STOCKHOLM (Bloomberg) — Bermuda-based West Siberian Resources Ltd., the Stockholm-traded Russian oil producer, agreed to buy closely held OAO Alliance Oil Co. for about $1.5 billion in stock to add refining capacity as oil prices soar.

Alliance Oil will become a wholly owned subsidiary of West Siberian in exchange for about 1.78 billion new West Siberian shares, according to a statement yesterday.

West Siberian will gain access to Alliance's Khabarovsk oil refinery in Russia's Far East, which is currently undergoing a $1 billion upgrade that will be completed by 2011. Managing director Maxim Barski said Russia's tax system favours oil refining because of lower export taxes than those imposed on crude export sales.

"West Siberian will acquire a large refinery capacity, transportation system and gas station network and will be able to sell refined oil products, which have higher margins and lower taxes," said John Helgesson, an analyst at Swedbank Markets in Stockholm, who has a "buy" rating on the stock. "This is a step in the right direction."

West Siberian rose as much as 1.05 kronor, or 20 percent, to 6.35 kronor and traded at 5.60 kronor as of 1.33 p.m. in Stockholm, giving the company a market value of 6.66 billion kronor ($1.05 billion).

The combined company will have oil reserves of 430 million barrels and production of almost 51,000 barrels a day, West Siberian said in the statement. Its joint production and refining assets will be valued at about $2.5 billion.

Oil prices have risen to a record $100 a barrel in New York, boosting economic growth in Russia as the government raised export duties in line with the price of the country's Urals blend of crude.