Kleinwort to advise on Russian gas sell-off: Investors to be offered up to 9 per cent of giant with reserves worth dollars 1,500bn

KLEINWORT BENSON has been appointed to advise on the international share sale in the world's largest gas company, Russia's partly privatised monolith RAO Gazprom.

The company, described by a Kleinwort Benson director as 'the Saudi Arabia of the gas industry', is selling up to 9 per cent of its shares to global investors.

Kleinwort will take up to a year to decide on the deal to go for, and whether through the equity markets or trade investors.

Separately, British Gas has been in talks with Gazprom on a deal that might provide expertise in return for a stake in the Russian company. Gazprom dwarfs British Gas - the Russian combine produces 10 times more than the entire North Sea gas output each year, and has 169 times the reserves of the British company.

Gazprom, which produces, stores and distributes Russia's gas, supplies a third of the world's gas production, owns 35 per cent of the world's reserves and provides 30 per cent of Europe's annual supplies.

'It is the Saudi Arabia of the gas industry,' Philip Lambert, a director at Kleinwort, said.

Valuation is still at an early stage. Gazprom has three-and-a-half times the reserves of the 14 next largest gas companies in the world. The latter are capitalised at a total of dollars 430bn, suggesting Gazprom may have gas reserves worth more than dollars 1,500bn.

Gazprom is Russia's largest foreign currency earner. Its sales to Europe alone net dollars 8bn a year. Although it sells 100 billion cubic metres of gas a year to Europe, using its 215,000 kilometres of pipelines, more than 80 per cent of its production is sold in Russia.

Mr Lambert denied that investors might be put off by political instability in Russia. There was a large global demand for the shares.

'There has already been a lot of equity investment into Russia. Gazprom is an integral part of the world gas industry.

'It is a huge, powerful, critical part of the Russian economy. It already has strong links with the West.'

Gazprom has been progressively privatised. About 34 per cent has been sold to Russians, who have been issued with vouchers that enable them to participate in the denationalisation process. Staff own 15 per cent, and the Russian government is keeping another 40 per cent. About 1 per cent is held by Russian gas distributors.

Gazprom already has a series of joint ventures with Western gas companies, such as Australia's BHP Petroleum and Germany's Wintershall.

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