Chinese oil giant Sinopec said on Friday it will pay $3.5 billion for a 30% stake in the Brazil unit of Portugal's Galp, extending China's drive to secure access to energy for its rapidly expanding economy.

The agreement gives state-run Sinopec a stake nearly all of the major discoveries in Brazil's prolific deepwater region known as the subsalt. They also offer Sinopec a beachhead in one of the fastest-growing non-OPEC oil frontiers, an area believed to hold 50 billion barrels of oil, enough to supply all China's needs for 15 years at current consumption rates.

The deal also helps Beijing expand its presence in Brazil, a commodities giant where Chinese companies - seeking to feed a booming economy - have already made investments ranging from soy processing to iron mining.

"For Sinopec, there are not many opportunities to grow in the traditional domestic upstream oil and gas sector - overseas acquisition is an area to find growth," said UOB Kay Hian analyst Yan Shi.

"It will benefit Sinopec on upstream reserves and reduce risks in its money-losing downstream operation."

Chinese oil consumption rose more than 10% in 2010 from 2009 and nearly doubled in the last decade, according the BP's annual statistical review of world energy. China now consumes more than 10% of world oil output.

The deal follows Sinopec's $7 billion acquisition last year of a 40% stake in the Brazilian arm of Spanish oil company Repsol. The two agreements together give it a foothold in Brazil's biggest oil discoveries, including the giant Lula and Cernambi fields that are among the world's largest oil discoveries this decade.

Analysts described the deal as a savvy one for Sinopec, but a disappointing one for state-controlled Galp, which wants to raise cash as the Euro zone debt crisis crushes Portugal's finances.

"The implied values of Galp assets from that deal are disappointing. Repsol got $5.6-$5.8 per barrel of reserves and this deal works out at $3.9 per barrel," said Pedro Pintassilgo, a fund manager at F&C in Lisbon.

Galp Shares Sink

The deal also knocked fellow Brazil-exposed oil and gas company BG Group, which dropped more than 2%, while the Dow Jones Stoxx Europe Oil and Gas index was up 0.3%.

The head of Brazil's Petrobras said last month BG may sell shares in its Brazilian subsidiary, although the company declined to comment on this.

Galp is a minority partner with Petrobras, a Brazilian state-controlled company that also has private investors, in key finds including the vast Lula field, formerly known as Tupi, where BG is also a partner, as well as the Cernambi and Iara finds.

Buyouts such as the Sinopec-Galp deal are on the rise because Brazil halted auctions for deepwater blocks to revamp its oil laws. Further bidding rounds for exploration leases are currently stalled by a dispute among states over how to divvy up royalties.

Brazil's vast subsalt oil deposits, located in an area the size of New York state believed to hold 50 billion barrels of oil, have drawn in the interest of oil giants such as Exxon Mobile and Royal Dutch Shell.

Brazil's Petrobras will have a minimum 30% stake in any future bidding rounds for subsalt projects, under new regulations approved last year and will be an operator of those projects.

Under the development plans, Sinopec expects to get 21,300 barrels of oil equivalent per day (boedp) in 2015 with production expected to peak at 112,500 boedp in 2024.

Under the agreement, Sinopec's wholly owned unit, Sinopec International Exploration and Production Corp (SIPC), will take new shares to be issued by Galp and assume shareholder loans, Sinopec Group said in a statement.

"Taking into consideration this investment and projected future capital expenditure, the total cash payout amounts to approximately $5.18 billion at closing," Sinopec said.

The transaction must be approved by the Chinese government.

Sinopec Group is the parent of Hong Kong-listed and Shanghai-listed China Petroleum & Chemical Corp (Sinopec). The group does overseas upstream oil and gas investment and operations via its wholly owned unit SIPC.