Russia’s number two oil producer, OAO Yukos, plans to expand into electricity generation, targeting annual power output of 13m MWh by 2005, according to a report in the Vedomosti newspaper Wednesday.

“There are different possibilities of how to go about this: either we will build our own power generators or take part in some projects with (national power monopoly) RAO Unified Energy System,” Yukos’s chief executive Mikhail Khodorkovsky was quoted as saying.

Yukos is currently buying up shares in some regional power generators, which UES is planning to divest during its reform aimed at breaking up the monopoly into separate generation, distribution and marketing units, Vedomosti said.

The oil producer holds about 30 per cent of OAO Tomskenergo, a power generator in the western Siberian town of Tomsk where Yukos has one of its production subsidiaries.

Yukos targets natural gas-burning power plants, which will allow the oil producer to utilize its own associated natural gas.

Yukos and many other Russian oil producers mostly burn their associated gas.

“The electricity market now being formed will simplify transmission and allow (us) to distribute electricity via swaps and that’s why we are looking for regions where the electricity could be sold and where it could be produced,” Khodorkovsky said.

Last week, Yukos became a founding member of the electricity trading system administrator, a body in charge of the Russian electricity market slated for full deregulation by 2004.