By Charles Newbery

BUENOS AIRES (MNI) - China is taking a fresh step to gain energy supplies in South America through a deal with Bridas Corp., a leading oil group in Argentina with an ambitious international investment plan, analysts said Monday.

China's state energy company Cnooc said announced Sunday it had offered $3.1 billion in cash to create a 50-50 venture with Bridas Energy Holdings, now wholly owned by Bridas.

The deal, which is expected to close in the first half of this year, will give Cnooc a stronghold in South America, a market with potential for expansion in the energy and food supplies that China needs.

And it will give Bridas the backing it needs to develop projects there and in foreign markets, including the proposed construction of a natural gas pipeline in Central Asia.

Cnooc and Bridas will share management of the joint venture, gaining Cnooc local sway and know-how on the ground in Argentina and Bridas in other markets.

Cnooc "is looking very long term and not at the short term obstacles in Argentina," said Osvaldo Cado, an economist at Prefinex, a financial consulting firm in Buenos Aires. "They are putting a foot here and another there. South America is part of its long-term growth strategy."

Federico MacDougall, an energy expert at economist at the University of Belgrano in Buenos Aires, said, "China had tried a more aggressive plan for Latin America, but that failed."

The initial plan included announcements of multi-million dollar projects earlier this decade, such exploration and production of oil and natural gas off the coast of Argentina.

"It failed and so it changed its plans," he said.

A big setback in China's ambitions to gain more energy supplies came in 2005 when its purchase of U.S. oil company Unocal Corp. for about $18 billion was rejected by the U.S. government on concerns of national security.

The new strategy is to string together resources through smaller participations, helping to get it on the ground where it can then plan expansion, MacDougall said.

This has raised concern among world leaders that China's snapping up of resources in Africa and Latin America to feed its burgeoning demand for energy could cause trouble for other nations that depend on foreign energy supplies like the United States.

"China is looking at the world and all the possibilities there are to meet its huge and growing demand," said Gerardo Rabinovich, an energy expert at the General Mosconi Institute of Energy in Argentina. "The deal is part of a global strategy and not just for energy. South America also is attractive for food."

To be sure, Argentina and Brazil are poised to start bringing in huge corn and soybean harvests, exporting most of the soy output because of limited domestic consumption. China imported 57% of Argentina's exports of soybeans and other oilseeds and derivatives in 2009.

The deal with Bridas is "another sign that China is looking to extend to all continents," said Luis Palma Cane, an economist in Buenos Aires.

Why Bridas?

Bridas is run by Alejandro and Carlos Bulgheroni, brothers who are "very quick on their toes," said Jaime Abut, a business consultant in Rosario, Argentina.

They have built Pan American Energy, a venture 40% owned by the family and 60% by BP, into the second biggest oil producer in Argentina.

While oil and natural gas production have fallen this decade in Argentina, Pan American's has gone up, allowing it to maintain oil exports while most other producers can now only sell crude domestically because of dwindling output.

Their astute management has kept them on good terms with the different governments in Argentina, including President Cristina Fernandez de Kirchner, who's administration only last week slammed Brazil's Petrobras and Royal Dutch Shell for not producing enough gasoline.

Indeed, while the energy business in Argentina has been sidelined by the short-term policies like price controls and high taxes of Fernandez de Kirchner and her predecessor and husband, Nestor Kirchner, the Bulgheronis have come through these with growth, Abut said.

He expects the Bulgheronis to use the partnership with Cnooc to press forward with its explorations off the coast of Argentina as well as to develop other assets, like a gas pipeline project in Central Asia.

"Bridas will get the technology and a strong injection of finances that it needs for offshore exploration," said Palma Cane. "China has great expertise in offshore exploration, in deep waters. This is a trend in the world."

** Market News International **