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Last Updated: Friday, 27 August, 2004, 06:46 GMT 07:46 UK
Lukoil stake on sale for $1.9bn
Drilling for oil in northern Russia
Lukoil has been talking to US firm ConocoPhillips about investment
Russian officials handling the sale of a stake in oil giant Lukoil have set an opening price of $1.9bn (1bn) for 7.6% of the company.

Lukoil pumps 19% of Russia's output of crude oil and holds the same amount of Russia's reserves.

It is also a significant global player, with 2% of worldwide production and 1.5% of reserves.

There are two bidders so far, US driller ConocoPhillips and a New York investment firm, officials said.

The auction is expected to attract more interest, as buying into Russia's vast oil reserves offers one of the few quick ways for global oil firms to increase their reserves, though the legal quagmire currently sucking down Yukos may dampen enthusiasm.

Yukos is being chased by Russian authorities for multi-million dollar tax arrears.

Lining up

ConocoPhillips is widely seen as the front runner for Lukoil. Its chief executive, James Mulva, flew to Russia for talks with President Vladimir Putin and Lukoil boss Vagit Alekperov last month.

The sale will go a long way to balance out a lot of bad Yukos vibes
Paul Collision, Brunswick UBS analyst name here

ConocoPhillips has been talking to Lukoil about investment possibilities since September 2003.

"So far we have talked to only two candidates," said Kirill Tomashchuk, who heads Russia's Federal Property Fund, and is co-ordinating the stake sale.

He confirmed that ConocoPhillips is in the running, said the other potential buyer was Dabir Investments, run by David Guggenheim, and added that he is expecting more bidders to come forward.

Rare chance

Russia and the Middle East are the "only two places in the world where Big Oil can spend big money to find big production and reserves," said Gene Gillespie, an oil analyst at New York firm Howard Gillespie.

With instability in the Middle East, "the former Soviet Union is one, if not the only, game in town for the large companies to be able to do something that'll move the needle," he said.

The auction, due on 29 September, will bring a major windfall for the Russian government.

The sell-off will be closely watched by foreign investors for signals about the Kremlin's stance towards the oil industry, which is reeling from the tax fraud trials embroiling Yukos and its former boss, Mikhail Khodorkovsky.

"The sale will go a long way to balance out a lot of bad Yukos vibes," said Paul Collison, an analyst at Brunswick UBS in Moscow.




SEE ALSO:
Prosecutors seize Yukos records
26 Aug 04  |  Business
Lukoil wants fresh Iraq oil deal
11 Mar 04  |  Business
Lukoil 'eyeing US joint venture'
10 Nov 03  |  Business
Russia strikes Iraq oil deal
17 Jan 03  |  Business


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