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. Last Updated: 07/27/2016

Gazprom Neft, LUKoil Set Up Venture

Itar-TassAlekperov, left, and Gazprom Neft CEO Alexander Dyukov signing the deal Friday as Gazprom's Alexei Miller looks on.
Gazprom Neft, the oil arm of Gazprom, and LUKoil have set up a joint venture to cooperate in new projects in Russia and abroad, the firms said Friday.

The venture, in which Gazprom Neft and LUKoil will hold 51 and 49 percent respectively, will acquire new licenses and explore, develop and produce oil and gas, mainly in Russia, but also overseas.

"The document that we have signed will help our companies develop more dynamically. The venture will develop new projects in production and refining of hydrocarbon resources," LUKoil CEO Vagit Alekperov said after signing the deal. He gave no details about the value of the venture, the investment that would go into it or how much oil it was expected to produce.

The companies will share operational control of the venture, which will work in the regions of their mutual interests, such as east Siberia, Timan-Pechora in the Arctic, and the Caspian Sea, LUKoil first vice president Ravil Maganov said.

Analysts said Gazprom's strong ties with the Kremlin could protect LUKoil from excessive pressure from state authorities, while LUKoil could help Gazprom become a major oil player.

"LUKoil may fear possible amendments to the subsoil use law that would restrict access to strategic fields even for domestic private sector firms," said Oleg Maximov from Troika Dialog.

An alliance with Gazprom Neft could enhance LUKoil's chances of winning upcoming oil field auctions in Timan-Pechora, where LUKoil is actively working, Maximov said.

LUKoil and Gazprom Neft had planned to sign the deal last year, but postponed it after Gazprom Neft CEO Alexander Ryazanov quit in November.