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. Last Updated: 07/27/2016

Gazprom Considers Oil Deals

Gazprom, the world's biggest natural gas producer, is considering taking stakes in soon-to-be privatized domestic oil firms as part of an ambitious expansion policy that already includes major projects involving Turkey and Iran.

Details of its intentions are vague, but oil and gas industry sources in Moscow identified Anglo-Dutch oil major Royal Dutch/Shell Group and top Russian oil company LUKoil as possible partners with Gazprom.

"[Gazprom chairman Rem] Vyakhirev said yesterday that Gazprom was going to participate in sales," of Russian oil companies, Gazprom spokesman Anatoly Kotov said.

"When asked if Gazprom wanted to participate alone or with an ally, he replied 'with LUKoil,'" Kotov added.

LUKoil would not immediately comment on the possibility of linking up with the gas giant.

Gazprom would not specify which of Russia's dozen or so vertically integrated oil companies it may be sizing up.

The most attractive assets in the process of being sold or due to go on the block soon are generally considered to be state oil firm Rosneft and Eastern Oil Co.

Rosneft chairman Alexander Putilov said Gazprom and Shell were pondering a joint bid for a stake in the company.

"Shell is not in a position to comment on market rumors," a spokesman at the group's London headquarters said.

Energy analysts said Gazprom is probably more interested in Russian oil companies' natural gas riches rather their oil.

"They have always wanted to demarcate oil from gas and keep oil companies out of gas, so they are unlikely to make a high profile foray into oil at this stage," said Jonathan Stern, vice president at Gas Strategies, a London-based consulting firm.

Gazprom accounts for 95 percent of Russian gas production, controls 80 percent of the country's gas reserves and is a key supplier to Western Europe. It plans pipeline and production projects costing billions of dollars each.

They include a new pipeline network through Belarus and Poland into Germany to double supplies to Europe from Russia's arctic Yamal peninsula and an underwater route linking Russia to Turkey and the opening up of new markets in southern Europe. Gazprom also has a 30 percent stake in a $2 billion deal led by Total SA of France to tap a giant Iranian gas field.

Analysts said Gazprom would probably need a partner to bid for oil companies because of its many existing commitments.

It may be turning to the oil sector could be a bid for exposure to Far Eastern markets because demand there is set to grow faster than in Europe, they added.