ONGC to consider oil-for-dividend exchange for its Russia assets

State-run oil and gas producer ONGC is likely to swap crude oil against dividends receivable from its hydrocarbon blocks in Russia in the wake of the Russia Ukraine crisis. However, sustainability of these oil and gas blocks is a bigger concern given that major foreign explorers, many of which partner with ONGC, are exiting the assets, the sources said.

As Russia faces a barrage of sanctions from the US and its Western allies for invading Ukraine, the biggest casualty has been crude oil. Brent crude oil prices crossed $100 per barrel mark on February 27 and are now hovering around $128 per barrel.

Higher prices are an advantage for ONGC. The immediate concern, however, is that since Russian banks are blocked from the SWIFT facility, the company could face issues concerning repatriation of dividends. The dividends are repatriated twice in a year and the next dividend is due sometime after four months. Sources said if the war persists and the sanctions continue for the next four months, then the company may look at oil for dividend swap option.

In FY21, ONGC received Rs 1,593 crore as dividend from its subsidiary ONGC Videsh (OVL) for its JSC Vankorneft asset as against Rs 396 crore in FY20.

“There is no issue if the dividends are brought back later. However, the bigger concern is the sustainability of these blocks, the impact on supply chain, and if there would be any sanction on supply of oil and gas from Russia if the situation worsens from here,” sources said. The company is hopeful that if the war persists, “the field season for seismic surveys that begins in October-November, in India, will see participation of many global companies with their offices in India, including Russians, towards Seismic program chalked out for next field season. This would definitely address the issues which are emerging on account of current Russia-Ukraine engagement.

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