Repsol, Sinopec make big oil find offshore Brazil

Oslo, Feb 27th 2012 - Spain's Repsol and China's Sinopec have made an oil discovery offshore Brazil that could be one of the biggest so far in the area and that boosted confidence that Angola's deepwater reserves may be abundant too.

The firms' Brazilian joint venture has struck oil in the Campos Basin off the coast of the Latin American country, it said on Monday.

"The well ... drilled into a hydrocarbons column of 500 metres, one of the thickest discovered in Brazil to date," Repsol said in a statement.

Brazil is at the centre of an oil boom, with majors flocking to Latin America's largest economy and its hydrocarbon reserves, considered among the biggest in the world.

Repsol did not provide an estimate for the size of the find, but one of its partners, Norway's Statoil, said it was a "high-impact" one: it could hold more than 250 million barrels of oil equivalent (boe) or provide 100 million boe net to Statoil.

One analyst said the discovery could be even bigger and had the potential to be an elephant when compared with a recent discovery made by Petrobras in the same area.

"Using the same ratio between the oil column size and the recoverable recourses, the estimated size of (the find) is in excess of 500 million boe," Teodor Sveen Nilsen, an analyst at Oslo-based firm Swedbank First Securities, wrote in a note to clients.


ANGOLA LOOKING PROMISING

The partners in the Brazilian discovery, called Pao de Acucar or Sugar Bread, are Repsol Sinopec Brasil, the well's operator with a 35 percent stake, Brazil's Petrobras with 30 percent and Statoil with 35 percent.

Repsol has a 60 percent stake in the Brazilian joint venture, while Sinopec holds 40 percent.

Shares in Repsol and Statoil were up 0.63 percent and 1.46 percent at 0949 GMT respectively, outperforming a flat European oil and gas index.

Nilsen said the find was worth at least 0.6 crown per Statoil share now and could be worth 1.0-1.2 crown per share were the find to be an elephant.

Statoil said the Brazilian find was the sixth high-impact find it had made over the past 12 months after it struck big offshore Tanzania, Brazil, in the North Sea and in the Arctic.

The find also confirmed the potential for finding large oil and gas resources on the other side of the South Atlantic Ocean, in Angola's offshore deepwater blocks, where the Norwegian firm believes it can make billion-barrel discoveries.

These areas were formed millions of years ago when the African and South American continents were still connected.

"This discovery ... improves our confidence in the recently acquired acreage position in the pre-salt Kwanza basin of Angola," Statoil's head of exploration, Tim Dodson, said in a statement.

Statoil holds two operatorships in the so-called "pre-salt" blocks off Angola and has stakes in three more. - Reuters

World Bank to China: Free up your economy or bust

A worker rides a bicycle at a Sinopec oil refinery in China. State owned enterprises, like Sinopec, account for roughly 40% of the country's GDP, according to estimates.

New York, February 27th, 2012 - The World Bank and a Chinese think tank have a stern warning for China's government: transition to a freer market system, or else face an economic crisis.

The "China 2030" report, released by the World Bank on Monday, recommends China enact reforms promoting a freer economy. Those reforms include a major overhaul turning China's powerful state-owned companies into commercial enterprises.

"China could postpone reforms and risk the possibility of an economic crisis in the future -- or it could implement reforms proactively. Clearly, the latter approach is preferable," the report said.

The report is compiled by the World Bank and the Development Research Center, a research group that reports directly to China's State Council. It encourages China to promote innovation, competition and entrepreneurship as means of economic growth, rather than allowing growth to be primarily government engineered.

The world's second-largest economy has been rising rapidly, averaging around 10% growth a year for the last three decades. Much of that momentum has come as China's rural population moves into the cities and as the government has funded massive infrastructure projects and retained a powerful influence over the country's biggest companies.

State-owned companies dominate China's banking, energy, telecom, health care and technology sectors. Overall, they account for about 40% of the country's gross domestic product, according to Andrew Szamosszegi and Cole Kyle, who have researched the topic for the U.S.-China Economic and Security Review Commission.

Their latest report to the commission puts it bluntly: The Chinese government has not "expressed an interest in becoming a bastion of free market capitalism."

Critics point out that China cannot maintain rapid growth under this system forever. Emerging economies tend to start slowing when their GDP reaches about $16,740 per capita, according to research by economists Barry Eichengreen of the University of California at Berkeley, Donghyun Park of the Asian Development Bank and Kwanho Shin of Korea University.

They suspect China will hit the slowdown point around 2015. The World Bank's report forecasts a similiar slowdown, predicting economic growth will gradually slow from an average of 8.6% in 2011-2015 to an average of 5% growth per year in 2026-2030.

"China's leaders have recognized that the country's growth model, which has been so successful for the past 30 years, will need to be changed to accommodate new challenges," World Bank Group President Robert Zoellick said in a statement.

The World Bank's report suggested China should separate "ownership from management" of state-owned enterprises and implement modern corporate governance practices, including appointment of senior management, public financial disclosures and external auditing.

In spinning off its state-owned companies, the report recommended the government should also consider establishing state asset management companies that would represent the government as a shareholder, but would "independently and professionally" manage and trade assets in financial markets.

China currently has four major asset management companies that it originally created to oversee bad loans spun off from its four major banks. They're 100% owned by the Chinese government. - CNNMoney.