Last year Brazil's state-managed Petrobras raised about $10 billion in Chinese state-backed finance as part of its gigantic investment program for offshore fields discovered over the past few years.

The borrowing was part of Brazil's stated aim of finding finance either through domestic sources or through lenders other than major Western oil companies.

Petrobras has followed a vigorous policy of research and development as well as acquisition and is the largest company in Latin America by market capitalization and revenue. It is also the largest company with headquarters in the southern hemisphere.

Petrobras sees itself as a world leader in advanced deep-water and ultra-deep water oil exploration and production technologies and is expressly disinclined to share its expertise with competitors or rivals unless it sees clear benefits in such exchanges.

As a result, while international investors have repeatedly tried to get into deals with Petrobras, the company has been selective in positive response to proposals for collaboration.

Industry analysts said a Brazil-China deal was in the cards and would likely involve Sinopec, China's No. 2 state oil giant, acquiring stake in two offshore blocks in exchange for cash for Petrobras.

However, analysts said the deal could well encompass wider cooperation between Sinopec and Petrobras in view of China's overall strategy to secure long-term energy suppliers and the Brazilian company's deep-water expertise.

Chinese President Hu Jintao is in Brazil for a summit of BRIC group of emerging economies of Brazil, Russia, India and China but he has cut short his Latin American tour and canceled stops in Chile and Venezuela, presumably because of earthquake disaster in southern China. He has overseen negotiations on all major oil deals.

Brazil's Estado de Sao Paulo newspaper said Sinopec would take stakes in the BM-PAMA-3 and BM-PAMA-8 blocks in the deep waters of the Para-Maranhao basin in northern Brazil.

In March British oil giant BP PLC entered Brazil's deep-water oil market indirectly when it clinched a $7 billion deal for purchase of Devon Energy Corporation assets. The purchase included Devon's interests in Brazil, Azerbaijan and the Gulf of Mexico.

But, in Brazil specifically, the deal gave BP 10 exploration blocks in the Campos and Camamu-Almada basins, north of Rio de Janeiro.

Although the discoveries in the area haven't been as dramatic as those reported in Santos Basin, similarity of geological features has given exploration scientists hope.

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