Spanish oil major Repsol and China’s Sinopec will form an alliance in Brazil valued at $17.8bn.

Sinopec will buy a 40% stake in the joint venture for $7.1bn, while Repsol will retain the remaining interest.

The deal is expected to help Repsol develop costly subsalt deposits, which have been estimated to hold 50 billion barrels of crude.

Sincopec is aiming for a production of 200,000 barrels per day oil equivalent from its acquired interests.

Repsol holds stakes in Brazil’s Santos and Espirito Santo basins and plans to invest $14bn through 2019 to increase crude output.