LUKoil, Russia's largest oil producer, says it has not yet decided what to do with the paper left unsold from its recent offer of convertible bonds, and may allow foreign investors to bid for a second tranche of bonds originally targeted at domestic investors.


LUKoil spokesman Alexander Vasilenko said the company's board decided yesterday to study the question of how to place the unsold bonds, but no decision had been taken on whether or not to limit availability to Russian investors.


"It could not determine whether they will be placed by the end of this year or next year," he said.


LUKoil sold 320,000 out of 350,000 bonds on offer last month at 4.63 million rubles each ($1,000), raising around $320 million.


Each bond is convertible into 170 LUKoil shares.


Atlantic Richfield Co. bought 241,080 bonds, convertible into 6.3 percent of LUKoil voting shares, for $250 million.


Another 110,000 bonds were set aside for Russian investors.


But Vasilenko said Russian interest in the first tranche, formally billed as an international offering, had been disappointing and the company was considering opening the second tranche up to foreign investors.


The sale of these bonds would depend on what shares would be auctioned by the state authorities by the end of the year.


One LUKoil source said he believed the State Property Committee intended to offer 30 percent of LUKoil in the shares-for-loans scheme. This would mean that banks would bid for the right to manage and eventually sell state-owned shares in return for loans to the government.


Putting a stake of this size would effectively hand the company over to the winner of that auction, the LUKoil source said.