The company has made an agreement with the government of Alaska that should clear the way for it to swallow up Atlantic Richfield, the US oil company.
Alaskans have voiced serious concern about such a combination's domination of the economy of the US state. And competition authorities in Washington had threatened to stop the deal, since it would give BP Amoco a huge stake in the Californian market for petrol.
Under the deal, BP Amoco and Arco, the marketing division of Atlantic Richfield, would sell off 175,000 barrels of Alaskan production a day, along with exploration leases and part of their combined stake in the Trans-Alaska Pipeline.
"After months of complex negotiations we have agreed to terms which will allow BP Amoco to retain nearly three-quarters of the value of Arco's Alaskan assets," said a statement from the companies on Friday night. "At the same time, we have met the exacting requirements of the state of Alaska in a deal we believe will be acceptable to Alaska as a whole."
Alaska's governor, Tony Knowles, said: "This assures that there will be competition on the North Slope of Alaska. I believe this proposed agreement protects the interests of Alaskans."
The two companies will keep just over half of the oil production that currently comes from Arco in Alaska, giving them 60 per cent of the state's total yield. Together, they will account for 16 per cent of the oil production in the US. Globally, the only larger company in existence will be Exxon.