Move is part of nation's drive to expand portfolio of overseas oil, gas reserves

LONDON/HONG KONG - China Petrochemical Corp (Sinopec Group), which paid $7.1 billion for Repsol YPF SA's Brazilian unit, is in talks to buy a stake in Galp Energia SGPS SA's division in Latin America's second-biggest oil producing country, according to people with knowledge of the matter.

Galp is negotiating with Sinopec and at least one other party before a bidding deadline this month, said one of the people, who declined to be identified as the process is private.

The Chinese refiner may also bid for a share in Marathon Oil Corp's Angolan operations, two people with knowledge of the asset sale said.

Chinese energy companies have bid more than $16 billion for overseas oil and natural gas assets this year to build reserves and supply the world's largest energy consumer.

Galp, which has a stake in the Western Hemisphere's biggest oil discovery since 1976, said this year it would seek to raise 2 billion euros ($2.7 billion) by selling part of its Brazilian unit.

"Brazil is emerging as a country with big reserves and deposits and could be a large exporter of oil, and China wants a large piece of that," said Victor Shum, a senior principal at Purvin & Gertz Inc, a consultant in Singapore. "Sinopec wants to be more integrated with enough upstream assets to balance their refining and marketing businesses. Of course, money for acquisitions isn't a problem."

Sinopec's investment in the Repsol unit last year was China's largest overseas oil deal since the refiner bought Addax Petroleum Corp. for C$8.3 billion ($8.3 billion) in 2009 to gain reserves in Iraq's Kurdistan and West Africa.

State-owned Petroleo Brasileiro SA said on Tuesday it's seeking investors from Asia to develop fields in Brazil, South America's biggest oil producer after Venezuela.

Galp, which has stakes in four offshore blocks in the Santos Basin, including the Lula find, initially sought to sell one-quarter of the unit and later increased the stake on offer to as much as 40 percent, according to one of the people. Lula is the largest crude discovery in the Americas since Mexico's Cantarell field in 1976.

Chief Executive Officer Manuel Ferreira de Oliveira has sought investors since May to help finance the development of oilfields off the Brazilian coast. Ferreira de Oliveira said last week that the company expects to select the buyer of a stake this month.

Sinopec returned to talks with Galp, Portugal's biggest oil company, after briefly considering a stake in the Brazilian assets of BG Group PLC, the people said.

Huang Wensheng, Sinopec's Beijing-based spokesman, said the company wouldn't comment on market speculation or rumors. Pedro Marques Pereira, a spokesman at Lisbon-based Galp, declined to comment.

Neil Burrows, a spokesman at BG, based in Reading, England, said the company keeps "all assets in our portfolio under review" and doesn't "speculate on any particular assets."

Galp hired JPMorgan Chase & Co, UBS AG and Bank of America Corp to advise on the sale, people with knowledge of the matter said in May. Eni SpA, Italy's biggest oil company, and Portuguese holding company Amorim Energia BV each control one-third of Galp.

Brazil's Lula field, formerly known as Tupi, holds an estimated 6.5 billion barrels of recoverable oil and equivalents. Galp is also a partner with Petroleo Brasileiro SA at Cernambi, which holds 1.8 billion barrels of estimated reserves.

Marathon Oil is exploring a sale of a stake in its Angolan operations for as much as $800 million, according to the two people with knowledge of the process. Marathon, working with Standard Chartered PLC, expects final bids before the end of the month, one of the people said.

Bloomberg News