India’s Oil and Natural Gas Corporation Limited (ONGC) is moving to keep its 20% stake in the Sakhalin-1 oil project in Russia after the Kremlin allowed the Indian state-run company to pay its contribution to the project’s abandonment fund in rubles from the frozen dividends it is due, sources with knowledge of the plans told Reuters on Friday.
ONGC Videsh, the overseas unit of Oil and Natural Gas Corporation Limited (ONGC), has a 20% interest in the project, but contribution to the abandonment fund, one used for decommissioning of wells, has been a requirement to keep the stake.
Due to the U.S. sanctions, ONGC Videsh and other Indian state companies have not been able to use some $800 million in dividends due from their stakes in energy assets in Russia.
Moscow has now given the green light to ONGC Videsh to contribute Russian rubles to the abandonment fund using the pending dividends of Indian companies, according to the anonymous Reuters sources.
Previously, the Sakhalin-1 oil project was operated by U.S. supermajor ExxonMobil, but Russia removed it from the operatorship position in 2022 amid the company’s own total pullout from Russia.
Exxon quit Sakhalin-1 after the Russian invasion of Ukraine, which triggered an exodus of foreign oil firms and service providers.
This summer, Vladimir Putin amended his decree from 2022 giving full Russian ownership to Sakhlain-1, and opened the door to a return of foreign companies to the oil and gas project.
Back in 2022, Putin signed a decree to seize the Sakhalin-1 project, in which Exxon held a 30% stake.
The Russian government authorized in November 2022 a transfer of a 20% stake in the new Sakhalin-1 operator to India’s ONGC Videsh Limited and 30% to SODECO, or Sakhalin Oil and Gas Development Co, which comprises Japanese firms Itochu, Marubeni, and Japan Petroleum Exploration Co.
Russia also decided to let the Japanese firms keep their stake in Sakhalin-1 as Moscow reshuffled ownership of domestic oil and gas projects after a mass exodus of Western firms.
Last week, Japan said that the government continues to recognize that securing energy from overseas, including the Sakhalin Project, is extremely important for Japan’s energy security.
By Charles Kennedy for Oilprice.com
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