Exxon’s exit from Russia puts OVL in a tough spot – ThePrint

New Delhi, Mar 2 (PTI) Exxon Mobil Corp’s decision to leave Russia has put India’s flagship overseas company ONGC Videsh in a difficult situation as it is a partner in the Sakhalin-1 oil fields operated by the global energy giant in the Russian Far East, sources said. .

ONGC Videsh Ltd (OVL) and three other Indian state-owned companies hold a 49.9% stake in a separate Vankor oilfield in Western Siberia, but that investment will not be affected as they repatriated their dividend income for the year last in January 2022 and would not immediately face problems as Russia was cut off from the SWIFT global payment system following its invasion of Ukraine.

ExxonMobil has a 30% stake in the offshore oil assets of Sakhalin-1, where ONGC Videsh Ltd – the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC) – has a 20% stake .

The field, which produced some 227,400 barrels of oil per day (11.35 million tonnes per year) and more than 12 billion cubic meters of natural and associated gas in 2021, is operated by ExxonMobil.

Although he did not set a time frame for leaving the company, ExxonMobil’s exit would mean that technical manpower and expertise would no longer be available on the project, three sources with knowledge said. directly from the file.

In all likelihood Russia’s Rosneft, which has a 20% stake in the fields, will take over Exxon’s share, they said.

The Sakhalin-1 project, where partners have so far invested $17 billion in developing the reserves beneath the sea that freezes in winter, is considered a technical marvel.

It involved developing three oil and gas fields off Sakhalin – Odoptu, Chayvo and Arkutun-Dagi – by drilling record-breaking wells from shore that drilled down and sideways up to seven miles to reach the reservoirs that had frustrated the Soviets when they discovered oil. there in 1979.

OVL joined the project in 2001 and ExxonMobil began pumping oil from fields deemed too deep and remote to produce in 2005.

Sources said ExxonMobil has publicly stated that it is beginning a process of shutting down operations and developing measures to exit the Sakhalin-1 business. It would no longer invest in new developments.

ExxonMobil, which joined BP and Shell in announcing its exit from Russia following Moscow’s invasion of Ukraine, has asked foreign officials to leave the project, sources said, adding that some wells could be being closed.

The majority of project managers are foreign nationals while U.S. contractor Parker Drilling is in charge of almost all drilling operations, they said, adding that ExxonMobil relies on other U.S. and international contractors to the operations.

In all likelihood, foreign personnel will leave the project over the next few days, sources said.

Besides ExxonMobil and OVL, the Japanese consortium Sodeco holds a 30% stake in Sakhalin-1 and the Russian producer Rosneft holds the remaining 20%.

ExxonMobil and Rosneft have been working on a plan to commercialize remaining natural gas reserves by exporting them to international markets as liquefied natural gas (LNG).

Non-associated gas from the Chayvo field is expected to be transported through a new pipeline to a 6.2 million tonnes per year liquefaction facility to be built at the port of De Kastri on the Russian mainland.

ExxonMobil’s exit will in all likelihood delay the project, sources said, adding that adding Western sanctions against Russia would mean it would be extremely difficult to arrange financing for the multi-billion development and LNG project. of dollars.

The OVL share of Sakhalin-1, which covers an area of ​​1,140 square kilometers, is 45,400 barrels per day (2.27 million tons).

The Indian company also holds a 26% stake in the Vankor field which produces some 11 million tonnes of oil per year. A consortium made up of Oil India Ltd, Indian Oil Corporation and a unit of Bharat Petroleum Corp Ltd (BPCL) holds another 23.9% stake in the project.

This project is not that complicated as Rosneft is the operator of the field with a 50.1% stake, sources said. The Russian firm will continue to manage operations without too many obstacles.

The Indian partners have already repatriated their dividend income from last year so they will not face an immediate challenge there, they added.

OVL also owns Imperial Energy Corporation Plc, an independent upstream oil exploration and production company with its main operations in the Tomsk region of Western Siberia, Russia. However, field operations are limited.

Russia is India’s main investment destination for oil and gas projects. While OVL spent $1.7 billion for its 20% stake in Sakhalin-1 in 2001, it bought Imperial Energy in 2009 for $2.1 billion.

Indian companies spent $4.2 billion for the 49.9% stake in Vankor.

Following Russia’s invasion of Ukraine, supermajors BP and Shell and Norway’s Equinor announced earlier this week that they would quit Russian joint venture projects and pull staff from the country.

French supermajor TotalEnergies said it would no longer provide new capital to projects in Russia, but refrained from announcing a plan to exit the investments. PTI ANZ ANZ ABM ABM

This report is automatically generated from the PTI news service. ThePrint declines all responsibility for its content.