LONDON (AP) -- BP took a big step toward solving a blocked Arctic exploration deal on Friday, when it said it was open to sign the contract with Russia's Rosneft through its unit TNK-BP -- giving up on its earlier claim to participate directly.
Alfa-Access-Renova, the British oil company's partner in the TNK-BP Russian joint venture, had objected to BP's agreement with Rosneft to look for oil in Arctic waters, and won a court order in Britain blocking the deal. AAR claims BP is contractually obliged to pursue all its deals in Russia through TNK-BP.
BP said an arbitration panel has now cleared the way for it to open negotiations with Rosneft about assigning BP's half of the Arctic exploration deal to TNK-BP, resolving the dispute.
If Rosneft agrees, BP said it will then be allowed to proceed with the $16 billion share swap with Rosneft, with some modifications.
BP shares were up 2.2 percent at 450.6 pence following the announcement.
"For the share swap to proceed, both BP and Rosneft would also have to agree that any shares received as a result of the share swap would be held for investment purposes only and placed in trust, with voting rights exercised by independent trustees, together with certain other technical amendments," BP said.
"Neither company would have representatives on the other's board in respect of these holdings."
Rosneft's agreement on TNK-BP participating in the Arctic deal and on changes to the share swap agreement are required for the deal to go ahead, BP said.
"What will happen after the next step we don't know yet. The next step is that we have to talk to Rosneft," BP spokesman David Nicholas said
He said the arbitration panel's ruling "is not a fait accompli. This is a step in the right direction."
On April 15, the Russian billionaire shareholders in AAR had proposed that TNK-BP should replace BP as Rosneft's partner in the Arctic.
AAR has asserted that its deal with BP makes it a partner in all of BP's activities in Russia.
AAR's CEO Stan Polovets welcomed Friday's developments, saying that the company will focus on working with BP and TNK-BP's management to expand development.
"We see the Arctic transaction with Rosneft as a great opportunity for TNK-BP and for Russia which we would like to succeed," Polovets said in a statement. "Today's agreement provides a good way forward for achieving these priorities and opens the way to bring BP's valuable expertise and technology to offshore exploration in Russia."
BP chief executive Bob Dudley has said his company and Rosneft had made an offer to buy out TNK-BP to solve the stalemate, but that that was rejected by AAR.
When Dudley announced the deal in January, he said it was "difficult to convey just how promising I find this historic agreement" which could open up one of the world's last remaining unexplored basins.
Under the terms of the share swap, BP was to take a 9.5 percent stake in Rosneft, which in turn would get 5 percent of BP shares, with each block worth about $8 billion. Added to an approximately 1 percent stake in Rosneft which BP bought earlier, the British oil company would end up owning 10 percent of the Russia's biggest crude oil producer.
BP already draws a quarter of its oil production from Russia. The Rosneft deal would give it access to 125,000 square kilometers (48,000 sq. miles) of the South Kara Sea, an area roughly as large as the North Sea where Britain and Norway struck oil.
Lynn Berry in Moscow contributed to this report.