The Hindu Business Line : Sakhalin gas: ONGC may opt for direct marketing

Gas talks
ONGC negotiating price with Exxon Mobil consortium for importing LNG to India from Sakhalin.
Indications are that Exxon Mobil is open to considering the options, including shipping the LNG.

New Delhi , Dec. 5

ONGC is considering various options, including direct marketing or swap for gas from Sakhalin fields in Russia.

A senior ONGC official told Business Line that apart from the issue of pricing, the company's price negotiation committee was discussing with the Exxon Mobil consortium options to bring the gas into the country.

"We are also examining the options of either giving the entire gas (ONGC Videsh Ltd's share in Sakhalin-I) to Sakhalin-II project or selling it to buyers in Japan or China," he said.

Positive side

The Indian exploration and production major had been negotiating price with Exxon Mobil consortium for importing liquefied natural gas (LNG) to India from Sakhalin gas fields. Declining to divulge any further details on the pricing of the gas, sources said the positive aspect was that the discussions had been initiated between the two commercial entities. The committee constituted by ONGC is discussing the deal with the Exxon Mobil consortium that includes ONGC Videsh Ltd (OVL), Sodeco and OAO Rosneft.

ONGC had earlier held discussions with Exxon Mobil for bringing in the gas as LNG, instead of selling it through a pipeline to a captive single buyer. Indications are that Exxon Mobil, which has 30 per cent stake and is also the operator of the field, is open to considering the options, including shipping the LNG.

The constitution of the committee was necessary as the deal had to be discussed between the buyer and the seller. OVL, the overseas arm of ONGC, was part of the seller consortium. Thus, in order to avoid any conflict of interest, the committee was set up, sources explained. This is India's largest investment abroad in oil and gas production. OVL directly holds 20 per cent stake in the consortium.

Russia project

Sakhalin-I project consists of three fields Chayvo, Odoptu and Arkutun-Dagi offshore the north-east coast of Sakhalin Island in Russia Far East. Together, they contain an estimated 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas. According to sources, the total gas deal would work out to be a sizeable one if the prices are anything to go by. Spot gas prices are around $8.5-$10 per million British thermal unit (mmBtu).

Sakhalin crude import

Meanwhile, ONGC has already brought one cargo of Sakhalin crude to India and the second is expected by the end of this month. One cargo would be up to seven lakh barrels.

The oil production at Sakhalin-1 block is expected to reach the optimum level in the first quarter of fiscal 2007-08 and fetch India 50,000 barrels per day of oil, besides gas.