Gazprom Neft: Interesting Opportunities In Europe

Gazprom Neft is considering the possibility of buying foreign oil companies and refineries, the company’s President Alexander Dyukov said at the company’s annual shareholders meeting. He said Gazprom Neft intended to develop its oil refining business, eying up “interesting” opportunities in Europe. Dyukov did not specify the location of the planned acquisitions, only noting that Gazprom Neft was interested in all three of the main export routes: Burgas, Primorsk and the East Siberia-Pacific Ocean pipeline. The company is also considering projects in Iraq, Venezuela and Africa. Gazprom Neft’s priorities, Dyukov said, would be outlined in the company’s development strategy up until the year 2020, which will be drafted before the end of this year.

In August 2008 Gazprom Neft will decide in principal whether or not to participate in Iran’s North Azadegan field. It has been proposed that the Russian oil company act as the operator for the North Azadegan field, taking a share in oil production. Gazprom hopes to receive a 60 percent stake in the project, while also being prepared to foot the bill for the entire investment. Dyukov refused to announce the project’s cost estimates, saying it would be announced once the feasibility study has been completed. He added that “it will be more than hundred million dollars.”

The idea to buy foreign oil companies and refineries is not in itself a bad one, but, with oil prices at their all-time high, Gazprom Neft will find it difficult to locate assets that are for sale. Even if it does succeed in this, the price of a buyout will be too high. The company has to weigh the risks and perhaps wait until oil prices subside. The result being,the news is unlikely to affect Gazprom Neft’s stock price in the short term.