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Russneft Plans to Increase Oil Output by a Third in 2018

July 1 (Bloomberg) -- OAO Russneft, the oil producer 49-percent owned by Vladimir Yevtushenkov’s AFK Sistema, plans to increase output by 33 percent in 2018 through exploration.

The company aims to step up production to 18 million metric tons, or 360,000 barrels a day, by that date, Moscow-based Russneft said today in an e-mailed statement. That compares with average output of 270,000 barrels a day at the end of May, according to Energy Ministry figures.

Production peaked at 300,000 barrels a day in 2006 before founder Mikhail Gutseriev fled Russia, citing pressure from tax police and prosecutors to sell the company. Russian billionaire Oleg Deripaska’s subsequent bid to buy Russneft failed to win approval from the country’s antitrust agency. In the intervening period, output fell as low as 240,000 barrels a day.

Russneft also announced the sale today of the Orsk refinery for an undisclosed sum to a group of foreign investors.

Yevtushenkov’s AFK Sistema has pushed for Russneft to restructure since it agreed to buy the stake from Gutseriev last year. Sistema may consider merging Russneft with its other oil holding, OAO Bashneft, when it reduces debt to $4 billion, Chief Executive officer Mikhail Shamolin said June 16. That may happen within the next three years, he said.

Russneft said it’s seeking to increase reserves to 1 billion tons from more than 600 million tons through acquisitions and exploration.

Sistema agreed to buy the 49 percent stake for a sum not greater than $100 million. That stake may be worth $1.5 billion now, Yevtushenkov said June 18.

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.

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