BAKU, Azerbaijan - British Petroleum has sealed a $40 million deal to perform a feasibility study in this region's hotly contested oil belt, according to industry sources and a company press release.


In alliance with the Norwegian Statoil company, BP has bought the exclusive right to conduct a feasibility study in the the Dostlug oilfield, offshore in the Caspian Sea.


Dostlug is one of a handful of oil fields which it is estimated will produce 1 billion barrels plus an additional one billion recoverable. Combined, experts said the fields could equal the North Sea in importance. While Azerbaijan now produces only a small percentage of the oil produced daily by the former Soviet republics, it is negotiating cautiously to raise output.


Details of the BP agreement are still being negotiated, but one source close to the deal said they expected the Azerbaijani government and the oil companies to share income evenly, with BP getting about two thirds of the commercial share and Statoil the remaining third.


Michael Heseltine, the President of Britain's Board of Trade, opened the office for British Petroleum in Baku last week. BP is one of several Western oil companies that have been fiercely competing in the race to re-open Azerbaijan's oil industry, which for 70 years has been closed to foreign developers. In the late nineteenth century, development of Baku's central Oil Avenue was dominated by foreign families.


The Russian Information Agency reported last week that Azerbaijan signed preliminary agreements with Penzoil, Remco and their joint subsidiary, Pennzoil Caspial, to develop oil and gas deposits on the Caspian Jihelf.


The Western companies are to invest $2. 5 billion over the next 10 years and will draw up a final version of the agreement within 90 days, Reuters reported.


Along with Russia, Kazakhstan and Oman, Azerbaijan is a member of the Caspian Pipeline Consortium, set up to build a pipeline to deliver, oil from the region to the world market.