Oil giant BP has confirmed it is in advanced talks with Kremlin-backed energy company Rosneft about selling its 50% stake in Russian joint venture TNK-BP.
The announcement from the UK energy company comes after its board reportedly backed proposals for a sale worth 27 billion US dollars (£17 billion), paid in a combination of cash and shares in Rosneft.
BP, which formed the TNK-BP joint venture in 2003, stressed that no agreement has yet been reached.
It is thought BP will receive up to 13 billion US dollars (£8 billion) and take a stake of between 15% to 20% in Rosneft.
Rosneft would become the world's biggest publicly traded oil company after the deal, with daily crude output of more than three million barrels.
It would also end years of wrangling over BP's Russian joint venture, which is owned with billionaire partners operating as Alfa-Access-Renova (AAR).
BP has had a fraught relationship with AAR, although the venture is thought to have earned the British firm 19 billion US dollars (£11.8 billion) in dividends. A dispute between BP and AAR effectively sank a proposed tie-up between the British blue chip and Rosneft last year, which included Arctic exploration plans.
Key points thought to be under negotiation are said to be the number of seats BP will be given on Rosneft's board, with BP likely to take one or two seats. It is believed that BP chief executive Bob Dudley and David Peattie, the group's head of Russia, could join the board, while a prominent Russian may also be appointed to BP's board - such as Rosneft boss Igor Sechin.
But there are concerns of potential legal action from AAR, following its success in scuppering the Rosneft deal with BP last year. TNK-BP has exploration and production assets as well as downstream marketing operations in Russia and Ukraine, alongside interests in Brazil, Venezuela and Vietnam.
It is the third biggest oil producer in Russia behind Rosneft, which the state controls, and second-placed Lukoil, which is owned by Russian investors. The business accounted for more than a quarter of BP's production and 90% of its 2011 dividend.