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US' ConocoPhilipps wins auction for 7.6% Lukoil stake

US oil giant ConocoPhilipps yesterday bought the Russian government's 7.6 percent stake in Russia's Lukoil -- the world's No. 2 oil company by reserves -- in Russia's biggest privatization.

ConocoPhilipps bought the stake for US$1.988 billion, only a fraction above US$1.928 billion starting price. John Lowe and John Carig, ConocoPhilipps' vice presidents, acted as bidders in the auction.

"Of course, we are satisfied with the biggest price in Russia's privatization," said Lukoil Vice President Leonid Fedun. "We are expecting a significant increase in the capitalization of the company."

Other applicants at the Lukoil auction included Russia's Promvyazbank and Promregionholding, who represented unidentified clients.

Earlier reports indicated that rival bidders were a company controlled by David Guggenheim -- a member of the family behind modern art museums -- and a company controlled by Lukoil management, but officials at the auction denied their participation.

ConocoPhilipps' victory appeared predetermined since July, when Russian President Vladimir Putin gave his tacit approval to its bid at a meeting with the heads of both companies.

Putin's blessing to ConocoPhilipps has been widely interpreted as a signal that the Kremlin isn't opposed to foreign investors tapping into Russia's cheap and plentiful oil and gas reserves.

Coming on the heels of French company Total's reported US$1 billion acquisition of a 25 percent plus one share stake in gas producer Novatek, a successful bid by ConocoPhilipps provides a much sought after reassurance after the government's crackdown on Yukos.

The price tag made the sale the single biggest cash-earner in the history of Russian privatization, beating the US$1.88 billion sale of a 25 percent stake in the Svyazinvest telecom group in 1997.
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