Scotia Sees More Brazil Oil Deals as Asia Fuels $30 Billion Asset Scramble

Scotia Waterous, the energy mergers and acquisitions unit of Canada’s third-largest bank, said it sees “sizeable” oil transactions in Brazil this year after advising on $16 billion of Latin American deals in 2010.

“There’s definitely potential to see transactions for several billion of dollars,” Randy Crath, managing director for Latin American business at the Bank of Nova Scotia unit, said in a telephone interview. “Brazil would continue to be very important for the next couple of years at least,” he said.

BP Plc, Europe’s second-biggest oil producer, and China Petrochemical Corp. are among companies interested in oil and gas assets in Brazil, site of the Western Hemisphere’s largest discovery in three decades. Crath, who worked on more than half of last year’s $30 billion of exploration and production deals in Latin America, said he expects companies to seek partners to help fund exploration or exit Brazil for strategic reasons.

“It has been a hot place, absolutely,” he said of Brazil, where he lived 4 years. “The pre-salt in general and all the excitement surrounding the discoveries and the development that is going on there it’s attracting a lot of interest worldwide.”

Scotia last year advised China Petrochemical, known as Sinopec, on its acquisition of a 40 percent stake in Repsol YPF SA’s Brazilian unit for $7.1 billion and also on its purchase of Occidental Petroleum Corp.’s Argentine subsidiary. Crath’s team of 10 bankers also advised SK Energy Co.’s on its sale of three oil blocks in Brazil to Maersk Oil for $2.4 billion.

Chinese Interest

Sinopec and Sinochem Group, which last year agreed to pay $3 billion to Statoil ASA for 40 percent of the Brazilian offshore Peregrino field, will likely be active in Latin America again during 2011, together with other Asian companies such as Cnooc Ltd., China’s largest offshore energy producer, and PTT Exploration & Production Pcl, Thailand’s only listed oil and gas explorer, he said. China National Petroleum Corp., known as CNPC, and Korea National Oil Corp. may also be involved in deals.

“The Chinese companies are actively looking at alternatives, they are looking globally and Latin America is an attractive place for them to invest,” said Crath, 48, who lived for almost 14 years in the region. “I would expect to see Asian transactions in Latin America during 2011,” he said from Houston.

OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by Eike Batista, plans to sell a minority stake in its Campos oil field. Batista said in September that Cnooc and Sinopec were among companies likely to bid for the assets. OGX, based in Rio de Janeiro, said Dec. 6 that it is continuing talks this year on the sale.

Royal Dutch Shell

Royal Dutch Shell Plc, Europe’s largest oil company, is seeking to sell stakes in four blocks offshore Brazil to raise cash for development, it said Aug. 19. The stakes range from 20 percent of the BM-S-8 block to 82.5 percent of BM-ES-28.

The so-called pre-salt area hosts fields lying two miles below the ocean surface and another two to four miles beneath the seabed. The region holds at least 123 billion barrels of oil, according to a study by Hernani Chaves, a professor at the Rio University who worked at Brazilian state-controlled oil producer Petroleo Brasileiro SA for 35 years.

The forecast, which the study puts at a 90 percent probability, compares with the 50 billion-barrel estimate that Brazil’s oil regulator uses in presentations. Saudi Arabia, holder of the world largest proved reserves, has 265 billion barrels according to BP Plc’s 2010 Statistical Review.

In March, BP agreed to buy $7 billion of assets from Devon Energy Corp. in the Gulf of Mexico, Brazil and Azerbaijan. Michael Daly, BP’s executive vice president for exploration, said Feb. 1 he expected the acquisition of offshore assets in Brazil from Devon in the first half of the year.