(Adds grey market prices)

LONDON (AFX) - The controversial initial public offering of shares in Russia's state-owned oil producer Rosneft has been 'oversubscribed', one of the advisers confirmed.

'The book is now oversubscribed and is still gaining momentum,' said a spokeswoman for one of the IPO's advisers.

She refused to specify at what price the shares were taken up.

Pricing of the shares, which were offered at 5.85-7.85 usd each to raise at least 8.5 bln usd, will be announced late next week.

The shares, equivalent to a 14.3 pct stake in the group, will start trading on the London and Moscow stock exchanges on July 19.

In the grey market, the shares are currently fetching a price of between 6.45 usd and 6.85 usd, according to spread betting firm Cantor Index.

Investors in the secondary market were generally 'cautious' about the IPO and would prefer to wait until they are certain that the 'enormous' offer has the support of large fund managers and institutional buyers, said a source at Cantor.

Press reports claimed some of the world's largest energy companies have been lining up to subscribe to the offer.

The Financial Times, in an unsourced article, said the IPO has attracted enough demand to cover the minimum target proceeds of 8.5 bln usd.

China National Petroleum Corp and Malaysia's Petronas are thought to be closest to taking stakes in the IPO, while BP PLC is believed to be waiting for the other international strategic investors to emerge and further clarity on pricing before making a decision. Royal Dutch Shell PLC has been offered a stake of up to 2 bln usd, the newspaper said.

BP and Shell have repeatedly refused to comment on whether they will be subscribing to the offer.

India's Oil & Natural Gas Corp has confirmed it is considering investing up to 3 bln usd in the IPO.

That will give the state-run ONGC a 5 pct stake in Rosneft, the country's Petroleum Secretary, M.S. Srinivasan, told reporters.

The flotation will value Rosneft at 60-80 bln usd.

monicca.egoy@afxnews.com

mbe/joy

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