The British oil company's board will meet on Friday to consider a cash and stock offer worth over $25 billion. It is not tied to asset deals or exploration tie-ups with Rosneft although those may come in the future, sources said.

Rosneft has already made an offer of around $28 billion to BP's equal partners in TNK-BP, the AAR consortium owned by four Soviet-born tycoons, according to the sources in London, Moscow and elsewhere.

Other sources familiar with BP, Rosneft, their advisers and financiers said the terms of two offers may differ, but that they value the whole of TNK-BP at over $50 billion.

Some British newspapers reported that BP's chief executive Bob Dudley would be recommending the offer to the board.

"The offer is in. It's a split of the two," (cash and shares). It's a clean offer and there's no other plan on the table," said one source. "If he thinks it's the best offer Dudley will recommend it but the board may say we need to reconvene and consider this aspect or that. It's not an automatic tick in the box."

Over the past few days sources painted a picture of a three-way deal that could emerge over the coming weeks, with some details to be hammered out during a visit to London this week by Rosneft Chief Executive Igor Sechin.

"BP is reviewing options (with regard to the offer)," said one source.

The sources said BP and the four tycoons could emerge with minority stakes in an enlarged Rosneft plus billions of dollars in cash in exchange for the highly profitable company.

The combined group would dominate Russia's increasingly state-controlled oil industry.

President Vladimir Putin has been determinedly regaining state control of assets that passed cheaply to a small group of businessmen when privatized in a hurry in the 1990s.

Rosneft's absorption of another oil firm, Yukos, and the imprisonment of its former owner Mikhail Khodorkovsky in the mid-2000s was the biggest step in this process until now.

That was also masterminded by Sechin, who was deputy chief of staff at the Kremlin - Putin's gatekeeper - at the time.

Citing this background, sources said that although BP would likely get stock in Rosneft as part of its package, the tycoons might not, and that a structure of deferred payments of more cash could be on the cards for the AAR partners.

A stock purchase by BP could also allow Putin to show some of his critics that he is diversifying, not concentrating, ownership in the oil industry, analysts have said.

MORE OUTPUT THAN EXXON

A combined Rosneft-TNK-BP would be producing well over 4 million barrels of oil and gas a day - more than U.S. No.1 Exxon Mobil (XOM.N), the biggest producer among the world's investor-owned oil companies.

According to two sources familiar with the matter, Rosneft agreed on Tuesday to pay the tycoons' AAR consortium $28 billion. Financial sources said it was unlikely all to be in cash, especially if Rosneft intends to buy out BP as well.

They also said the real value of the two deals would be somewhat lower than implied by the headline $28 billion figure put on the AAR part, but would still be in excess of $50 billion in total.

About $15 billion could be met by a loan Rosneft has been negotiating with international banks, and it can get another $3 billion from Russian banks, the financial sources said.

However, "There is a point where raising debt would have a negative impact on Rosneft's credit rating," said one banker, while another said $20 billion was the most Rosneft can borrow without putting a strain on its ability to refinance later.

Bankers told ThomsonReuters LPC that Rosneft's $15 billion loan request had not changed since this week's developments. The loan package consists of bridge loans to be refinanced with bond issues and a term loan that will be held by banks. A total of 10 banks have already joined the deal and the loan could be concluded in three to four weeks, banking sources said.

BP, Rosneft and AAR all declined comment.

Shares in BP climbed 3 percent on Wednesday and added a further 0.7 percent on Thursday, and were holding most of the ground gained on Friday, down 0.2 percent at 451.25 pence.

Investors see potential for BP's fraught history in Russia to take a positive turn even if their half of the deal does not go through.

ARCTIC REVISIT

The AAR part of the deal is a re-hash of a plan that fell through last year, under which BP and Rosneft offered to buy out the tycoons and sign a tie-up deal to explore in the Arctic together.

Some analysts speculated that this week's negotiations could end with BP turning down the Rosneft offer and keeping its stake, but pursuing instead the Arctic deal that fell through. Others said the Arctic exploration plan might go ahead anyway.

"We thus see positively the two possible scenarios," said analyst Dominique Patry at Cheuvreux. "Either BP ends up selling its stake to Rosneft for a similar value to the rumored $28 billion offered to AAR, or BP keeps its 50 percent stake in TNK-BP but with Rosneft as a partner."

SOURED RELATIONS

BP's decision in June to put its own stake up for sale put pressure on the oligarchs to sell their half rather than be left holding a devalued stake and at the mercy of Rosneft.

AAR chief executive Stan Polovets said on Wednesday his group would not now be making an offer to BP, leaving the way clear for Rosneft to strike a deal.

Relations between BP and the tycoons Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik soured last year when AAR blocked the proposed co-operation between BP and Rosneft, saying it violated a TNK-BP exclusivity agreement.

An attempt to resolve the dispute was thwarted when AAR turned down a $32 billion offer for its stake from BP and Rosneft in May 2011. Relations deteriorated further, with Fridman quitting as CEO of TNK-BP in May this year.

BP put its stake up for sale the following month in an attempt to bring the issue to a close and focus management on another pressing issue - resolving the billions of dollars of potential fines and compensation payments with U.S. authorities over the 2010 U.S. Gulf oil spill.

The move presented the four 'oligarch' co-owners of TNK-BP with the unpalatable prospect of going into business with Kremlin-backed Rosneft, and without the international expertise that BP has brought to the venture.

Any deal will be subject to government approval but Sechin, in comments made to the Financial Times last week, made it clear that Rosneft's ambition to invest in TNK-BP enjoyed Putin's backing.

(Additional reporting by Doug Busvine, Melissa Akin, Katya Golubkova and Vladimir Soldatkin in Moscow and Sarah Young in London; Editing by Will Waterman and Anna Willard)

• A Permanent Economic Emergency