Baoji Oilfield Machinery Co Ltd's joint venture with two Brazilian companies will mainly focus on drilling rig production and assembly and related services. [Photo / China Daily]

BEIJING - Baoji Oilfield Machinery Co Ltd (BOMCO), the largest oil equipment subsidiary of China National Petroleum Corp (CNPC), has set up a joint venture in Brazil with local companies, CNPC said on its website Monday.

BOMCO signed an agreement with the Brazilian companies BRCP and Asperbras on July 16 to establish a joint venture in oil equipment manufacturing and related services.

BOMCO will have a 34 percent stake in the venture and BRCP and Asperbras will each hold 33 percent, according to the statement by CNPC.

The joint venture, the first of its kind between a Chinese and Brazilian companies in oil equipment manufacturing, will "help CNPC become an integrated international energy group", said Li Xinhua, vice-general manager of CNPC.

The venture, in Salvador, Bahia state, is expected to begin producing and assembling drilling rigs, and providing related services in October.

BRCP is a trading company engaged in oil equipment accessory businesses and Asperbras is a drilling service provider for the Brazilian state oil company Petrobras, CNPC said in Monday's statement.

Because of the venture's local partners, Brazil will give it priority among competitors and preferential tax policies.

The move comes after a statement from the CEO of Petroleo Brasileiro SA (Petrobras), the state-controlled oil and gas giant, saying that Brazil is about to become the largest market for ultra-deepwater-exploration equipment.

"In terms of growth possibilities, in the next 10 years, most of the discoveries will come from Brazil," Jose Sergio Gabrielli, CEO of Petrobras, said, according to a Xinhua News Agency report in June.

"In the immediate future, we will see a reduction of the consumption of oil byproducts in the US, Europe, and Japan, and an increase in consumption in China, India, Brazil, and Africa, where you have accelerated economic growth," Gabrielli said.

CNPC has not been heavily involved in the Brazilian energy market.

It signed a Memorandum of Understanding in 2009 with Petrobras to study ethanol production projects in Brazil and the export of ethanol to China.