Russian gas monopoly Gazprom signed a deal yesterday to take over Sibneft, Russia's No 5 oil company, for $13.1 billion from Roman Abramovich's Millhouse Capital.
Through the deal, Russia's largest ever takeover, Gazprom will acquire 72.663 per cent of Sibneft, Gazprom and Millhouse said in a joint statement.
Taking into account shares in Sibneft it already owns, Gazprom's stake in Sibneft will rise to 75.679 per cent ensuring outright operational control.
The acquisition of Sibneft will give President Vladimir Putin's government control of as much as 30 per cent 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.
"The state is going to run the energy business in Russia for the foreseeable future," Chris Weafer, head of strategy at Alfa Bank in Moscow, said.
The government sold 51 per cent of Sibneft for $100 million at the end of 1996 before it changed hands and ended up in Abram-ovich's control.
It is not publicly known how much of Sibneft Abramovich owns personally and how much he paid for the shares.
Gazprom earlier bought 3.02 per cent of Sibneft through its banking unit, Gazprombank, according to yesterday'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.
Putin is tightening his grip on the energy industry and creating government-run companies big enough to compete with ExxonMobil Corp, BP Plc and Royal Dutch Shell Plc.
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. 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 Co.
Yukos's 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," Weafer said.
Russia's oil production increased 1.2 per cent in July from the year-ago period, the slowest pace this year, as higher taxes and tighter state control make companies reluctant to spend more on production.
