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Shell Sells Brazilian Oil Field Stake to Qatar

NEW YORK (The Deal) -- Royal Dutch Shell (RDS.A - Get Report) has agreed to sell a 23% stake in a Brazilian oil field to Qatar Petroleum International for $1 billion, striking a second big-ticket deal in just over a week as it offloads assets to cut capital expenditure.

Shell will retain a 50% stake in Block 10 of the offshore Parque das Conchas field, returning its holding to the level it was at in October, before it exercised a pre-emption right to increase its stake and block an acquisition by China's Sinochem Group.

Shell paid about $1 billion to buy the 23% stake from Brazil's Petroleo Brasileiro, meaning it will make little or no profit on the transaction.

"This brings a strategic partner into the holding, someone Shell works with in other regions," said a person with knowledge of the situation who asked not to be named. "It isn't really a commercial deal."

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Shell has tied itself to Qatar after spending about $19 billion to build Pearl GTL, the world's largest gas-to-liquid plant, in the Gulf State. Shell also owns a 30% stake in the related Qatargas 4 liquefied natural gas project, where it is a junior partner to Qatar Petroleum, which owns 70%.

The announcement of the Brazil deal comes a day before Shell's new CEO, Ben van Beurden, is expected to flesh out plans at his company's fourth-quarter results to sell assets and reduce investment. Shell last month warned that profit for 2013 will be about $16.8 billion, down from $27.2 billion in 2012 after capitalspending nearly doubled to $44.3 billion.

Selling down the stake in Brazil should go some way to cutting into those costs. Hague-headquartered Shell, and its partner in Block 10, India's Oil and Natural Gas, are in the process of expanding production from the site by as much as 28,000 barrels of oil equivalent, up from the current level of about 50,000 boe. Shell declined to say how much it was investing in the expansion project or what share of the capital expenditure will be assumed by Qatar Petroleum.

In October, Shell and Oil and Natural Gas bought 23% and 12% stakes, respectively, in block 10 from Petroleo Brasileiro, known as Petrobras. Shell declined to say how much it paid for its share but a source said it was close to $1 billion, a figure that is in line with the $529 million that ONGC paid for its 12% stake.

Van Beurden announced his first disposal on Jan. 20 when Shell said it will sell minority stakes in two Western Australian liquefied natural gas assets to Kuwait Foreign Petroleum Exploration Corp. for $1.14 billion.

JPMorgan Cazenove Ltd. analyst Fred Lucas last month drew up a list of $30 billion of Shell assets that could find their way onto the block. It included: a 32.1% stake in Australia's Woodside Petroleum worth an estimated $7 billion; petrol stations that might be worth $4.4 billion; pipelines worth an estimated $3.5 billion; and U.S. shale assets worth $5.1 billion.

Shell declined to name its advisers.

Its shares traded Wednesday at 2,135 pence, up 11.5 pence, or under 1%, on their Tuesday close.

--By Paul Whitfield

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