BP Plc, London, (London: BP) has entered a global production alliance with Rosneft, Moscow, (Russia, London: ROSN) which involves a stock swap agreement valued at US$7.8 billion.

BP has agreed to issue 988.7 million shares to Rosneft, and Rosneft will transfer 1.01 billion shares to BP.

The two companies will jointly explore and develop three license blocks—EPNZ 1, 2, 3—on the Russian Arctic continental shelf. These licenses were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometers in a highly prospective area of the South Kara Sea.

The agreement creates the first major equity-linked partnership between a national and international oil company. Pro forma, Rosneft will hold 5% of BP’s voting shares in exchange for approximately 9.5% of Rosneft’s shares.

BP and Rosneft also plan to establish an Arctic technology center in Russia that will work with various specialists to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from the Arctic shelf.

Rosneft and BP have agreed to continue their joint technical studies in the Russian Arctic to assess hydrocarbon prospectivity in areas beyond the Kara Sea. The parties will also seek additional opportunities for international collaboration beyond their 50/50 joint venture partnership in German-based refining joint venture Ruhr Oel GmbH—subject to completion of Rosneft’s recent purchase of 50% of Ruhr Oel from PDVSA.

BP chief executive Bob Dudley says, “We are very pleased to be joining Russia’s leading oil company to jointly explore some of the most promising parts of the Russian Arctic, one of the world’s last remaining unexplored basins. Underpinning this alliance is a new type of relationship based on a significant cross-shareholding, and bringing together technology, exploration and safe and responsible field development skills.”

Rosneft president Eduard Khudainatov says, “I am pleased that in just a few months we’ve significantly moved forward in implementing Russia’s offshore strategy. In its operations, our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry. 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.”

Rosneft is Russia’s largest oil-producing company. It produces some 2.4 million barrels of oil equivalent per day, and has reserves of 15.1 trillion barrels equivalent.