In a bid to resolve the issue of Indian oil PSUs stuck with dividend payments worth around $400 million, Russia and India are exploring alternatives, including making payments via a third country’s currency and re-investing the income in energy assets in the erstwhile Soviet Union.

Top sources in the government assured that the matter of stuck dividend payments is being deliberated by both the countries at the top levels and the issue will be resolved.

The dividend income is worth around $400 million, or roughly ₹3,200 crore, which is largely due to ONGC Videsh (OVL) followed by Oil India (OIL), Bharat PetroResources (BRPL) and Indian Oil Corporation (IOC).

Sources said that dividend income is stuck due to problems in payments with Russia being cut off from the global payment system, SWIFT, due to the special operations in Ukraine.

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“Talks are on with the Russians and the issue will be resolved. Among the alternatives discussed is payments through a third currency and the opportunity to re-invest in Russian oil and gas assets,” explained one of the sources.

India’s Russian oil assets

ONGC Videsh (OVL) has a 20 per cent participating interest (PI) in Sakhalin-1 through a Production Sharing Agreement (PSA) in July 2001. OVL accounted for its 20 per cent interest in the project as joint operations.

It also acquired Imperial Energy, an independent upstream oil exploration and production company, having its main activities in the Tomsk region of Western Siberia in January 2009. Imperial’s interests consisted of 10 E&P license blocks in Tomsk, which were granted during 2005 to 2017 have different validity dates and will expire between 2027 and 2029.

The ONGC subsidiary also acquired 26 per cent equity (15 per cent equity on May 31, 2016, and an additional 11 per cent equity on October 28, 2016) in CSJC Vankorneft, which is the owner of the Vankor Field and North Vankor license. Other partners are the Indian consortium of OIL-IOC-BPRL with 23.9 per cent PI and Rosneft with 50.1 per cent PI as the operator.

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Dividend conundrum

The issue of repatriation of dividend income of OVL and the other three oil PSUs got stuck due to the Russia-Ukraine war. On October 7, 2022, the Russian President issued a decree for the transfer of all rights and obligations of the Sakhalin-I (S-1) consortium under the PSA to a Russian company—Sakhalin-1 Limited Liability Company (Sakhalin-1 LLC).

Subsequently, Russia, on October 12, 2022, transferred the rights of the oil consortium to the newly-formed company and the existing foreign parties in the PSA were required to give their consent to receive their stake in Sakhalin-1 LLC proportionate to their holdings in the S-1 project.

OVL submitted the consent to claim its right in the Sakhalin-1 LLC on November 7, 2022, and two days later, Russia granted OVL its proportionate share of 20 per cent.