BP to Pay $7 Billion for Devon Exploration Rights

FILE - In this Oct. 25, 2007 file photo, the BP (British Petroleum) logo is seen at a gas station in...

FILE - In this Oct. 25, 2007 file photo, the BP (British Petroleum) logo is seen at a gas station in Washington. BP will spend $7 billion to buy exploration rights to areas in the Gulf of Mexico, offshore Brazil and Canada owned by Devon Energy. (AP Photo/Charles Dharapak, file)

(AP)

BP is expanding its dominant oil and gas operations in the Gulf of Mexico and dropping anchor off Brazil with a $7 billion deal to buy exploration rights from Devon Energy.

BP will get the rights for 10 exploration blocks in Brazil and others in the Gulf of Mexico and in the Caspian Sea near Azerbaijan. BP PLC already is the largest leaseholder in the Gulf of Mexico with more than 650 blocks producing over 400,000 barrels of oil equivalent daily.

Brazil is one of the world's most promising areas for oil exploration.

Devon, based in Oklahoma City, has interests in more than 450 offshore blocks in the Gulf that account for about 7 percent 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 billion.

Devon has 10 offshore blocks in Brazil covering 1.4 million 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.

As the world's petroleum supplies become more difficult and more expensive to access, major oil companies are building their oil and gas holdings by taking over smaller companies. Raymond James analyst Pavel Molchanov said it makes sense for BP to buy Devon's Brazil operations instead of starting its own deep-water projects there. "It's very difficult for a western company that's not already in Brazil to enter places like the Campos Basin where Devon is already present. Brazil's government wants to make sure they maintain control."

Brazil's president pledged last summer to exert more state control over the immense oil fields discovered off its shores.

The Brazilian assets represent potential future growth for BP.

"It's not instant gratification," Molchanov said. "These assets aren't going to deliver barrels of oil bubbling up very soon. But in the long run it makes sense."