Gazprom Buys Abramovich?s Sibneft for $13.1Bln

Russia?s natural gas monopoly Gazprom has agreed to pay $13.1 billion to take over Roman Abramovich?s Sibneft Oil Company as the Russian government is on a buying spree for assets that were sold off after the Soviet Union collapsed. The information of the deal was reported on Wednesday, Sept. 28.

The acquisition of Sibneft will give President Putin?s government control of as much as 30 percent of the crude oil pumped in Russia, the world?s second-largest supplier, as prices stay near record highs. Gazprom already has the world?s largest natural gas reserves and is the biggest foreign gas supplier to Europe. The deal will be Russia?s biggest ever.

Gazprom will pay $3.80 a share for the 72.7 percent stake owned by Abramovich, 38, and Russia?s richest man, and his partners. The government sold 51 percent of Sibneft for $100 million at the end of 1996 before it changed hands and ended up in Abramovich?s control. It?s not publicly known how much of Sibneft Abramovich owns personally and how much he paid for the shares. Gazprom earlier bought 3.02 percent of Sibneft through its banking unit, Gazprombank, according to today?s statement.

Gazprom didn?t give details of how it is funding the purchase in the statement. Spokesman Sergei Kupriyanov said the company will be borrowing money, declining to be more specific. Meanwhile Gazprom is said to have secured a $12 billion credit package from a consortium of Western banks including ABN Amro, Dresdner Bank and others.

Russian authorities are tightening the state?s grip on the energy industry and creating government-run companies big enough to compete with Exxon Mobil, British Petroleum and Royal Dutch/Shell. Buying Sibneft will more than quadruple Gazprom?s crude oil output to 1.17 million barrels a day. The Kremlin controls another 1.5 million barrels a day through state-owned Rosneft which acquired lucrative production asset Yuganskneftegaz at a forced state auction in December 2004. Combined, that?s more oil than Kuwait sells.

Russia?s five-year oil boom is stalling after the government raised tax rates and used $28 billion in back-tax claims to dismantle Yukos Oil Company, the country?s biggest oil exporter last year. Yukos? former chief executive, Mikhail Khodorkovsky, was jailed for nine years on charges that he calls retribution for his support of Putin?s political opponents. ?A final decision on Sibneft will almost certainly trigger the endgame for Yukos,? Alfa Bank?s Weafer said.

Gazprom is expanding into oil after the government raised its stake to a majority in June. In addition to the crude oil production, Gazprom?s oil-refining capacity will rise almost sixfold, including the Omsk plant, Russia?s second-biggest refiner this year. Sibneft will bring about 910,000 barrels of daily oil production under Kremlin control, representing about $50 million a day in revenue.