Lukoil Confirms Intention to Set Up Gazprom Neft JV Soon

MOSCOW, Nov 16, 2006 (Dow Jones Newsires)

Russian oil producer OAO Lukoil Holdings (LKOH.RS) plans to set up a joint-venture with the oil subsidiary of state-controlled energy giant OAO Gazprom (GSPBEX.RS) to acquire assets in Russia and abroad, Lukoil said Thursday.

Talks are still underway but are expected to be completed "soon", a spokesman for the company told Dow Jones Newswires.

Lukoil Chief Executive Vagit Alekperov Thursday said in an interview on Russia's Vesti 24 television program that the companies were close to a deal, Russian news agency Interfax reported.

"We have agreed to set up a joint venture with Gazprom," Alekperov said. "This agreement should be signed in the near future. Gazprom has appointed Gazprom Neft as the operator of this joint venture."

The announcement comes one day after the surprise dismissal of Gazprom Deputy Chief Executive Alexander Ryazanov, the official primarily responsible for Gazprom's strategic expansion into the oil business last year and Gazprom Neft Chief Executive.

Gazprom Neft's board of directors will meet Nov. 22 to vote on naming Alexander Dyukov, currently chief executive of its gas-processing subsidiary, Sibur Holding, as acting CEO of Gazprom Neft, Gazprom said Thursday.

The Gazprom Neft board will also call an extraordinary meeting of shareholders to confirm Dyukov as Ryazanov's replacement, Gazprom said.

Gazprom Neft, formerly known as Sibneft, was acquired from tycoon Roman Abramovich's Millhouse Capital in 2005 for more than $13 billion.

Lukoil recently announced a 10-year plan to double total oil and gas output to 4 million barrels a day of oil equivalent from 2.1 million b/doe, and has been actively prowling European and East Asian markets for possible downstream acquisitions.

Gazprom Neft, however, raised capital expenditure forecasts after being purchased by Gazprom and has focused investments on staving off falling production at its existing production sites.

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