ONGC mulling to take stake in Russian entity managing Sakhalin 1: Report

Earlier in October, 2022, Russian President Vladimir Putin had issued a decree to establish a new operator for the ExxonMobil-led project and authorised the Kremlin to decide whether foreign shareholders could retain stakes in Sakhalin 1.

“ONGC Videsh will protect its share in the project, which means it will take a stake in the new entity,” reported news agency Reuters citing sources.

The ONGC holds a stake in the project through its overseas investment arm ONGC Videsh.

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Managed by Rosneft subsidiary Sakhalinmorneftegaz-shelf, the new Russian entity will own investors’ rights in Sakhalin 1, while the foreign shareholders will have one month to decide on retaining stakes in the project.

Following Moscow “unilaterally terminated” its interests in the Sakhalin-1 oil and gas project in October, Exxon has fully exited Russia.

After Exxon declared force majeure in April and refused to accept Russian insurance cover for the tankers as western insurers pulled out due to the sanctions, output of Sakhalin 1 collapsed.

Prior to Russia launched its so-called “special military operations” in Ukraine, Sakhlin 1 was producing 220,000 bpd.

Sources claim operatorship of the project by a Russian entity will lead to smooth functioning of Sakhalin 1 and would ensure shipping of oil.

Two Indian refiners could not lift oil cargoes, sold by ONGC Videsh, due to insurance problems.

For ONGC Videsh, the Sakhalin 1 project has turned out to be a money spinner and accounted for about a quarter of its proved reserves of 124.7 million tonnes in the year ended March 31, 2022.

Also, reports claim ONGC would consider taking additional stake in the project if that makes “commercial sense”.

As per details, Sakhalin Oil and Gas Development Co (SODECO), a consortium of Japanese firms, holds a 30% stake in the project while Russian oil major Rosneft through Sakhalinmorneftegaz-shelf and R N Astra own the remaining 20% share.

Though ONGC is keen to retain its stake in the project, SODECO said it was still gathering information about the decree.

“We are gathering information about the decree and plan to make a decision by Nov. 12 whether or not we will apply for a stake in the new entity after consulting with our stakeholders, including the Japanese industry ministry”, a spokesperson at SODECO said on 17 October.

With Reuters inputs.