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After BP's Russian foray, is anything else for sale?
By Andrew Hurst

MOSCOW, Feb 13 (Reuters) - British oil giant BP <BP.L> has made waves by swooping on Russia's TNK in a $6.75 billion deal, but international rivals may have trouble finding anything else for sale at the right price.

Industry watchers are weighing up which of Russia's top five private oil firms might be a potential target for foreign takeover after BP's purchase of 50 percent of TNK, the country's third biggest oil company, was announced on Tuesday.

Attention is focused on second-ranked YUKOS <YUKO.RTS> and on Sibneft <SIBN.RTS>, fifth in the pecking order.

Both are potential targets for foreigners because their main shareholders are perceived as financial investors out to maximise profits with a view to bailing out in the future at a good price.

"The most obvious candidates to sell equity stakes are YUKOS and Sibneft because their management never hid their intention to sell if the price was right," said Valery Nesterov, an oil analyst at Troika Dialog.

Pressure on the world's top oil corporations, such as Royal Dutch Shell <RD.AS> <SHEL.L>, ExxonMobil <XOM.N> and TotalFinaElf <TOTF.PA>, to get in on the act in the world's second largest oil exporting nation will prove hard to resist.

"I do not think we have seen the last of attempted merger and acquisition activity (in Russia). There is a herd instinct among the oil majors," said Jonathan Stern, an energy researcher at the Royal Institute of International Affairs in London.

Because of its sheer size, a deal with YUKOS would be far more expensive than the BP purchase of TNK. Sibneft would be more manageable but buying control would not come cheap, say analysts.


"I would wait for a lower oil price and visibility on Iraq ... but you have to weigh that against an oil deal going to someone else," said Adam Landes, analyst at Renaissance Capital.

Others wonder whether the owners of YUKOS and Sibneft, both growing at breakneck speed and raking in record profits, would be in any great hurry to sell.

"I am not sure what they would do with their money. The oil business in Russia will give them more returns, given the global economy is not in good shape," said Evgeny Gavrilenkov, a former government economist.

Russia's top oil company Lukoil <LKOH.RTS>and fourth-ranked Surgutneftegaz <SNGS.RTS> are seen as unlikely takeover targets because they are cash-rich, with top managers who are wedded to the industry and do not not want to lose control, say analysts.

This may add to a sense of frustration among BP's international competitors. "There will be other oil majors desperately hoping that BP will screw up their investment while others are scratching their heads," said Landes.

Many were taken aback by BP's decision to make a thrust into Russia when the possibility of a United States-led war against Iraq has driven oil prices sky high and pushed up oil asset valuations in Russia.

"I thought they (BP) would wait for a post-Iraq scenario when oil prices would drop. The fact they went ahead may be because they felt they would be pre-empted," Stern said, adding there could be more surprise deals in the next few months.


Others say BP's foreign rivals may have to wait a while to bring off a similar deal. "I would regard a comparable deal with another oil major as improbable in two to three years," said Matt Thomas, an oil and gas analyst at Citibank in London.

Greenfield investments in oil fields and "production sharing agreements" (PSAs) -- joint ventures with Russian partners in specific oil fields -- could not be ruled out.

France's TotalFinaElf has said it is considering whether to make an investment worth up to $3 billion in developing an oil and gas field in Eastern Siberia.

Royal Dutch Shell seems more interested in tapping Russia's huge gas potential, while the world's number one oil group ExxonMobil is more comfortable with "greenfield" oil projects where it does not have to work with partners, analysts say.

But by acquiring equity in a Russian oil firm, BP may have changed the rules of the Russian oil game. "This is a sea change in the way Russia is shaping up for oil investors," said Stern. "It makes the PSA stuff look old hat."

As the first foreign company to buy a Russian oil company, BP secured support from the market-oriented government of President Vladimir Putin, which is keen to attract Western capital and know-how to modernise the economy.

Other foreigners may not get such a warm welcome if they decide to go for a big Russian oil company too soon.

Russian politicians have strong nationalist instincts and, with elections looming, may bristle if they feel the nation's oil treasures are being sold off to foreigners too quickly.

"Oil is everything in this country. If there is another deal like this in the next few months there will be a lot of noise in the Duma (parliament)," said Gavrilenkov.

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