Gazprom to Bid for Yukos Facility

Russia's state-controlled gas monopoly, Gazprom, announced today that it is planning to bid for the main production facility of troubled oil company Yukos.

If successful, the move to purchase the Yugansk oil facility would give Gazprom control over 18% of Russian oil production, according to analysts.

The Yugansk unit, which produces 1m barrels per day, was seized by the government and is due to be auctioned off on December 19 to raise money against its parent company's crippling back tax bills.

"The management board of Gazprom has decided that [its oil division] Gazpromneft will take part in the auction," Sergei Bogdanchikov, the head of Gazpromneft, told an energy conference. "We hope we will be able to win the contest."

Yukos challenges the legality of the planned sale and has said it will take any buyer to court.

The company has filed an appeal against the decision by bailiffs to auction off Yugansk and the challenge will be heard on Friday, Russian news agencies reported this week, quoting a source in the Moscow arbitration court.

Yukos, Russia's leading oil producer, faces $24.5bn (£12.9bn) in tax claims for 2000-2003 in what critics of the government's action have described as a Kremlin-led drive to crush its jailed founder Mikhail Khodorkovsky and reassume dominance in the oil sector.

Fearing persecution by the state, key Yukos executives left Russia last week. But the company's chief executive officer, Steven Theede, was quoted as saying by the New York Times today that he planned to return next week and did not fear for his security.

It was not immediately clear whether Gazprom would participate on its own or in conjunction with foreign energy firms. Mr Bogdanchikov said, however, that the company might tap into the international capital market to finance its bid.

He also said Gazpromneft had considered acquiring other oil companies, including Kremlin-connected Surgutneftegaz, but called Yuganskneftegaz "the most attractive option", with the potential to boost Gazpromneft's oil output to 2.4m barrels per day by 2010.

"Acquiring assets with [annual] production of the order of 50m tonnes will allow us to raise output to 88-90m tonnes," Mr Bogdanchikov added.