Brazil signed an agreement on Thursday to supply China with 100,000 to 160,000 barrels of oil per day at market prices and expects to obtain billions of dollars in Chinese investment to develop its huge oil reserves.
The agreement, which will take effect immediately, was announced at Brazil's foreign ministry after President Luiz Inacio Lula da Silva met with Chinese Vice-President Xi Jinping in the capital city of Brasilia.
The oil will go to State-owned China National Petroleum Corp and to Sinopec.
Brazil's state-run energy company, Petrobras signed a memorandum of understanding to secure long-term financing from the Chinese Development Bank and hopes to receive up to $10 billion from it by May. The funds are to help extract massive, newly found oil reserves deep beneath the ocean floor off Brazil's southern coast.
"We'll settle it by the time the president (Lula) visits China in May," Petrobras Chief Executive Jose Sergio Gabrielli told reporters after meeting with Chinese officials.
"It could reach $10 billion," he added.
The foray into Brazil is part of China's global push to ensure future supplies of key natural resources, such as petroleum, agricultural goods and minerals.
Petrobras needs cash to help cover the massive costs of exploring vast new discoveries of high-grade light oil and natural gas in the so-called Santos Basin, which analysts estimate could hold up to 80 billion barrels of oil.
Brazilian Foreign Minister Celso Amorim hailed the deals as proof of growing cooperation between two large emerging markets.
"This is the most important South-South relationship," he said, referring to growing trade ties between developing countries.
On Tuesday, China Development Bank signed a $25 billion financing deal with Russia's state oil champion Rosneft and pipeline monopoly Transneft in exchange for oil from the huge new East Siberian fields for the next two decades.
Petrobras said on Monday it was negotiating with up to four oil consumer countries to receive financing from them in exchange for future oil supplies. It is the first time that the Brazilian firm has negotiated this type of financing.