(Reuters) - Saudi Aramco is in the early stages of considering a potential bid for BP's lubricant business Castrol, according to a person with knowledge of the matter.

BP has been exploring all options around its Castrol business, including a possible sale, as part of a strategic review.

The business would be expected to be worth around $6 billion to $8 billion, Ashley Kelty, an analyst at Panmure Liberum, said in a note last week.

A BP spokesperson declined to comment. Aramco did not immediately respond to a Reuters request for comment.

BP shares were up 1% at 412.15p at 1332 GMT.

Bloomberg News was first to report about Aramco's interest in Castrol on Wednesday, which comes a day after the Saudi oil giant reported a drop in its annual profit and signalled it will slash its dividend payouts by nearly a third this year.

BP said last week it was reviewing its lubricants business, Castrol, and targeting $20 billion in divestments by 2027.

The divestment program is a key part of CEO Murray Auchincloss' strategy to reduce capital expenditures, cut costs, divest assets, and drive higher cash flow and returns, ultimately aiming to restore investor confidence and enhance earnings.

BP, which has underperformed peers like Shell and Exxon, has come under increasing pressure to change strategy after news that U.S. activist investor Elliott Investment Management has built a 5% stake in the company.

According to Elliott, BP would benefit from selling its Castrol lubricants and its network of service stations to unlock value and boost share buybacks, a source told Reuters last week.

Bloomberg's report said Aramco hasn't made a final decision on the structure of a potential bid for Castrol or whether it will proceed as deliberations are still in the early stage.