The "strategic global alliance" will see the firms exchange expertise in exploring the region.

As part of the deal Rosneft will take 5% of BP's shares in exchange for approximately 9.5% of Rosneft's shares.

It is BP's first deal since the Deepwater Horizon spill last year.

'Unexplored'
"This unique agreement underlines our long-term, strategic and deepening links with the world's largest hydrocarbon-producing nation," said BP's chief executive Bob Dudley.

The firms will explore in three areas - known as EPNZ 1,2,3 - on the Russian Arctic continental shelf.

The areas covers 125,000 square kilometres in an area of the South Kara Sea.

"Our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry," said Rosneft's President, Eduard Khudainatov.

"This project is unique in its complexity and scale both for Russia and the global oil and gas industry. We see it as the next step in developing our relations with BP."

Since the rig disaster in the US Gulf of Mexico BP has been disposing of assets.

BP has also had significant problems with Russia in the past.

Mr Dudley is the former chief executive of Russian joint venture TNK-BP, and was forced out of the country in 2008 after falling out with other shareholders.

But he said he was pleased to now be working with Rosneft in "one of the world's last remaining unexplored basins".

Return to profit
BP had a terrible 2010 with the Gulf of Mexico spill which is going to cost them at least $40bn.

But in November BP announced it was back in profit in the three months to September after last quarter' s record loss.

The firm said its replacement cost profit for the period was $1.85bn (£1.15bn), as against the $17bn loss recorded from April to June.

The previous loss reflected the massive costs of the Gulf of Mexico oil spill crisis, which followed an explosion on a drilling rig in April.

Source: BBC