More consolidation for Russian oil: Novatek

MOSCOW (Reuters) - Russia's oil industry has further room for consolidation and oil firm Surgutneftegas (SNGS.MM: Quote, Profile, Research, Stock Buzz) could be taken over next, Russia's number two gas firm, Novatek, told the Reuters Russia Investment Summit on Tuesday.

"The market should expect to see further consolidation ... Surgut is the most likely candidate for a takeover. It's Kremlin-friendly," said Novatek's CFO Mark Gyetvay.

A match with the world's largest gas producer and Russian gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) makes the most sense, Gyetvay said.

Gazprom has big ambitions in the oil business.

Two years ago it bought oil company Sibneft, now Gazprom Neft, from Russia's wealthiest man, Roman Abramovich, but it is looking to soak up more.

"Gazprom wants to create as much a balance between oil and gas as it can," Gyetvay said.

Gyetvay's comments echoed those of Russia's Sputnik Group CEO Boris Jordan on Monday, who said Surgut could fit well with state-controlled firms Gazprom or oil major Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz).

Shares of Surgut, Russia's fourth largest oil firm, have risen since early August on rumors the Kremlin is considering creating a new state oil major.

While there is plenty of scope for consolidation in Russia's oil sector, Gyetvay said, its gas industry has no such opportunities considering the extent of Gazprom's dominance.

Novatek, in which Gazprom has a 19.4 percent stake, produced five percent of Gazprom's output last year, or 28.7 billion cubic metres of gas, about enough to cover the demand of a country such as Italy for seven months.

"We're never going to compete with the likes of Gazprom. It's a complimentary business. Everyone thought we were crazy when we started ... but being number two is a nice enviable position," Gyetvay said.

The Kremlin, which owns 51 percent of Gazprom, has already increased the state's direct share in the oil business to over 40 percent from just 10 percent five years ago and analysts expect this trend to continue.