BP buys into offshore Brazil with $7bn Devon Energy deal

Acquisition includes assets in Brazil, Azerbaijan and the Gulf of Mexico

BP is finally joining the rush for Brazil's deepwater oil reserves with a $7bn (£4.7bn) deal with Devon Energy to buy assets in Brazil, Azerbaijan and the Gulf of Mexico.

Although the deal only gives BP up to 40, 000 barrels per day of actual production, it provides the company its first foothold in the spectacularly promising but technically challenging areas off the Brazilian coast.

Under the terms agreed with Devon, BP will also sell the Oklahoma-based company a 50 per cent stake in its Kirby oil sands project in Canada for $500m.

Tony Hayward, the BP chief executive, said: "This strategic opportunity fits well with BP's operating strengths and key interests around the world, offering us significant additional long-term growth potential with an emphasis on high-margin oil."

In Brazil, BP gains an interest in eight licence blocks in the Campos and Camamu-Almada basins off the East coast. The Campos blocks include three existing discoveries made by Devon – called Xerelete, Wahoo and Itaipu – with an estimated 500 million barrels of resources between them, as well as the Polvo field, which is already in production. BP will also gain two onshore licences in the Panaiba basin.

The Gulf of Mexico licences are also a good fit for BP, focusing on the ultra-deep Paleogene layer lying in a 300-mile swath across the seabed in rocks laid down as much as 65 million years ago. BP is already the largest producer in the Gulf of Mexico, pumping out more than 400,000 barrels of oil and gas per day. And it is the largest leaseholder of tricky ultra-deepwater areas, including Kaskida and last September's "giant" discovery at nearby Tiber.

Alongside some 240 ultra-deepwater leases and four producing oil fields at Zia, Magnolia, Merganser and Nansen, yesterday's Devon deal hands over the US group's 30 per cent interest in Kaskida, giving BP 100 per cent ownership of the 3 billion barrel field.

BP's experience in the Gulf of Mexico will be critical to its success in Brazil. Lessons learnt from the problematic Thunder Horse field, which took three years longer than expected to bring on stream, have yielded significant expertise, and it has developed state-of-the-art technology for dealing with the salt layers that bedevil traditional seismic imaging techniques.

But Brazil is still a major challenge. In total, the offshore oil fields are estimated to hold at least 80 billion barrels of oil and gas, and international majors have flocked to the region in recent years. BG Group, Shell, Galp, Repsol and ExxonMobil all already have positions in the region, in partnership with Brazil's Petrobras.

The Santos Basin in particular, just to the south of Campos, has yielded an unprecedented run of drilling successes in recent years. But the technical challenges of both the water and the salt layers in the rock put the region at the cutting edge of what is technically possible, and commercial production is only just beginning.

The biggest risk of all is political, as the Brazilian government strives to secure as much of the benefits as possible from its newly discovered glut of resources.

The tie-up in Canada is less of a priority for BP. The group has only a single, undeveloped interest in controversial tar sands resources, under a joint venture with Husky Energy put together in 2007, which faces its final investment decision towards the end of this year. But the involvement of Devon – which is selling out of far-flung assets such as Brazil specifically to concentrate on its core North American portfolio – will help to speed progress. Andy Inglis, BP's head of exploration and production, said: "Devon is an experienced operator in the Canadian oil sands, with a proven track record, and we expect this transaction will accelerate the development of the Kirby assets."

In Azerbaijan, the deal will raise BP's interest in the Azeri-Chirag-Guneshli (ACG) development to just shy of 40 per cent.

In deep water: The new oil rush

*Drilling for hydrocarbons in deepwater regions such as offshore Brazil and the Gulf of Mexico come with massive technical challenges.

*First there is the sea. The Campos and Camamu-Almada basins are filled more than 2,500 metres deep with inhospitable Atlantic Ocean. Then there is the rock, which may be more than a kilometre thick. But they are as nothing compared with the salt, which can lie up to 2 kilometres thick, blocking seismic imaging techniques so vital to modern hydrocarbon prospecting and complicating extraction.

*Once found, deepwater and so-called "sub salt" oil reserves are then enormously difficult to get out. The Tiber Prospect discovered by BP in the Gulf of Mexico last year, for example, is expected to hold up to 3 billion barrels of oil and gas. But as little as 20 per cent of it is expected to be extractable.

*The Tiber well is one of the world's deepest ever, drilled 11,000 metres into the seabed through 1,000 metres of water – as far below the earth's surface as a passenger jet flies above it.

PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
video
Arts and Entertainment
Martin Amis: Taken to task over rash decisions and ill-judged statements
booksThe Zone of Interest just doesn't work, says James Runcie
Life and Style
life – it's not, says Rachel McKinnon
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Travel
travelFrom Notting Hill Carnival to Zombeavers at FrightFest
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Service Delivery and Support Manager

£55000 - £75000 per annum + excellent benefits: Harrington Starr: Service Deli...

Corporate Tax Solicitor

Highly Competitive Salary: Austen Lloyd: CITY - HIGHEST QUALITY INTERNATIONAL ...

Relationship Manager

£500 - £600 per day: Orgtel: Relationship Manager, London, Banking, Accountant...

Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home