UPDATE: Gazprom Neft Offers Chevron, Eni, Shell Asset Swaps

UPDATE: Gazprom Neft Offers Chevron, Eni, Shell Asset Swaps

(Recasts, updates with analyst comments, background.)

By Jacob Gronholt-Pedersen

Of DOW JONES NEWSWIRES

MOSCOW -(Dow Jones)- Russia’s OAO Gazprom Neft (SIBN.RS) Thursday offered oil majors Chevron Corp. (CVX), Eni SpA (E) and Royal Dutch Shell PLC (RDSA) the chance to swap some of their overseas assets for some of Gazprom Neft’s Russian production assets.

The offer would give the international companies the chance to increase their reserve base and Russian operations, while forwarding Gazprom Neft’s ambitions to become a global oil player, analysts say.

Gazprom Neft, the oil arm of state-controlled gas giant OAO Gazprom (GAZP.RS) and Russia’s fifth-biggest oil producer, didn’t detail the assets it’s prepared to swap but Boris Zilbermintz, deputy general director for exploration and production, said: “We’ve already made our proposals, and we’re waiting until the end of September for responses.”

Chevron, Eni and Shell all declined to comment.

International oil majors are struggling to grow their oil reserve bases – an important metric that investors watch closely – partly because of dwindling global reserves of economically accessible oil.

“The majors are ready to negotiate anything that makes sense to produce economically in order to get broaden their reserve base,” Ron Smith, chief strategist at Alfa Bank, a Moscow-based investment bank, said.

Italy’s Eni last year acquired a 20% stake in Gazprom Neft together with other assets belonging to bankrupt Russian oil producer OAO Yukos. In 2006, Chevron formed a joint venture with Gazprom Neft, called Northern Taiga Neftegas LLC, to explore and develop the Yamal-Nenets area of Western Siberia.

The moves were seen by analysts as an indication of how keen Western energy companies are to gain foothold in the Russian upstream market.

However, the western oil majors have had mixed fortunes with their Russian investments in a political climate where the state is asserting control over the country’s natural resources.

Shell lost control of the huge Sakhalin-2 project in Russia’s Far East in 2006 after Russian environmental regulators bombarded it with complaints, selling a majority stake in the project to Gazprom. BP PLC (BP), meanwhile, is battling a group of Russian tycoons for control of its TNK-BP Russian joint venture and is seeing widespread regulatory and bureaucratic interference by Russian authorities in the process.

Gazprom Neft earlier this year outlined an ambitious plan to become a global vertically integrated energy player. It said it would increase annual crude output to between 90 million tons and 100 million tons, or 2 million barrels a day, by 2020. It also aims to raise its capitalization to $100 billion by then.

“We’re starting to step up our international activity,” Boris Zilbermintz said.

In July, Alexei Miller, chief executive of Gazprom, said all of Gazprom’s oil assets would be handed over to Gazprom Neft, Russia’s fifth-largest oil company.

“I would assume Gazprom Neft could be interested in bringing in Western expertise to explore some of the more challenging fields in western Siberia,” said Alfa Bank’s Ron Smith, noting that Gazprom has a fair amount of oil stuck in its gas fields, which it can’t explore with outdated Russian technology.

Company Web site: www.gazprom-neft.ru

-By Jacob Gronholt-Pedersen, Dow Jones Newswires; +7 495 937 8445; [email protected]

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