Exxon Mobil’s announcement to exit Russia leaves ONGC Videsh Ltd in a quandary

Exxon Mobil Corp’s decision to exit Russia has put India’s flagship overseas firm ONGC Videsh Limited in a fix as it is a partner in the global energy giant-operated Sakhalin-1 oil fields in Far East Russia.

ExxonMobil holds 30 per cent stake in the Sakhalin-1 offshore oil assets, where ONGC Videsh Ltd — the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC) — has a 20 per cent interest. The field, which produced some 227,400 barrels of oil a day (11.35 million tonnes a year) and over 12 billion cubic metres of natural and associated gas in 2021, is operated by ExxonMobil.

In all likelihood, Russia’s Rosneft, which holds 20 per cent participating interest in the fields, will take over Exxon’s share. The Sakhalin-1 project, where the partners have so far invested $ 17 billion in developing the reserves lying below the sea that freezes during winter, is regarded as a technical marvel.

Besides ExxonMobil and OVL, Japanese consortium Sodeco has a 30 per cent interest in Sakhalin-1 and Russian producer Rosneft has the remaining 20 per cent. ExxonMobil and Rosneft have been working on a plan to commercialise remaining natural gas reserves by exporting them to international markets as liquefied natural gas (LNG).

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

ONGC Videsh Ltd (OVL) and three other state-owned Indian firms also hold 49.9 per cent stake in a separate Vankor oilfield in west Siberia. Indian firms spent $ 4.2 billion for the 49.9 per cent stake in Vankor. Russia is India’s single biggest investment destination for oil and gas projects. While OVL spent $ 1.7 billion for its 20 per cent stake in Sakhalin-1 in 2001, it bought Imperial Energy in 2009 for $ 2.1 billion.

Leave a Reply

Your email address will not be published.