The battle for control of BP's Russian oil venture escalated Wednesday with plans by its local tycoon co-owners to put in a cash offer estimated at $25 billion for the British group's full stake.
But analysts said the 50-percent holding in Russia's third-largest oil producer was still likely to end up in the hands of the state firm Rosneft and its powerful chief Igor Sechin -- a confidante of President Vladimir Putin.
BP has until October 17 to negotiate with both rivals in good faith after putting up the stake for sale on June 1 amidst a heated board battle that made the TNK-BP venture unmanageable despite its profitability.
A source familiar with the situation said the bid decision was reached after it became clear that BP was not interested in selling only half of its holding as initially suggested by the billionaires grouped in the AAR alliance.
"AAR will offer to buy BP's entire 50 percent stake in the TNK-BP venture in an all-cash offer rather than half of the holding it sought earlier," the source told AFP.
The person close to the talks said the new amount had still not been decided amid analyst estimates of the stake being worth between $20 and $30 billion. The partners had been ready to pay $10 billion for the 25-percent stake.
The bid is meant to counter attempts by Russian oil champion Rosneft to raise $15 billion for a much broader deal that would include a share swap agreement that has the incentive of keeping BP in Russia for the long term.
Fitch Ratings said the amount should not pose too big a hurdle for Rosneft -- responsible for nearly a quarter of Russia's oil production -- and that its "current capital structure could absorb a maximum of $15 billion additional debt."
Sechin is believed to be pushing strongly for the takeover as he seeks to make his firm into a seat of Russian energy power that will eventually include larger natural gas holdings.
BP for its part needs an urgent cash infusion as it pays for the consequences of the Gulf of Mexico oil spill and seeks new investments that could make up for assets lost to help cover the cleanup costs.
Analysts believe that new Siberian and Arctic oil possibilities provided by Rosneft fit perfectly into such BP plans.
"From BP's perspective, cooperation with a state company creates new opportunities for growth," said Nomos Bank analyst Denis Borisov. "But the price should be the clincher here."
Yet a deal with the partners would raise the possibility of them dropping lawsuits against the British group over a failed Arctic exploration tie-up it had tried to strike last year with Rosneft.
BP was already hit with a $3.1-billion Russian fine in July that the group is now contesting. But another case in Stockholm may prove far more damaging because it is being pursued under British law.
The Sunday Times reported that BP is ready to counter by offering Rosneft a seat on the company's 15-member board -- the first ever awarded to a Russian.
The AAR billionaires are due to make their formal offer to BP by the October 17 expiration of the negotiations period.
The person close to the deal also indicated that the tycoons were far from certain that Rosneft would be given the green light to act by Putin's fractured government -- a claim confirmed by weeks of indecision thus far.
"It is is not clear at this stage whether the Russian government will approve Rosneft's purchase of the BP stake."
Some of Russia's more liberal officials have argued against broader state involvement in the energy sector and view Sechin as a dangerous force who wants to centralise private assets for the Kremlin.