British oil major BP is in talks to pay about $1.2 billion for a majority stake in a privately held Canadian company with large reserves of oil-rich sand deposits, the Sunday Times reported.

A deal to take a stake in Value Creation could anger environmentalists and some BP shareholders who fiercely oppose the oil sands business, which they say is expensive and environmentally damaging, the paper said.

Value Creation is in financial trouble and faces being put into receivership on Monday, it reported.

BP declined to comment.

Reliance Industries, which operates the world's biggest oil refining complex in India, is thought to have made a rival $2 billion takeover bid but BP is understood to be the preferred partner, the paper said. Value Creation's largest block of leases, Terre de Grace, covers about 290 square miles in the Athabasca region of Alberta.