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BP buys Devon Energy assets for US$ 7 billion

Oilfield Technology,

In a broad ranging deal, BP will pay Devon Energy US$ 7 billion in cash for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico. These include interests in 10 exploration blocks in Brazil, including seven in the prolific Campos Basin; a major portfolio of deepwater exploration acreage and prospects in the US Gulf of Mexico; and an interest in the BP operated Azeri-Chirag-Gunashli (ACG) development in the Caspian Sea, Azerbaijan.

In addition, BP will sell to Devon Energy a 50% stake in BP's Kirby oilsands interests in Alberta, Canada, for US$ 500 million. The parties have agreed to form a 50/50 joint venture, operated by Devon, to pursue the development of the interest. Devon will commit to fund an additional US$ 150 million of capital costs on BP’s behalf. Completion of certain transfers will be subject to regulatory approvals and other third party consents.

The deal will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight licence blocks in the Campos and Camamu-Almada Basins, in water depths ranging from 330 - 9100 ft (100 - 2780 m), as well as two onshore licences in the Parnaiba Basin. The Campos Basin blocks include three discoveries: Xerelete, pre-salt Wahoo and Itaipu, and the producing Polvo field.

Gulf of Mexico
In the US deepwater Gulf of Mexico, BP will gain a high quality portfolio with interests in some 240 leases, with a particular focus on the emerging Paleogene play in the ultra deepwater. The addition of Devon’s 30% interest in the major Paleogene discovery Kaskida will give BP a 100% interest in the project. The assets also include interests in four producing oilfields: Zia, Magnolia, Merganser and Nansen.

In Azerbaijan, acquisition of Devon’s 5.63% stake in the ACG development will increase BP’s operating interest in the fields to 39.77%.

Joint venture in Canada
The undeveloped Kirby oilsands leases are in the southeast of the Athabasca region of Alberta, close to the Devon operated Jackfish development, which started production in 2007. Like Jackfish, the Kirby oilsands are suitable for in situ development using steam assisted gravity drainage (SAGD). BP and Devon have agreed an initial appraisal programme to assess the significant potential of the Kirby acreage and to establish a long term development plan. In addition to forming the joint venture, BP and Devon have agreed to enter into a long term heavy crude offtake agreement for production from the Kirby development as well as a portion of the production from some of Devon's other oilsands assets.

BP is currently undertaking a major investment programme at its Whiting, Indiana, refinery, significantly increasing its capacity to process heavy crudes such as Canadian heavy oil. The Whiting upgrade is planned to come onstream in 2012. On completion of the transaction, Devon’s employees in Brazil are expected to join BP.

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