Chevron Corporation (NYSE:CVX) is teaming up with BP plc (NYSE:BP) and ConocoPhillips (NYSE:COP) to form an alliance to jointly develop oil and gas projects in the Keathley Canyon of the Gulf of Mexico. The trio of big oil giants are reshuffling ownership interests in order to optimize the development of recent discoveries as well as explore for additional sources of oil and gas. Here's a breakdown of the new alliance and what it means for investors.

Chevron takes charge in the Gulf
The sweeping alliance covers a total of 24 jointly held offshore leases in the northwest section of the Keathley Canyon in the deepwater of the Gulf of Mexico. As part of the deal Chevron will acquire roughly half of BP's interests in the Gila and Tiber fields, which were discovered by BP in 2013 and 2009, respectively. Further, BP, Chevron and ConocoPhillips have agreed to joint ownership interests in exploration blocks east of Gila known as Gibson, which covers a six-lease area. The alliance also covers the Chevron-operated Guadalupe discovery, which Chevron, BP, and another partner discovered late last year.

The map below details the location of these leases.

Source: Chevron Corporation Press Release

The driving force behind the alliance is to develop these new discoveries, as well as ones in the future, in the most cost-effective manner. The plan is to evaluate the potential of a centralized production facility, which would help to keep development costs low. That facility would be similar to Chevron's Jack/St. Malo project where it was able to jointly develop those two fields in a way to save money while optimizing its resources.

BP pulls back
In one sense the deal represents a step back for BP as it's giving up a big chunk of the future potential of both Gila and Tiber. (Incidentally, Tiber was discovered using the same Deepwater Horizon drillship just seven months prior to to the rig's tragic disaster.) However, the company still remains the largest investor in the Gulf of Mexico and is one of the region's top producers. Further, in just the past two years the company has had four start-ups in the Gulf of Mexico, so it's clearly not backing away. What it is doing is optimizing its assets in the Gulf so it can reduce its risk as it pursues future growth in the region.

Source: BP plc

That being said, the deal really represents the continued emergence of Chevron as a leader in the Gulf of Mexico. The company recently brought Jack/St. Malo and Tubular Bells online, while also announcing the development of Stampede and the discovery of Anchor and Guadalupe. This progress, combined with the company's leading position in the deepwater of the Gulf of Mexico, has Chevron really taking the leadership role in developing the next phase of the Gulf's growth. Over the next three years the Gulf is expected to show surprising strength as the region is expected to add 700,000 barrels of oil production per day thanks in part to the ramp in production from Chevron's assets.

It's this growth that ConocoPhillips is looking to join as its a relatively new participant in the deepwater. However, by working with leaders like Chevron and BP the independent oil and gas driller can latch on the tails of these Gulf veterans and participate in their success as it start its own efforts in the Gulf. 

Investor takeaway
Chevron is really taking advantage of low oil prices by going on the offensive and taking control of development of recent discoveries in the Gulf. In doing so it's betting on the long-term recovery of oil prices as these discoveries will take years to turn into oil production. Chevron's plan is to work together with its peers to get costs down so that when this oil production comes online it will enjoy exceptional long-term returns by delivering relatively low cost oil because of the potential for optimized development.