China's Sinopec Group and CNOOC are bidding for stakes in assets owned by Brazilian oil and gas start-up OGX SA in a potential $7 billion deal, sources with direct knowledge of the matter said on Friday.

OGX, part of the EBX industrial conglomerate owned by Brazilian billionaire Eike Batista, is considering sales of stakes in some of its oil blocks after making a string of hydrocarbons finds in recent months.

Morgan Stanley was advising Sinopec on its bid, two of the sources said, declining to elaborate on the exact structure of the proposed deal. Bank of America-Merrill Lynch was advising CNOOC, another source said.

CNOOC and Sinopec were likely to launch a joint bid, one of the sources added. The deal may also include an OGX equity component, said the sources, but whether or not the company would go ahead with selling stock in the newly public company remained unclear.

The sources were not authorised to speak publicly about the matter and declined to be named. Morgan Stanley and Bank of America-Merrill Lynch declined to comment.

Sinopec could not be reached for comment. 'Given the stage of the process, I am not in a position to give any comments,' Sinopec spokesman Huang Wensheng told Reuters when asked about the auction in late August.

CNOOC and OGX were not immediately available for comment.-Reuters