The $16 billion tie-up between BP and Russia's largest oil firm Rosneft collapsed last night, after the AAR consortium which represents the owners of half of BP's Russian venture TNK-BP failed to reach an agreement with BP that would unlock their partnership and let BP tie up with Rosneft, RIA Novosti reported.
BP will now focus on the development of TNK-BP and continue talks, BP said on Tuesday.
"BP and Alfa-Access-Renova (AAR) announced today that they would intensify their efforts to ensure TNK-BP's continued success following the lapse of the BP-Rosneft share swap transaction (and the related Arctic exploration opportunity) originally announced on 14 January 2011," BP said in a statement.
"In recent months, BP has conducted detailed negotiations with AAR and Rosneft to seek a reasonable and businesslike solution that would allow the agreements to proceed to the satisfaction of all parties. Such a solution has not been found at this time, although talks will continue."
In January, Rosneft and BP agreed on a share swap in which Rosneft was to exchange 9.5 percent of its stock for 5 percent in BP. The deal, supported by Deputy Prime Minister Igor Sechin, also includes plans to jointly develop oil production in the Russian Arctic.
But the contract was blocked by a court injunction following legal action by AAR, which said the BP-AAR shareholder agreement obliged BP to ask for TNK-BP's approval before BP could get involved in any Russian project.
The deadline for completing the BP-Rosneft alliance expired at 3 a.m. Moscow time on Tuesday.
"As we have always stated, AAR is a long-term strategic investor, and we look forward to working with BP on delivering the next phase of TNK-BP's growth, both in Russia and internationally," the statement quoted Mikhail Fridman, one of the four AAR billionaires as saying.
"AAR also sees significant benefit to developing cooperation with Rosneft within the framework of the TNK-BP shareholder agreement, and we plan to continue discussions about potential collaboration among BP, Rosneft and AAR."
Earlier on Tuesday Vedomosti business daily said BP and Rosneft planned to offer AAR $30 billion for its TNK-BP stake, although AAR wanted a number of written guarantees for the purchase, while BP and Rosneft only wanted to sign a trilateral binding memorandum.