ONGC-Videsh receives authorization for Sakhalin-I bid
India's Petroleum Minister Ram Naik announced on January 6 that the cabinet's economic affairs committee had given
its approval to plans for investments in a Russian oil development project. As such, Naik said, the state-owned oil
and gas company ONGC-Videsh has been given permission to bid for a 20 % stake in the Sakhalin-I consortium. The
Indian company is hoping to buy the equity slated for sale by Rosneft and its subsidiary Sakhalinmorneftegaz, which
hold a combined stake of 40 %.
ONGC-Videsh will be allowed to invest up to $ 1.7 bn in the Sakhalin-I project, he said. If the Russian government accepts the company's bid, he added, India will have a secure source of fuel. ONGC-Videsh's share of output from the concession would amount to 2-4 mm tpy of crude oil after 2005 and 5-8 mm cmpd of natural gas after 2006, he said.
The minister did not comment on the Indian company's chances of winning the stake in the Sakhalin-I project. Rosneft rejected ONGC-Videsh's initial bid of $ 170 mm for 20 % of the concession, calling it too low, and indicated that it would rather sell the stake to BP-Amoco. The Russian state-owned company and its subsidiary have been forced to sell half of their collective 40 % stake, as they are unable to cover all required investments in the project.
Equity in the Sakhalin-I concession is currently split 17 % to Rosneft and 23 % to Sakhalinmorneftegaz, a subsidiary of Rosneft. Exxon Neftegas holds a 30 % stake, and SODECO -- owned by several Japanese conglomerates, including Itochu and Marubeni -- holds the remaining 30 %.
The Sakhalin-I group's three offshore fields are believed to contain about 341 mm tons of crude oil and 425 bn cm of
natural gas, according to Russian government data. Development of the Arkutun-Dagi, Chaivo and Odoptu fields may
require up to $ 12 bn over the 42-year life of the project.
Exxon Neftegas announced last year that the group had found oil in the first test well drilled at the Chaivo field. Oil was found in the Chaivo-6 well at the Miocene level and was as of late September flowing at a test rate of 6,000 bpd, according to a company press release. Exxon Neftegas and its partners sunk the well to a depth of 3,075 meters in 15-meter-deep waters off the northeast coast of Sakhalin Island, ExxonMobil said.