The battle for control of BP's Russian oil joint venture escalated on Wednesday when its local tycoon co-owners said they were putting in a cash offer for the British group's entire stake.
But analysts said the 50-percent holding in Russia's third-largest crude 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 following a heated board battle that effectively 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.
"BP wasn't interested in AAR's proposal to buy a 25 percent stake, and so AAR agreed to expand it bid for BP's entire stake in TNK-BP," the source told AFP.
"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 added.
The person added that the Russian partners had still not determined what price to offer for a stake that analysts believe may worth as much as $25 to $30 billion.
First Deputy Prime Minister Igor Shuvalov said Tuesday that the government had still not issued -- nor even formally discussed -- a recommendation over whether Rosneft should pursue the British stake.
Yet the country's largest oil company is already reportedly in the process of raising $15 billion for a bid that would include a share swap agreement keeping BP in Russia for the long term.
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 and be a heavyweight on a global scale.
UBS analyst Konstantin Cherepanov told Vedomosti that BP would prefer to stay in Russia through a share swap with Rosneft that would also offer it access to deals both in Siberia and across the energy-rich Arctic region.
BCS analyst Vladislav Metnyov added that Rosneft's capacity to raise capital was much greater than that of the tycoons.
The source close to the talks said TNK-BP rather the billionaires themselves would be the "principal borrower" of a loan that analysts believe may reach as high as $25 to $30 billion.
"AAR's offer will be more attractive to BP's shareholders since it is all cash," said the source.
But it would also raise the possibility of the oligarchs dropping the huge lawsuits they are pursuing 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 fine of $3.1 billion by a Siberian court 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 billionaires argue that the TNK-BP agreement stipulates that BP must offer preliminary rights on all deals it conducts in Russia or Ukraine to the joint venture -- a process it was cut out of during the Arctic negotiations.
The source said the AAR billionaires would make their formal offer to BP by the October 17 expiration of the negotiations period.