Russia's Rosneft has agreed to buy TNK-BP, a 50-50 venture between BP of the United Kingdom and a group of billionaires, for US$54.8 billion (S$67 billion) in the third-biggest oil acquisition ever, Bloomberg news agency reported on Monday.

By absorbing Russia's third-largest oil company, state-run Rosneft will match the output of Exxon Mobil of the US and control more than 40 per cent of Russia's crude output.

Rosneft, led by Chief Executive Officer Igor Sechin, will buy BP's 50 per cent stake in TNK-BP for US$26.8 billion in cash and shares and has an initial agreement to acquire the billionaires' half of the company for US$28 billion in cash.

The UK company will take a 19.75 per cent stake in Rosneft and obtain two seats on the board. The deal is London-based BP's biggest for 13 years and BP Chief Executive Officer Bob Dudley's boldest move yet to transform the company after the 2010 Gulf of Mexico oil spill.

"Rosneft is a company working to become a global leader," Mr Dudley said. "BP looks forward to being able to contribute to Rosneft's success and add value through our participation on the board."

The only oil and gas acquisitions that have been bigger than Monday's deal are Exxon's US$80 billion merger with Mobil in 1998 and BP's US$56 billion purchase of Amoco Corp in the same year.

BP will receive US$17.1 billion in cash and 12.8 per cent of Rosneft's shares for its half of TNK. BP will reinvest US$4.8 billion in the government's shares of Rosneft, leaving it with US$12.3 billion in cash, 19.75 per cent of the state-backed company and two board seats.

TODAY