The deal calls for BP and Russia's Alfa Group and Access-Renova to pool their energy assets in the country, which include exploration interests in Sakhalin and Siberia together with downstream businesses in Russia and the Ukraine.

BP estimates the new entity will have reserves in excess of 5.2 billion barrels of oil and produce about 1.2 million barrels per day.

Merrill Lynch International, Morgan Stanley & Co and United Financial Group advised BP on the deal.

In other BP news, the company said on Wednesday that fourth-quarter profits had increased 49%, boosted by higher prices and lower costs at its core upstream operations.

BP said profits increased to $US2.64 billion, up from $US1.77 billion from the corresponding period last year. Revenue increased 35% to $US50.14 billion from $US37.11 billion.

BP added it plans to spend more than $20 billion over the next five years on oil and gas projects in five newly-designated "profit centres" in addition to its new commitment in Russia.