Rosneft on Tuesday shattered BP's hopes of exploiting Russian Arctic oil by pulling out of a planned joint venture with the British giant after losing patience with protracted negotiations.
A Rosneft source told AFP that the state-controlled Russian oil giant was now looking for a new Western partner following the failure of the two sides to resolve a row concerning BP's Russian joint venture before Monday's deadline.
The deal -- championed by Prime Minister Vladimir Putin -- was hailed as a breakthrough in Russian business ties with the West and a chance for BP to restore its reputation after the Gulf of Mexico oil spill.
But it appears neither side expected objections from a group of Russian oligarchs who own half of BP's existing Russian joint venture TNK-BP. They objected that the deal breached their shareholder pact and blocked it in court.
BP and Rosneft sought to buy out the billionaires -- known collectively as AAR -- to end the crisis but the Russian firm tired of the conditions and price demands they set.
The Rosneft source said it was now ready to offer the difficult Kara Sea project to another experienced Western firm.
"Various partners have sent us their proposals about entering the Arctic shelf project," the Rosneft official told AFP, asking not to be named.
"We had not reviewed them until now since we still had a deal with BP. But as of today, the company intends to carefully study these proposals," the source said.
Rosneft -- forged into Russia's state champion from the ruins of the jailed Mikhail Khodorkovsky's Yukos oil firm -- has already been approached by the US multinational ExxonMobil and the Anglo-Dutch firm Royal Dutch Shell.
NTV television said California-based Chevron may also be in the running.
Rosneft finds itself sitting on some of the world's largest untapped reserves while at the same lacking the expertise or equipment needed to tap the wealth and turn itself into a dominant international force.
The British firm had also been hoping to use the Russian tie-up to end years of BP shares' underperformance and bringing a new growth strategy after the 2010 Gulf of Mexico oil spill forced to sell several fields.
But the Russian partners at TNK-BP became furious when the Rosneft agreement was struck without their agreement and successfully argued in court that they had a right of first refusal on any deal.
BP had spent weeks trying to buy the local billionaires out of TNK-BP in hopes of completing the deal.
The Rosneft source said the Russian company was also willing to contribute cash to the deal and that the two sides had by the end upped BP's initial $27 billion offer by more than $5 billion.
The Russian partners "declined the offers even though there was a premium placed on the price," the Rosneft source said.
"According to some analysts' estimates, it was $10 billion more than the market price. The market price is estimated at $22 billion and they were offered more than $32 billion."
The news appeared to catch the British firm and its Russian partners off guard, coming only moments before they issued their own prepared statement saying that further negotiations were in store.
"We plan to continue discussions about potential collaboration among BP, Rosneft and AAR," AAR shareholder Mikhail Fridman said in the statement.
The British firm and the Russian partners added that while "a solution has not been found at this time ... talks will continue."
Putin's formal blessing of the initial agreement had left many analysts predicting that a solution would be found eventually even if this took more time. Several suggested that Rosneft may extend the deadline again.
But Putin had at one stage expressed his frustration over BP's board room problems and Rosneft was silent in the days leading up to the deadline.
A spokesman for Russia's de facto leader said the deal's collapse had no broader political or economic implications.
"This will not impair Russia's investment climate," spokesman Dmitry Peskov told Interfax.
"The deal was corporate in nature," Putin's spokesman said. "It was struck within the frameworks of corporate procedures and only concerned the companies" involved.
Copyright Agence France-Presse, 2011
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