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Russia may be considering the creation of a massive state oil company by combining current state assets Rosneft and Gazprom Neft, and private Lukoil, the Wall Street Journal reported, citing unnamed sources.
According to the report, the mechanism discussed is for Rosneft to absorb the two smaller companies, which would result in the world’s second-largest oil company by output, right after Saudi Aramco.
Rosneft alone is currently pumping an average of some 3.5 million barrels daily, per Rystad data cited by the Wall Street Journal. Gazprom Neft produces close to 2 million bpd, and Lukoil pumps just over 2 million bpd.
The report cited a Rosneft official as dismissing the information from the sources as false, saying that the report “may be aimed at creating competitive market advantages in the interests of other market participants.” A Lukoil spokesman told the Wall Street Journal that the company was not on merger negotiations “with any parties as this would not be in the interest of the company.”
The WSJ noted in its report that all three oil companies are subject to U.S. sanctions and a hypothetical combination could boost their resilience to these sanctions, according to the unnamed sources.
Revenues from oil and gas sales still make up a substantial part of Russia’s budget income but the government is working to reduce that by stimulating other industries. A few years ago, oil and gas revenues made up 35-40% of Russia’s budget revenues, Russian Finance Minister Anton Siluanov said last month, adding that this share is set to drop to 27% next year and to 23% in 2027.
In the latest sign of why such a reduction in the share of oil and gas revenues is important, Bloomberg estimates suggested that Russia’s oil and gas export revenues had declined by 29% on the year in October. The decline was a result of lower market prices for crude oil.
