BP's move to gain a foothold in Russia's offshore Arctic oilfields through a deal with state-controlled Rosneft has collapsed after it failed to resolve a dispute with partners in TNK-BP.

BP chief executive Bob Dudley had trumpeted the Rosneft deal, agreed in January, as showing BP could still offer growth after the disastrous Gulf of Mexico oil spill last year.

Mr Dudley said BP had not been able to reach a deal with partners in its Russian venture TNK-BP about the proposed Rosneft transaction.

BP's partners in TNK-BP - four Russian oligarchs represented by the Alfa-Access-Renova consortium - objected to the Rosneft deal and took court action to block it, raising investor questions about Dudley's judgement, particularly given his previous experience in Russia.

A last-ditch effort to push the deal through involved BP and Rosneft making a cash and stock offer to buy out AAR.

But there was no agreement and, after months of wrangling, Rosneft decided to pull out of the proposed alliance with BP and search for new partners to explore the three Arctic Kara Sea blocks earmarked for the offshore venture with BP.

Rosneft is talking to Exxon, Shell, Chevron and Chinese companies to explore the offshore territory, the source said. BP had until last night to complete a $16 billion share swap with Rosneft as part of their proposed deal that would have given it an interest in leases that could contain over 40 billion barrels of oil.

The source said BP and Rosneft offered $32 billion, including $9 billion in BP stock, to buy AAR's stake in TNK-BP.

For its part, a source close to BP said it still hoped to buy out its TNK-BP partners, although there was no timeline for this. The company said talks with Rosneft would also continue.

"BP remains committed to Russia, to working constructively with AAR in TNK-BP and to our existing good relationship with Rosneft," Mr Dudley said in a statement.

Reuters