British energy giant BP plc (BP - Analyst Report) has teamed up with China National Offshore Oil Corp (CNOOC) – China’s largest offshore explorer in the South China Sea.

A production sharing agreement was inked between the two companies relating to Block 54/11 in the deepwater Pearl River Mouth Basin, South China Sea. However, the financial terms were not revealed in the agreement.

The block spans 4,586 square kilometers and lies in water depths ranging from 370 meters to 2,300 meters. Block 54/11 will be operated by CNOOC with a majority stake of 51%. BP will be responsible to bear the exploration costs of the block, which is close to its existing deepwater interests in Blocks 43/11 and 42/05.

The deal reveals China’s ability to develop its own oil and gas reserves and at the same time acquire stakes in projects around the world. The new acreage is an addition to BP’s deepwater portfolio in the South China Sea and extends its relationship with CNOOC.

Both blocks 42/05 and 43/11, are in the exploration phase and were awarded to BP in 2010 and 2011, respectively. BP’s presence in China dates back to the 1970s. Currently, the British giant operates 17 active joint ventures and wholly owned BP business entities in the region. The company had already invested about $4.9 billion at year-end 2012.

London, England-based BP is one of the world's largest energy companies, providing customers with fuel for transportation, energy for heat and light, retail services and petrochemical products. It operates in three segments: Exploration and Production, Refining and Marketing, and Other Businesses and Corporate.

For 2013, the company expects refining margins to experience a downfall from the 2012 level due to turnaround activity. The company's petrochemicals margins are also expected to remain weak during 2013.