Lukoil signed off on the creation of the joint venture with Gazprom Neft on Friday that will see them co-operate on new projects at home and abroad.
The deal will give Gaz-prom Neft a 51 per cent stake and Lukoil 49 per cent, while ConocoPhillips, which currently holds a 20 per cent stake in Lukoil, will be excluded from the venture.
The agreement comes as the state increases its sway over the energy sector, limiting Lukoil’s room for growth, and as both Lukoil and Gazprom Neft face increasing competition from state-controlled Rosneft.
Rosneft this month overtook Lukoil as Russia’s number one oil producer after it snapped up the remains of Mikhail Khodorkovsky’s Yukos oil empire in a series of bankruptcy auctions the state-run firm dominated.
Valery Nesterov, energy analyst at Troika Dialog, said that, without teaming up with Gazprom Neft, Lukoil risked being further outstripped by Rosneft. New laws on developing strategic new fields will limit access to companies that are majority Russian-owned, he said.
Even though the company is totally controlled by its Russian management, which holds 28 per cent of Lukoil’s shares, the combined amount held by foreign investors in the company could exceed 50 per cent, Mr Nesterov said.
“It also faces the strengthening growth of Rosneft and ahead is a battle for the major new oilfields that remain undistributed in Timan Pechora,” Mr Nesterov added, referring to the oil-rich province in northern Russia that is up for grabs.
Gazprom Neft, Rosneft’s state-run rival, has also been left by the wayside by Rosneft’s recent surge. Gazprom did not take part in any of the Yukos auction, mainly, bankers say, because it feared the legal risks of doing so. Yukos’s main shareholder GML has threatened a “lifetime of litigation” for any participant in the break-up of Yukos, which has been smashed by more than $33bn in back taxes. In teaming up with Lukoil, Gazprom Neft could also win vital expertise in helping boost its oil venture, analysts said. Since Gazprom created the oil arm in 2005 via its $13bn acquisition of Roman Abramovich’s Sibneft, the oil venture has been flagging.
