The British oil group BP has agreed to buy US$7bn (Dh25.7bn) of assets in Azerbaijan, Brazil and the Gulf of Mexico from the US independent oil company Devon Energy. Yesterday's announcement came just two days after a BP-led consortium sanctioned a $6bn oil development in Azerbaijan. The deal with Devon will boost BP's stake to nearly 40 per cent from 34 per cent in the "supergiant" Azeri-Chirag-Gunashli oilfield in the Caspian Sea. The deposit contains more than 7 billion barrels of reserves.
BP and partners including other multinationals such as Chevron and ExxonMobil on Tuesday agreed to proceed with the next phase of the field's development, which would boost production to 1 million barrels per day (bpd) from the current 854,000 bpd and allow an additional 360 million barrels of crude to be recovered. In its proposed transaction with Devon, which requires government and regulatory approvals, BP will also gain its first access to deepwater oil prospects off the coast of Brazil, the site of a number of world-class oil finds in the past few years. In addition, the deal would boost BP's deepwater presence off the US Gulf Coast, where several major oil companies are developing some of their largest recent oil discoveries.
The acquisitions could also extend BP's lead over ExxonMobil as the world's most prolific private-sector oil producer, analysts said. BP overtook its arch rival for the first time last year, reporting 4 million bpd of output - more than the crude pumped by Iran, the second-largest OPEC exporter. Jason Kenney, the head of oil and gas research at ING Commercial Banking in Edinburgh, told Bloomberg the asset purchase from Devon was one of the best deals BP had ever made. "Brazil was missing from BP's portfolio, and the assets are all high-margin barrels," he 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," said Tony Hayward, the chief executive of BP. The company's head of exploration and production, Andy Inglis, said the entry into Brazil's Campos Basin and the additional access to Gulf of Mexico oil reserves and exploration prospects would underscore BP's position "as the leading deepwater international oil company".
In the US Gulf of Mexico, BP stands to gain interests in 240 deepwater oil and gas leases and boost its holding in the major Kaskida oil discovery to 100 per cent from 70 per cent. "Kaskida alone could be worth $6bn, so the deal looks accretive," Evolution Securities said in a research note. Colin Smith, an analyst at the electronic brokerage ICAP, estimated that BP had agreed to buy 140 million barrels of oil equivalent of proved oil and gas reserves.
Devon, based in Oklahoma, said in November that it planned to divest its Gulf of Mexico and international assets to focus on onshore oil and gas development in North America. "These sales, combined with our previously announced divestitures of $1.3bn of deepwater Gulf of Mexico assets, put Devon well on the way to completing its strategic repositioning," said Larry Nichols, the company's chairman and chief executive.
In a related transaction announced yesterday, BP has agreed to sell Devon a 50 per cent stake in its Kirby oil sands project in Canada for $500 million. The two companies said they would form a venture to develop the oil sands lease, which had languished in BP's portfolio since the company acquired it several years ago. BP was the last of the major international oil companies to make a substantial investment in Canada's vast but technically challenging and environmentally controversial ultra-heavy oil resource. Although the Kirby project was not a natural fit for BP's oil production portfolio, it is viewed as an important source of feedstock for the company's Whiting refinery in the US Midwest.
Devon's existing oil sands project, Jackfish, is located close to the Kirby lease. "We are excited about the opportunity to work with a world-class organisation such as BP to leverage our expertise," said John Richels, the president of Devon. @Email:firstname.lastname@example.org