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. Last Updated: 07/27/2016

Paper: Gazprom Eyes 57% Stake in Sibneft

Gas monopoly Gazprom is looking to buy control of Sibneft, the No. 5 oil company owned by Roman Abramovich's holding Millhouse Capital, Vedomosti reported Wednesday.

Vedomosti quoted several sources familiar with the situation as saying that Gazprom had made an approach to buy the 57.5 percent stake in Sibneft.

A spokesman for Sibneft said that the company was not on offer, but the report still sent Sibneft's shares 4.4 percent higher at the opening to $3.07, valuing the company at around $14 billion.

"Sibneft's shareholders regard the company as a long-term investment, so it is not up for sale," said Sibneft spokesman Alexei Firsov. "If somebody wants to buy something, that doesn't necessarily mean it is for sale."

The report comes as Gazprom seeks to diversify out of gas and into oil by spending the money it is likely to receive when the Russian state buys back 10.7 percent of its treasury stock.

The share buyback, which would give Gazprom a cash injection of $7 billion to $8 billion, would secure state control over the world's largest gas company and pave the way for restrictions on foreign ownership of its shares to be scrapped.

The Kremlin wants to turn Gazprom into a world-class integrated energy firm able to project Russian power abroad, but attempts so far to acquire major oil assets have failed.

Gazprom had been the favorite to buy Yuganskneftegaz, the core oil unit of Yukos seized by the state in lieu of punitive back taxes, but was defeated in December by state-owned oil firm Rosneft.

The Yugansk buy derailed a planned Gazprom-Rosneft merger, leaving Gazprom casting around for alternatives.

"Of these, Sibneft appears to be the most attractive asset -- unlike Yuganskneftegaz, it is not burdened with debts and risks," Vedomosti quoted one unnamed Gazprom manager as saying.

A Gazprom spokesman declined to comment on the Vedomosti report. But industry sources confirmed Gazprom's interest in using its share buyback cash to target Sibneft. Other sources say that Abramovich is looking to reduce his exposure to Russia in the wake of the breakup of Yukos and prosecution of former CEO Mikhail Khodorkovsky for fraud, tax evasion and embezzlement.

Sibneft has been an active buyer of new reserves lately, in what industry insiders interpret as an attempt to make the firm more attractive to a buyer.

"The news comes as no surprise and is market-neutral at this stage," commented Oleg Maximov, energy analyst at Troika Dialog in Moscow. "But several problems make the deal unrealistic, at least in the near term."

The chief obstacle is that a 34.5 percent stake in Sibneft, acquired by Yukos as part of an abortive merger deal in 2003, remains frozen by the Russian courts as part of the Yukos case.

Yukos paid $3 billion for 20 percent of Sibneft, whose recovery is not being sought by Sibneft's principals. They are trying to get back the remaining 14.5 percent, Vedomosti said.

Vedomosti quoted one source as saying the company's owners would rather sell a 72 percent stake -- their current 57.5 percent holding plus the 14.5 percent they are trying to recover.