BP has been forced to abandon hopes of drilling in the Arctic, currently the centre of a new oil rush, owing to its tarnished reputation after the Gulf of Mexico spill.

The company confirmed tonight that it was no longer trying to win an exploration licence in Greenland, despite earlier reports of its interest. "We are not participating in the bid round," said a spokesman at BP's London headquarters, who declined to discuss its reasons for the reverse.

The setback, which follows the announcement this week of a major find in the region by British rival Cairn Energy, is the first sign that the Gulf of Mexico disaster may have permanently damaged BP's ability to operate – not just in US waters, but in other environmentally sensitive parts of the world.

Today the bureau of minerals and petroleum in Nuuk, the capital of Greenland, confirmed that the names of successful bidders for future exploration licences would be announced in the next couple of weeks.

The bureau refused to comment on widespread rumours that it had specifically decided not to consider BP as a result of the recent Macondo well disaster in the US. However, senior sources confirmed to the Guardian that both the Greenland government and BP had agreed it would be inappropriate for the company to be involved. "With the Greenpeace ship already harassing Cairn off Greenland — a company which has an exemplary safety record – everyone realised it would be political madness to give the green light to BP," one source said.

BP has traditionally been at the forefront of breaking into new frontiers such as Russia and Angola, as well as drilling the deepest wells in the Gulf of Mexico, but the blowout and enormous environmental damage in the southern states has completely changed its external image and its own ambitions.

There has been speculation since the Deepwater Horizon accident in April that BP could find itself persona non grata, particularly in sensitive environmental regions such as the Arctic.

BP's current interests around the Arctic region are centred on Alaska, but there has been extensive speculation that the company is in talks with rivals such as Apache to sell these off in a desperate attempt to raise cash to pay for expected oil-spill liabilities of more than $30bn.

Cairn's announcement that it had struck gas this week reinforced the views of the US Geological Survey which said last year that it believed there could be 90bn barrels of oil and 50tn cubic metres of gas in the wider Arctic region.

There will be another round of bidding for drilling off Greenland next year and the year after, but BP's reverse this week shows that it will be difficult for the firm to secure future exploration licences in the area.

Environmentalists are particularly nervous about plans to open up Arctic seas for exploration because the cold conditions would make a spill far more damaging. Last month a report by US government scientists concluded that a quarter of the 4.9m barrels of oil estimated to have been spilled in the warm waters of the Gulf of Mexico had evaporated or dissolved. Oil spilled in the Arctic would be far harder to disperse and break down.

Despite the Deepwater Horizon disaster, major oil companies – BP included — still hope to begin drilling in the Arctic off the coast of North America soon. Barack Obama opened up US waters there to exploration shortly before the Deepwater Horizon explosion, but suspended the plans while investigations into the disaster took place.

Additional reporting by Tim Webb in London.