Mumbai: British oil giant BP and its partners in the Russian joint venture TNK-BP have finally agreed to restructure the management of the Russian oil venture, ending months of uncertainty and allowing for flotation of up to 20 per cent of the company's capital.

While the two partners would continue to hold 50 per cent stake each in the joint venture, Russia's third-largest oil producer, the 20 per cent initial public offer would also be equally shared.

BP has also agreed to a number of other Russian demands, including the removal of TNK-BP's chief executive Bob Dudley and the appointment of independent directors.

Dudley, who was denied a visa by the Russian government after his term expired, is currently managing the company from overseas after he left Russia in July citing harassment. (See: Russian authorities refuse work permit for TNK-BP's expatriate executives)

A Moscow court has banned him from working in the country for two years.

BP, which held 50 per cent of the joint venture stake, however, held more authority in the appointment of the chief executive and technical staff, which the Russian partners had objected to.

TNK-BP's Russian partners had accused BP of running the 50:50 joint ventue like a BP subsidiary and its British-appointed CEO Dudley of favoring British employees and shareholders.

BP, on the other hand, had accused its Russian partners and the Russian authorities of orchestrating a campaign of harassment against BP in a bid to secure control of the joint venture.

Currently, the two sides have an equal number of representatives on the TNK-BP's board, while the British partner held the right to appoint its chief executive.

Post restructuring, the two will still appoint four directors each but the balance of control will be exercised by the three independent directors.

In a statement issued after signing the MoU, BP said the two sides will finalise the agreement in the next few months.

''It will create a stable base from which to grow the joint venture to the benefit of everyone involved, including the Russian state for which strong capital investment and continued technical innovation to boost declining oil output are so important,'' BP chairman Peter Sutherland said in the statement.

"Structural changes in management should allow the company to expand in accordance with its own interests and capabilities, while retaining the much- needed BP expertise and experience," he added.

TNK-BP's current listed subsidiary TNK-BP Holding has a free float of around 5 per cent.

A final agreement between shareholders will enable the management and staff of TNK-BP to focus on the way forward for the company free of this significant distraction and the uncertainties around the company's business plan and capital expenditure, the company said in a website release.

TNK-BP remains a strong and competitive Russian oil and gas company having contributed more than $80 billion in taxes duties and excise to the Russian government in the five years since its inception. Its five-year performance is second to none in the Russian oil and gas industry in terms of organic production growth, replacement of reserves and total shareholder returns, the release noted.

''I am pleased that our shareholders have reached agreement in principle on resolving their differences. Implementation of this agreement will allow TNK-BP to develop greater independence and identity and help prepare it for a successful public offering in due course. Becoming a more publicly held company will drive even higher standards of corporate governance and provide a fairer market valuation'' CEO Robert Dudley said in the statement. ''We remain on track to deliver our best year of operational and financial performance in our five year history'', he added.

In 2008, TNK-BP had a record first half in terms of incone, return on capital, shareholder value and taxes.

Net income rose from $2.1 billion in the first half of 2007 to $4.7 billion in the first half of 2008.

EBDTA rose from $3.8 billion to $7.5 billion and return on capital employed rose from 26.7 per cent to 44.8 per cent.

TNK-BP also boosted its tax payment from $8.9 billion in H1 2007 to $15.6 billion in H1 2008.