Russian authorities are discussing the merger of Rosneft, Gazprom Neft and Lukoil into one company

Russian authorities are discussing the merger of Rosneft, Gazprom Neft and Lukoil into a single oil company.

The Russian government is working on a plan to merge the largest oil companies, during which the state-owned Rosneft will absorb Gazprom Neft and Lukoil, writes The Wall Street Journal.

Negotiations between the management of oil companies and officials took place during the last months. The WSJ’s sources say the discussions are indicative of Vladimir Putin’s plans to lean on the energy sector to support military spending. According to the interlocutors of the publication, the Russian president envisions a “giant capable of competing with Saudi Arabia.” In addition, the combined company will allegedly be able to more effectively resist Western sanctions, sources say.

At the same time, there is no certainty in the government: the details of any plan can change, and the negotiations themselves can lead to an agreement or not. This is not the first time that the merger of oil companies has been discussed, but, according to WSJ interlocutors, these plans have already faced opposition from the management of Rosneft and Lukoil. Lukoil’s transition to direct state control would mark “a major step toward ending the privatization of natural resources after the collapse of the USSR,” the WSJ notes.

However, if these plans materialize, the newly created company will be able to become the second largest producer of crude oil in the world after Saudi Aramco, and its production volumes will be three times higher than the American Exxon Mobil. This will allow Russia to raise prices for customers from India and China – its main sales markets.

A representative of “Rosneft” called the information of The Wall Street Journal false and stated that it “may be aimed at creating competitive advantages for the benefit of other market participants.” Lukoil denies the negotiations. Gazprom Neft did not respond to a request for comment.

Earlier, USM reported that Lukoil denied plans to sell the refinery in Bulgaria. Representatives of Lukoil’s Bulgarian branch – the company Litasco – stated that no negotiations are underway with the Qatari-British consortium.