- The Washington Times - Wednesday, April 23, 2003

MOSCOW (AP) Russia's largest oil company, Yukos, is buying rival Sibneft in a deal that would create one of the world's biggest oil producers.
Yukos, headed by Mikhail Khodorkovsky, will pay $3 billion in cash for an initial 20 percent stake in Sibneft, Russia's fifth-largest oil company, and plans to acquire the rest by the end of the year.
Mr. Khodorkovsky, Yukos' chief executive and largest shareholder, will be CEO of the new company, to be named YukosSibneft Oil Co. Sibneft President Eugene Shvidler will be chairman.
If approved by shareholders and regulators, the deal would result in a conglomerate with $15 billion in annual revenues and an expected market value of $35 billion.
With daily oil output expected at 2.06 million barrels, the new company will be the world's fourth-largest oil producer, behind BP, Exxon Mobil and Royal Dutch Shell. It will have total reserves of about 19.4 billion barrels of oil equivalent.
"The new industrial giant with its huge industrial and financial potential will reach even higher business efficiencies, moving closer to our strategic goal of becoming a leader of the global energy market," Mr. Khodorkovsky said.
He told reporters that the merger would allow the new company to explore prospective domestic oil fields in Eastern Siberia and Russia's Far East.
Russian legislator Vladimir Katrenko, chairman of the lower house's committee for energy, transport and communications, said the merger would boost the chances of building a pipeline to China, the Interfax news agency reported.
The combined entity is expected to include six principal refineries in Russia, one in the former Soviet republic of Lithuania, and several other refining facilities in Russia and in Belarus. These facilities refined a total of 421.8 million barrels in 2002.
"There is no doubt that the enlargement of the companies will benefit both the state and private owners," said Russian Prime Minister Mikhail Kasyanov. "It means winning new positions on the international market."
Russian Finance Minister Alexei Kudrin hailed the takeover as a "step toward higher efficiency" and a good example for other Russian companies.
"I think that it's a very positive step that Russian managers are trying to raise capitalization of their companies and raise their attractiveness for investors," Mr. Kudrin told reporters.
Yevgeny Yagupets, the executive director of the Russian Oil and Gas Union, said the merger would boost Russia's position in the world market.
"Our country has too many 'first-class' companies at present, but they still fail to meet the scale of world oil leaders," he was quoted as saying by the Itar-Tass news agency. "They need to unite assets with other participants in the market in order to compete with such giants as British Petroleum or Shell."

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