Rosneft's TNK-BP takeover set to create biggest oil firm

Rosneft was on course to buy both halves of the TNK-BP Russian joint venture for an estimated $56bn (£35bn) last night after holding audacious overlapping takeover talks with the owners, BP and the AAR consortium.

The Kremlin-controlled hydrocarbon giant was negotiating with both sides of the 50/50 joint venture over two separate deals that would give it complete control of TNK-BP and transform it into the world's biggest oil company.

In its first deal, Rosneft is understood to have reached an agreement to pay $28bn in cash to AAR, a quartet of Russian billionaires led by Viktor Vekselberg, to secure its half of TNK-BP.

For the second deal, Igor Sechin, Rosneft's chief executive and a close associate of President Vladimir Putin, flew into London yesterday afternoon as he sought to finalise the purchase of BP's stake. That transaction, which sources warned last night was still not a done deal, would also be worth about $28bn. However, this time Rosneft would pay with a mixture of cash and shares in Rosneft.

This would provide BP with billions of dollars of cash, which it desperately needs to help pay off compensation claims relating to the 2010 Gulf of Mexico oil spill. It would also give the FTSE 100 company a substantial stake in an enlarged Rosneft and, in turn, access to Russia's vast reserves of oil and gas. BP, Rosneft and AAR all declined to comment last night.

To complicate matters further, AAR had been involved in parallel negotiations to buy BP's stake in TNK-BP as it considered taking complete control of the joint venture. However, following its deal with Rosneft, it is understood AAR has decided not to make an offer for BP's stake.

BP has set a deadline of 9am this morning to receive offers for its stake in TNK-BP and Rosneft was last night set to be the sole bidder. The FTSE 100 oil company could make an announcement about a deal with Rosneft as soon as today.

An exit from the joint venture would come as a welcome relief to BP which has had a fraught nine-year relationship with AAR.

BP's relationship with AAR has included court cases and harassment claims by Bob Dudley, then head of TNK-BP and now BP chief executive, which forced his exit from Russia in 2008.