BP's oil and gas operations expand in Gulf of Mexico and Brazil

Mar 12, 2010 01:00 AM

BP is expanding its dominant oil and gas operations in the Gulf of Mexico and dropping anchor off Brazil with a $ 7 bn deal to buy exploration rights from Devon Energy.
BP will get rights for 10 exploration blocks in Brazil and others in the Gulf of Mexico and in the Caspian Sea near Azerbaijan. BP is selling a 50 % stake in its Kirby oil sands interests in Canada to Devon for $ 500 mm. The companies will form a joint venture as Devon beefs up its North American onshore portfolio.

BP is the largest leaseholder in the Gulf of Mexico, with more than 650 blocks producing over 400,000 barrels of oil equivalent daily.
Devon, based in Oklahoma City, has interests in more than 450 offshore blocks in the Gulf of Mexico that account for about 7 % of Devon's total oil and natural gas production. In December, it sold stakes in three development projects in the Gulf to Maersk Oil for $ 1.3 bn.

Devon has 10 offshore blocks in Brazil covering 1.4 mm acres. It has been working with national oil company Petrobras on five of the blocks. BP is acquiring eight offshore blocks and two onshore blocks from Devon.
"For BP it means that they will, in addition to bulking presence in the Gulf of Mexico and Azerbaijan, have access to one of the premier growth industries, which is Brazil," said Raymond James analyst Pavel Molchanov. "It's not instant gratification. These assets aren't going to deliver barrels of oil bubbling up very soon. But in the long run it makes sense," Molchanov said.

There has been a series of major discoveries in the deep water off Brazil since the massive Tupi field, estimated to hold 5 to 8 bn barrels of oil, was found in 2007. Petrobras said that the offshore areas already auctioned for exploration could produce up to 16 bn barrels. Estimates for the entire area range up to 100 bn barrels.
The offshore fields lie miles underwater and beneath a thick layer of salt, making exploration and production challenging. Petrobras has exploration deals with ExxonMobil, Amerada Hess, Royal Dutch Shell and several other multinational oil companies.

BP said in a strategy briefing earlier that it expected to boost its annual pre-tax profit by more than $ 3 bn over the next two to three years, and to increase oil and gas production by 1 % to 2 % within five years.
CEO Tony Hayward said BP hopes to start up 42 major projects by 2015 as existing fields decline.

Source / The Associated Press
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