Under the pact, to be signed in the presence of prime minister and president-elect, Vladimir Putin, Eni will also work with Rosneft to develop acreage in the Black Sea that U.S. Chevron Corp (CVX.N) had abandoned.

The deal would be modeled on the Exxon-Rosneft pact, with Eni taking a minority stake of 30 percent in the exploration venture and shouldering up-front investment costs, two industry sources told Reuters.

"The deal will be similar to that between Rosneft and Exxon," one of the sources said.

A third source said the deal would be "strategically massive" for state-controlled Eni. Both Rosneft and Eni declined to comment.

As with the Exxon deal, Rosneft would gain access to Eni projects outside Russia - part of a Kremlin strategy to expand the country's oil industry abroad and gain know-how to apply to projects at home.

The prize for reserve-hungry foreign majors is Russia's vast but largely unexplored offshore riches, which the world's top oil producer must exploit to sustain output above 10 million barrels per day.

Rosneft's proven oil reserves total 18 billion barrels - enough to sustain its current rate of oil output for 21 years, according to the company.

But it estimates its hydrocarbon 'resources' - which have yet to be explored and appraised - at more than 10 times higher at 206 billion barrels.

That would make Rosneft's offshore resources larger than the 100 billion barrels held in Brazil's 'pre-salt' province in the Atlantic basin that is yielding a production bonanza for state-controlled oil firm Petrobras (PBR.N).

But about two-third of Rosneft's resources are in the Arctic offshore, much of it icebound with no existing infrastructure - a daunting prospect for investors who face paying tens of billions of dollars to develop the province from scratch.

A QUESTION OF TAX

Putin's announcement this month that Russia would lighten the offshore tax burden - by scrapping duties levied on exports of hydrocarbons produced in Russia's Arctic offshore zones and cutting mineral extraction tax - has led to a rush by foreign majors to seek deals.

The proposed tax regime, which has yet to be made into law, is designed to guarantee investors an economic rate of return on their investment.

Foreign players have long been deterred from investing in Russia by its onerous energy taxes, which for years captured 90 cents on the dollar at the margin for each barrel of crude exported.

Only BP (BP.L) has a significant onshore presence in Russia through its 50 percent stake in Russia's No.3 oil firm TNK-BP (TNBP.MM) - a troubled but profitable venture that ended up getting in the way of its offshore deal with Rosneft last year.

Exxon and Shell (RDSa.L) have offshore projects near the Pacific island of Sakhalin that were set up in the 1990s as production-sharing agreements - a structure now spurned by the Kremlin due to cost overruns that hit state revenues.

Industry and political sources say the return of Putin to the Kremlin on March 4 has opened the way for the latest deals.

Deputy Prime Minister Igor Sechin, a Putin ally of roughly two decades, has been behind a push to fix the tax regime and secure key deals before Putin's return, which may trigger the loss of his formal brief as Russia's top energy official.

A QUESTION OF TIMING

Full scale production in the Arctic is likely to be years - if not decades - away due to the huge technical and logistical challenges of producing oil in the ice-strewn waters.

Exxon does not plan to drill its first well in the Arctic Kara Sea until 2014, while a final investment decision to develop the three blocks there is not expected until 2016-17.

Eni has had operations in the Norwegian sector of the Barents Sea since 1965, and CEO Paolo Scaroni has named the region as a key area for the group's strategic development.

Eni announced in January that oil and gas had been found at the Havis project, around 200 km off the Norwegian coast, in which it has a 30 percent stake. Norway's Statoil (STL.OL), with a 50 percent stake, is operator of the project.

Rosneft earlier this year won the right to develop three blocks on the Barents Sea continental shelf - Tsentralno-Barentsevsky, Fedynsky and Perseevsky.

The blocks have estimated resources of 3.3 billion metric tonnes (3.63 billion tons) of crude oil and gas condensate and up to 2.8 trillion cubic meters of gas.

Eni was expected to develop the Val Shatskogo area of the Black Sea that had been given up by Chevron.

(Additional reporting by Stephen Jewkes in Milan, Writing by Douglas Busvine; editing by Elizabeth Piper)

• A Permanent Economic Emergency