updated 11/30/2004 9:04:26 AM ET 2004-11-30T14:04:26

Russian gas giant Gazprom will participate in the Dec. 19 auction of Yukos unit Yuganskneftegaz, the head of the monopoly’s nascent oil division said Tuesday.

“Gazprom management made a decision today to participate in the auction for Yuganskneftegaz,” Sergei Bogdanchikov told a conference, according to Dow Jones Newswires.

Bogdanchikov is chief executive of OAO Rosneft, the company that will form the nucleus of Gazprom’s oil business after it merges with the gas monopoly. He has been tapped to lead the new unit, Gazpromneft, which would bid for Yuganskneftegaz.

Yuganskneftegaz, which produces 1 million barrels per day, is due to be auctioned off with a starting price of $8.6 billion against its parent company’s crippling back tax bills.

Yukos challenges the legality of the planned sale and has said it will take any buyer to court.

The company has filed an appeal against the decision by bailiffs to auction off Yuganskneftegaz and the challenge will be heard Friday, Russian news agencies reported this week, quoting a source in the Moscow Arbitration Court.

Russia’s No.1 oil producer faces $24.5 billion in back tax claims for 2000-2003 in what observers call a Kremlin-led drive to marginalize its jailed founder Mikhail Khodorkovsky and reassume dominance in the politically crucial oil sector.

It was not immediately clear from news reports whether Gazpromneft would participate on its own or in conjunction with foreign energy giants. Bogdanchikov said, however, that the company might tap into the international capital market to finance its bid, Dow Jones said.

He also said Gazpromneft had considered acquiring other oil companies, including Kremlin-connected Surgutneftegaz, but called Yuganskneftegaz “the most attractive option,” with the potential to boost Gazpromneft’s oil output to 2.4 million barrels per day by 2010.

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