The UK-based oil giant BP has announced a deal that will allow it to begin exploring off the coast of Brazil.
BP will pay the US firm Devon Energy $7 billion (£4.7 billion) in cash for its Brazilian assets, 240 leases in deepwater sites in the Gulf of Mexico and a small stake in an oil field in the Azerbaijani sector of the Caspian Sea.
Under the terms of the agreement, BP will receive 10 exploration blocks in BrazilÔÇÖs Campos and Camamu-Almada basins, in water depths from 100 metres to 2,780 metres.
Brazil is home to some of the world's largest deepwater oil fields. BP has thus far had limited exposure in the area, which holds the huge Tupi field among others. Tupi, the biggest oil find in the Western hemisphere since 1976, is estimated to contain recoverable reserves of between five billion and eight billion barrels of oil.
Brazil's so-called subsalt oil lies under thousands of feet of sand, rock and salt, and is therefore problematic for oil companies to access. The biggest prospects that have been developed so far are currently managed by Brazil's Petrobras and smaller companies such as the UKÔÇÖs BG Group and Repsol of Spain.
The deal will also reinforce BP's dominant position in the Gulf of Mexico. The company is already the largest producer in the region, with a daily production capacity of around 500,000 barrels. Last year, it discovered the giant Tiber oil field, following drilling of the world's deepest discovery well at over 35,000 feet.
The agreement with Devon underlines the growing trend by the oil majors to explore in deepwater as winning the rights to other, more accessible oil reserves in places like the Middle East becomes increasingly difficult.
BP will be selling Devon half its stake in its Kirby oil sands in Alberta, Canada, for $500 million (£334 million), as part of the deal. Devon, a mid-sized Oklahoma City-based company, doesn't have the financial resources to develop all of its assets, so has decided to concentrate on its onshore projects in North America.
Devon produces both conventional and heavy oil in Canada, and also has shale gas properties in the Horn River Basin of north-east British Columbia. The company pioneered the development of the Barnett Shale, the Texas gas field that led to the recent natural gas drilling boom.
In December, AP Moller-Maersk, the Danish shipping and oil group, bought Devon's stake in the Jack oil field in the Gulf of Mexico, for $300 million (┬ú200 million). Statoil of Norway is also taking a keen interest in the region, buying DevonÔÇÖs stake in the St Malo project.
Other bidders competing with BP for DevonÔÇÖs assets included China National Offshore Oil Corp., Galp of Portugal and oil majors such as Chevron, ExxonMobil and Royal Dutch Shell.
Neither BP nor Devon have yet made any comment on the deal.
