By Bradley Olson and Paul Kiernan
Exxon Mobil Corp., the only big oil company without a major foothold in Brazil, is in talks to gain access to the country's prized deep-water resources, according to people familiar with the matter.
The talks have included discussions about a joint venture partnership through which Exxon would invest in projects with state-oil firm Petróleo Brasileiro SA, or Petrobras, as well as potentially buying stakes in offshore tracts the Brazilian government plans to lease out this year, the people said.
The specific terms of any agreement have yet to be completed. One person cautioned that talks between Exxon and Petrobras remained at a preliminary stage. But Exxon, which has eyed deep water resources in Brazil for at least a decade, is working with Hess Corp. in seeking to expand in the country after Brazil revised its regulations last year to attract greater foreign investment, the people said.
Representatives for Exxon, Hess and Petrobras declined to comment.
Exxon would join French giant Total SA and Norwegian state-controlled Statoil ASA, both of which have formed partnerships with Petrobras and expanded in Brazil in the past year. Royal Dutch Shell PLC has said it plans to invest $10 billion in the country over the next five years as part of a push to double its global deep water production.
The race to expand in Brazil comes as Petrobras is selling tens of billions of dollars in assets in a bid to work off the largest debt burden in the global oil industry. Brazil's conservative government, in power since the impeachment of former President Dilma Rousseff last year, sees foreign investment in the oil sector as key to an economic recovery after Brazil's worst recession on record.
Risks abound for the big oil companies. Petrobras, the dominant player in Brazil, is at the center of an epic corruption scandal and is financially crippled by its $118 billion debt load. And while the business environment has improved over the past nine months, political analysts say the 2018 presidential election could easily reverse that trend.
Still, Brazil is one of the most important oil frontiers, with as much as 50 billion barrels of recoverable resources. Some analysts say the country has the opportunity to emerge as the world's fifth-largest crude producer by 2025, behind only Saudi Arabia, Russia, the U.S. and Iraq.
"Everybody wants to get a piece of the pie," said Kjetil Solbraekke, senior vice president for South America at consultancy Rystad Energy. "These are probably the most prolific, high-returning oil assets available in the world."
Exxon's interest in a partnership is the latest example of a strategy the company has pursued in recent years to gain access to state-controlled oil and gas resources. To gain entry to certain areas, the Irving, Texas, company has offered foreign players a chance to diversify their holdings and invest alongside Exxon in other projects around the world.
Such a partnership was at the heart of a series of deals between Exxon and Russia in 2011 and 2012 that were later put on hold due to U.S. sanctions. The company has also formed partnerships with Qatar, where it holds a lucrative concession to produce natural gas, to develop gas export projects in the Gulf of Mexico and in Mozambique.
Joining forces with Petrobras in a similar fashion on a series of investments may be the only way to build an offshore position in Brazil, analysts said.
"If you don't have a relationship with a dominant state player, such as Petrobras in Brazil, it's very difficult to go anywhere," said Ruaraidh Montgomery, an analyst at energy consulting firm Wood Mackenzie.
An industry bonanza for Brazilian resources began more than a decade ago with the discovery by Petrobras of the Lula field, which is believed to hold billions of barrels of oil.
Named after then-Brazilian President Luiz Inácio Lula da Silva, the field lies below several miles of ocean water and a thick layer of salt that can make drilling risky and expensive.
Emboldened by $100-a-barrel oil prices, the left-leaning government that ruled Brazil until last year imposed onerous requirements on the oil industry, making Petrobras the sole operator of oil projects in the prized sub-salt layer on the Brazil continental shelf and demanding high levels of locally produced parts and labor.
Brazil's notoriously complex, costly and often unclear operating environment are among the reasons Exxon stayed on the sidelines as other oil majors piled in.
Seeking to woo investors, Brazil's new leaders opened up the sub-salt to foreign operators last year and reduced the so-called local-content requirements in February. The country is also likely later this year to auction numerous offshore blocks to companies wishing to drill exploration wells, officials said.
Those changes are among the primary reasons Exxon is motivated to expand in Brazil, said people familiar with the company's plans.
Exxon holds an interest in two deep-water blocks off Brazil's shores, including more than 160,000 acres, and drilled several dry holes in the country more than five years ago with Hess.
Petrobras Chief Executive Pedro Parente said in an interview at a Houston energy conference last month that "We are discussing partnerships and divestments" and that there was a "very high level of interest" in the company's assets.
--Sarah Kent contributed to this article.
Write to Bradley Olson at Bradley.Olson@wsj.com and Paul Kiernan at email@example.com