BP Plc will pay A$1.785 billion ($1.3 billion) for Woolworths Ltd's network of Australian gas stations in a deal that will cement the London-based oil company as one of the nation's biggest fuel providers.

The British company will acquire 527 fuel outlets that are supplied by rival Caltex Australia Ltd, as well as 16 development sites, according to a statement on Wednesday from Sydney-based supermarket owner Woolworths.

BP already owns 350 retail locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners, according to a separate statement from the oil company.

BP and Woolworths also agreed to a partnership that includes the continuation and expansion of a scheme providing fuel discounts for supermarket customers.

BP has previously struck deals with retailers including Marks & Spencer Plc in the United Kingdom and REWE in Germany.

For Woolworths, the sale is part of Chief Executive Officer Brad Banducci's strategy to reverse the supermarket chain's declining fortunes. Since becoming CEO in February, Banducci has cut jobs, written off assets and slowed store openings, while sales at its Australian food division have started growing again.

The sale is "positive at the margin" for Woolworths, according to Michael McCarthy, chief market strategist at Sydney-based CMC Markets Asia Pacific Pty.

"Woolworths' management were just keen to do any deal. While it is good that there's movement, this was probably the easiest to do and probably the one that makes the least difference."

Completion of the transaction is not expected before Jan 2, 2018, and is subject to regulatory approvals.

Bloomberg