will continue their expansion plans in Brazil and will participate, jointly or independently, in future bids in Brazil. Antonio Brufau noted that the agreement becomes a milestone in the development of Repsol’s exploratory strategy and is a good value reflection of the firm’s commitment in Brazil, with a great industrial partner as is Sinopec.

28 Dec 2010.