Oil giant BP PLC is paying $7 billion US to U.S.-based Devon Energy for exploration rights in the Gulf of Mexico, offshore Brazil and in the Caspian Sea, the two companies announced Thursday.

The deal includes the sale by BP, for $500 million, of a 50 per cent stake in its Kirby oilsands interests in Alberta to Devon.

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When Kirby is developed, it will use heat to extract oil from the oilsands underground. ((Canadian Press))

Andy Inglis, BP's chief executive of exploration and production, said the joint venture in Canada will give BP a partner that is "an experienced operator in the Canadian oilsands with a proven track record of in situ development and production."

In situ production is used when oilsands are too deep to be mined, and heat is used to extract the oil so it can be pumped to the surface. "We expect this transaction will accelerate the development of the Kirby assets," Inglis said.

BP will get interests in 10 offshore exploration blocks covering 560,000 hectares off Brazil and will consolidate its place as the dominant producer in the Gulf of Mexico.

Oklahoma City-based Devon's plan is to focus on onshore oil and natural gas in North America.

"These sales, combined with our previously announced divestitures of $1.3 billion of deep-water Gulf of Mexico assets, put Devon well on the way to completing its strategic repositioning," said Devon CEO Larry Nichols. Devon sold stakes in three development projects in the Gulf in December to Maersk Oil for $1.3 billion.

"This is a good deal for BP and is consistent with its recent comments that it sees more asset based deals than corporate transactions," said Richard Griffith, analyst at Evolution Securities. Griffith said the Kaskida discovery in the Gulf of Mexico, which BP now owns in full after buying Devon's 30 per cent stake, could be worth $6 billion.