Russian gas monopoly's board rejects massive budget

Nov 29, 2006, 17:38 GMT

Moscow - The board of directors of Russian gas monopoly Gazprom on Wednesday rejected a proposed budget for 2007 that allotted billions for the purchase of assets of fallen Russian oil company Yukos, among other projects.

The world's largest natural gas producer said in a press release Wednesday evening that its board of directors had sent the budget back for 'reworking' and that it would meet again to vote on the amended document by year's end.

The board agreed with the 'general approaches' of the budget and an increased investment programme, the press release said.

Gazprom, which has a market capitalization of nearly 270 billion US dollars - did not say what aspects of the budget met with discord, and company spokesmen were not commenting on the matter Wednesday evening.

The failed document had outlined a 3.75 billion-dollar acquisition plan of the 20-percent stake Yukos holds in Gazprom Neft, which is otherwise entirely owned by Gazprom.

That money was part of a larger 20 billion-dollar investment programme proposed for 2007, a 42-percent increase over the company's current investments that fall just shy of 14 billion dollars.

The jump in the gas giant's 2007 spending, which could likely be used to fuel the acquisition of even more assets, comes as part of a 68-billion-dollar spending programme over the next three years.

Gazprom and the country's number one oil exporter, Rosneft, signed an agreement Tuesday to cooperate on unidentified future deposits, paving the way for new acquisitions and frightening a Europe that wants to see the supplier of one-quarter of its gas scaled back.

President Vladimir Putin's administration has attempted to turn the state-owned company into what the Russian leader hopes will become the largest energy corporation on the globe.

The behemoth has also been moving into other areas of energy creation, including not only liquefied natural gas and oil production but also electricity generation.

Earlier this week, monopoly said it was eyeing electricity networks in Greece and Bulgaria.

Gazprom had previously been in talks with Yukos for the 20 percent share in Gazprom Neft, formerly Sibneft, but talks were broken after bankrupt Yukos said it planned a public sale of its assets.

The stake in Gazprom Neft is one of a number of scattered assets left over from Mikhail Khodorkovsky's ruined oil empire. Deutsche Bank, a Gazprom consultant, has been linked to talks to buy the company's remains.

Company officials, however, have said not all of the funding in the investment programme would be put toward purchasing shares in other companies or other new assets.

Approximately 1.8 billion dollars will go toward developing fields the company already owns in Vietnam, the Bay of Bengal and at various sites in Russia.

But, as government officials close to Gazprom's board of directors told business newspaper Vedomosti last month as details of the proposed budget were leaked, the company's growth may be a bit frightening to some.

The Kremlin, the unidentified source said, will have to 'pay close attention to what exactly is hiding behind that shocking amount of financial investment.'