- Russia is weighing a plan to combine three of its oil giants, The Wall Street Journal reported.
- The report says the merger would help Russian energy be more competitive amid slowing oil demand.
- It would also generate more profits to fuel Putin's war effort in Ukraine, the report says.
Russia is considering a plan to combine three of its oil giants, making for the world's second-largest largest oil producer, The Wall Street Journal reported.
The deal would involve state-backed Rosneft Oil taking over state-owned Gazprom Neft (a subsidiary of Gazprom) and the independently-run Lukoil, the Journal report said.
Sources speaking with the Journal said the possible deal is subject to change and has been discussed among executives and government officials over the past few months.
Talks of similar mergers have circulated in recent years, but there remain some hurdles, like opposition from executives at Rosneft and Lukoil, plus the large amount of financing needed to pay Lukoil's shareholders, the report said.
It added that the merger is part of Putin's effort to compete with Saudi Arabia while oil demand slows amid a push toward renewable sources. If successful, the post-merger entity would be one of the world's largest oil producers, second only to Saudi Aramco, which produced almost 10 million barrels of oil a day in 2023, according to data from Rystad Energy UCube.
It would also pump nearly three times that of US oil producer Exxon Mobil, the report added.
The deal's proponents say the merger could generate far more revenue since the oil output from the three companies could be sold through Litasco, Lukoil's trading unit in Dubai.
That would help fuel Putin's war effort in Ukraine. Oil and gas are key lifelines for Russia's economy, and provide nearly a third of federal revenue, but have faced new obstacles amid Western sanctions.
Rosneft, Gazprom Neft, and Lukoil all face sanctions, making it difficult to engage in the energy trade with partners around the world.
The report comes as oil prices have been largely depressed this year, partly because China has suffered a prolonged economic downturn and as the conflict in the Middle East hasn't resulted in any disruption to supply.
The report said spokespeople from some of the involved parties denied the deal. A Rosneft spokesperson said the information was incorrect, while a Lukoil spokesperson said the company was not involved in merger talks because it would not be in the interest of the company, the report says. A state spokesperson, meanwhile, said the administration was not aware of a deal, the report adds.