Rosneft , Russia's top oil producer, plans to complete its acquisition of gas company Itera, a newspaper reported on Tuesday, strengthening its domestic market position as it seeks to chip away at Gazprom's export monopoly.
Rosneft already owns a 51 percent stake in Itera, which used to be Russia's second-largest gas producer, and its board has approved the purchase of the remaining 49 percent for around $3 billion, the Kommersant daily reported citing sources.
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Chief Executive Igor Sechin is building up the state energy major into a global player, buying up domestic players and partnering with the world's biggest energy firms, led by ExxonMobil , to exploit its vast reserves.
In the biggest coup since he moved from government to head Rosneft a year ago, Sechin completed the $55 billion purchase of Anglo-Russian oil venture TNK-BP in March, in a deal that turned Rosneft into the world's largest listed energy firm by output.
That is not enough for Sechin, a former deputy chief of staff to President Vladimir Putin who has set a goal of ramping up gas production at Rosneft by two-and-a-half times by the end of this decade.
"Rosneft has ambitious plans to produce 100 bcm in 2020, so strengthening its gas project portfolio is in line with that strategy," VTB Capital analysts led by Dmitry Loukashov said in a note.
The reported price, at $78 per barrel of oil equivalent reserves, looked expensive, VTB Capital said.
A year after taking over at Rosneft, Sechin's expansion drive has added to pressure on Gazprom, which is already facing a squeeze on export margins and volumes on the European export market, which generates nearly 60 percent of its gas revenues.
The buyout would mark the end of an era for Itera and its founder, former racing cyclist Igor Makarov, who prospered in the 1990s as a reseller of gas from Turkmenistan but was sidelined after Putin purged Gazprom's management a decade ago.
Both Rosneft and Itera declined immediate comment.
Rosneft and Itera formed a joint venture last year that plans to produce 13 billion cubic meters (bcm) of gas this year, or 2 percent of Russian total output dominated by Gazprom, which itself pumped 479 bcm last year.
Rosneft has also joined forces with gas independent Novatek to lobby for the right to export liquefied natural gas (LNG) - challenging Gazprom's goal to ramp up exports of LNG to Asia to reduce its reliance on pipeline gas exports to Europe.
Rosneft aims to increase its share of the domestic gas market from 9 percent to 19-22 percent by 2020, eating into Gazprom's 70 percent share.
It expects to produce more than 40 bcm in 2013, over 60 bcm by 2016 and 100 bcm in 2020, of which more than half is to be produced at newly acquired projects.
For Rosneft, the key issue would be securing sales contracts, still dominated by Gazprom and being challenged by Novatek, whose co-owner Gennady Timchenko is actively pushing expansion as well.
Last year, Rosneft secured contacts to supply state power company Inter RAO with natural gas for 25 years, in a deal estimated at $80 billion.
TNK-BP, now part of Rosneft, was also in talks to sign long-term gas deals worth up to $31 billion with Russian energy companies controlled by billionaire Viktor Vekselberg's KES.
Rosneft's main onshore gas asset is the Kharampurskoye field - in Russia's largest gas-producing region, Yamal Nenets. It holds more than 400 bcm in reserves but has yet to be linked into the trunk gas pipeline network run by Gazprom.
Rosneft and Exxon have proposed building a $15 billion LNG plant in Russia's Far East by 2018, but for the project to be able to export gas to Asia-Pacific markets the Gazprom export monopoly would have to be lifted.
Rosneft shares were up 0.8 percent to 213 roubles at 0835 GMT, lagging the overall market which was up 1.4 percent, as analysts warned that the Itera deal would add to the state company's heavy debt burden.
(Reporting by Katya Golubkova; editing by Douglas Busvine and Jason Neely)