BP PLC (BP.LN) will end its 13-year alliance with Russian state-owned oil company OAO Rosneft (ROSN.RS) to explore for oil and gas in Sahkalin, the U.K. energy giant confirmed Friday, saying it had taken the decision to exit the ZAO Elvary Neftegaz joint venture in part due to the "challenging economics" of the project.

"During recent meetings of the Elvary Neftegaz shareholders and board, BP confirmed its intention to exit the joint venture. There are many reasons for this decision, including the challenging economics of the discovered resource in the KV [Kaigansky-Vasuykansky] block," said BP.

The company first formed an exploration alliance with Rosneft in 1998, with an initial license to search for hydrocarbons in Kaigansky-Vasuykansky area granted in 2002. The following year, BP and Rosneft created the Elvary Neftegaz joint venture before commencing drilling operations in 2004.

Earlier this week, Rosneft Chief Executive Eduard Khudainatov was quoted by Interfax as saying BP had lost interest in Sakhalin.

Rosneft agreed in January with BP to a $16-billion share swap and development of three Arctic offshore licenses, but that deal was blocked by BP's partners in the TNK-BP Ltd. joint venture. Rosneft later announced a global partnership with Exxon Mobil Corp. (XOM).

BP said Friday it will work with Rosneft to find the best way to accomplish its exit from Sakhalin. In his remarks to Interfax, Khudainatov said Rosneft remained "very interested" in the project but wouldn't offer participation to anyone else following BP's departure.