China is making big steps into the crude oil business, as China Development Bank has agreed to loan oil-producer Petrobras $10 billion, according to Bloomberg. The money will help the company pay its way out of one of the worst years in the crude oil market.
As part of the agreement, Petrobras will supply Chinese companies with petroleum in return.
The deal with the Brazilian company began in May 2015, Nasdaq reported. While the details are still being discussed, Petrobras said that the money from the loan could be used for drilling into the hard-to-reach oil deposits off the coasts of Brazil.
While Petrobras doesn't have the money or resources for such a drill right now, this loan could change that.
Petrobras currently owes $130 billion in obligations, which makes it the world's largest oil company in terms of debts owed, Reuters reported. In fact, it's the world's most indebted, non-financial company in the world.
"This is a relief for Petrobras. This kind of oil-for-money contract has a cheaper financial cost for Petrobras than accessing the international bond market, especially after the company was downgraded to junk," said Edmar Almeida, professor at the Federal University of Rio de Janeiro.
Investors doubt that Petrobras to dig itself out of the hole it has created, with bonds being downgraded to junk status. China is hopeful, however, that the Brazilian oil-producer can pull through and supply the country with the oil it needs.
