ConocoPhillips' deal with Russian major Lukoil (search) gives the U.S. energy company a head start against other major U.S. oil producers in the quest to tap Russia's vast oil reserves, analysts said.

Houston-based ConocoPhillips (COP) Wednesday won an auction to buy 7.59 percent of Lukoil for $1.99 billion and said it reached an agreement to increase its total stake in the Russian company to 20 percent.

ConocoPhillips "delivered a huge knockout" with this deal, said Oppenheimer & Co. analyst Fadel Gheit. "Pound for pound, they'll really pack a punch."

Gheit said a 20 percent stake in Lukoil would add "a couple of billion barrels" to ConocoPhillips oil reserves as well as potentially give it access to lucrative Lukoil-operated oil fields in Iraq.

The two companies also will form a joint venture — 70 percent owned by Lukoil and 30 percent by Conoco — to develop Russia's northern Timan-Pechora oil region and expect to produce 200,000 barrels of oil per day by 2008.

ConocoPhillips, formed in 2002 through a merger between Conoco Inc. and Phillips Petroleum Co., is already the third-largest U.S. oil company. Lukoil has the world's second largest oil reserves after Exxon Mobil Corp. (XOM) of the United States.

"In the intermediate to long term, this transaction ... is going to put it (ConocoPhillips) on a very high level class on a comparative basis with any oil major out there," said Robert W. Baird analyst George Gaspar.

U.S. companies have recently stepped-up their exploration, Gaspar said, to maintain stable reserve levels. This deal "gives ConocoPhillips a much broader playing field in one of the most opportunistic non-OPEC areas in the world."

Without the Lukoil stake, the company was in danger of hitting a wall in terms of production growth, according to Gene Gillespie, analyst at Howard, Weil Labouisse, Friedrichs.

Gillespie estimated the deal would basically double ConocoPhillips' production growth to about 5 percent to 7 percent for the balance of the decade. His current expectation for production growth.

Western oil companies have, until recently, avoided major investments in Russia because of the risks of doing business in that country, perhaps best exemplified by the $7 billion tax dispute between oil major Yukos and the Kremlin.

However, many analysts said ConocoPhillips' deal with Lukoil can be read as a signal that the Russian government is willing to cooperate with Western companies, and noted that other U.S. majors will likely follow the company into Russia.

"This is a clear, deliberate move on the part of the Russian government to say 'We've not been the nicest boys in the past, but we do need to serve our people better and the Western influence is probably what we need,"' said John S. Herold analyst John Parry.

According to the analysts, it is not a question of if other U.S. oil companies will invest in Russia, but a question of when, and how large that investment will be.

"I think the ConocoPhillips investment is a prelude to Exxon Mobil and ChevronTexaco (CVX) making a more established appearance in Russia," said Gaspar, who noted both companies have the opportunity to make an investment in Yukos.

Shares of ConocoPhillips fell about 2 percent to $81.57 on the New York Stock Exchange Wednesday. Analysts said the deal, which was widely expected, had already been priced into the stock, which reached a more than 20-year high on Tuesday.