Friday's announcement comes after BP completed the sale of its 50 percent interest in TNK-BP to state-owned Rosneft. The deal allowed Rosneft, the Russian oil giant, to tighten its grip on the country's lucrative oil industry.
"We expect our stake in Rosneft will generate long-term value for BP and its shareholders," said BP Chairman Carl-Henric Svanberg. "But this buy-back program should also allow our shareholders to see benefits in the near-term from the value we have realized by reshaping our Russian business."
BP invested $8 billion in cash, shares and assets when it formed TNK-BP in 2003 and received a total of $19 billion in dividends over the next decade. That was followed by a reinvestment in Rosneft shares, for an overall consideration of $12.48 billion in cash.
BP now holds a 19.75 percent interest in Rosneft.
The deal allowed Rosneft, already the country's top oil producer, to increase its global profile and become the world's largest publicly traded producer of oil and gas, in terms of output. It pushed past ExxonMobil, whose daily output at 4.2 million barrels of oil was below the expanded Rosneft's projected 4.6 million at the time of the deal.
Rosneft was created out of the former Soviet state oil and gas authority in 1993. It is 75 percent owned by the government, with the remaining shares traded on the market or owned by the company and its managers.
"BP is moving on to the next phase of its business in Russia, becoming the largest private shareholder in Rosneft, Russia's leading oil company," chief executive Robert Dudley said. "In the process we have also released cash equivalent to at least six years of BP's anticipated future dividends from TNK-BP."
The buy-back is expected to take between 12 and 18 months to complete.
BP intends to keep $4.48 billion received from the sale of its interest in TNK-BP to reduce debt.