China Grows in South America by Buying Brazil’s Only Private VLCC Terminal
China continues to grow its influence over South America with China Merchants reporting an agreement to buy Brazil’s only privately operated VLCC terminal. The company reports the deal is part of its continued growth in the Latin America region and further consolidates its position globally.
China Merchants Port Holdings Co. reported on February 28 that it completed an agreement calling for it to acquire 70 percent of Vast Infraestrutura, operator of the onshore crude oil transshipment terminal in the Port of Açu. It is an industrial deep-water port that is within 24-hour sailing distance of Brazil’s major offshore production fields. It is the only terminal capable of handling Very Large Crude Carriers (VLCCs) that is not operated by Petrobras.
The deal calls for an initial payment of approximately $448 million but not to exceed $714 million based on adjustments for cash and other considerations. There are also milestone payments of $56 million contingent on operating licenses being received by the end of 2026 and 2027 and potential earn-out payments of approximately $160 million based on the five-year performance to the end of 2029.
China Merchants reports it has been actively exploring new growth drivers for its existing ports business. This deal coupled with the 2017 acquisition of TCP Participaçoes, the Brazilian container terminal operator, will enhance China Merchant’s regional strategy.
U.S.-based EIG Global Energy Partners is the primary investor in the parent company of Vast which started the terminal a decade ago in 2015. The terminal started with large agreements with Shell and other energy majors.
The newly acquired terminal handles approximately 30 percent of Brazil’s crude oil exports which are shipped through the facilities located north of Rio de Janeiro. The terminal averages 560,000 barrels per day. It currently has a licensed capacity of 1.2 million barrels per day. Vast highlights the strategic location of the terminal as well as its three berths allowing predictable operations with low downtime and a dedicated fleet of tugs to handle the tankers. In 2023, Vast reported a net profit before taxes of approximately $43 million.
China’s expansion in the Latin America region has drawn a lot of attention including from Donald Trump who targeted the involvement in Panama and the ports at the Panama Canal. Last month China celebrated the opening of the megaport project in Chancay, Peru. Analysts see it both as an effort to exert influence over South America well as to reshape global trade routes.
Under pressure from the United States, Panama reported that it would not renew its participation in China Belt & Road initiative. The country’s attorney general also filed with the courts to declare the port operations contract with China’s Hutchison unconstitutional.