Verenex Energy Inc said on Tuesday the international arm of China National Petroleum Corp ended a C$446 million ($417 million) agreement to acquire the Canadian oil producer after Libya's government refused to approve the deal.

Verenex shares fell C$1.10, or 14 percent, to C$6.55 by midmorning on Tuesday on the Toronto Stock Exchange, following the company's news release.

Libya's National Oil Company has refused needed approvals for the C$10 per share takeover that was first broached in February. Instead, Libya is mulling acquiring Verenex's assets itself.

However Verenex said Libya is uninterested in matching CNPC's offer and is instead looking to pay a lower price for the company. Negotiations are ongoing.

We are working through the process with the Libyans as we speak, said Jim McFarland, Verenex's chief executive. The key issue in this ... is price, but we are making progress on the key terms ... and we are hoping to have something here soon to keep moving on this thing.

Verenex said that CNPC delivered a written notice to the company on Monday that it had terminated the acquisition agreement. That agreement expired last month but was valid until either side decided to end it.

We weren't able to get the approval of the NOC for that purchase agreement, McFarland said. The Libyans have been pretty clear that what they want to do is to buy the asset. It's a good asset and they like it, so that has been the stumbling block ... What the Libyans are looking for is a lower price and the question is what is reasonable?

Verenex did not say when negotiations were expected to wrap up.

($1=$1.07 Canadian)

 (Reporting by Scott Haggett and Scott Anderson; editing by Rob Wilson)