ONGC Videsh repurchases a 20% share in Russia's Sakhalin-1 oil and gas reserves

    An official announced on Monday that ONGC Videsh Ltd, the foreign arm of the state-owned Oil and Natural Gas Corporation (ONGC), has repurchased a 20% share in the Sakhalin-1 oil and gas reserves in Russia's far east.

In October of last year, Russian President Vladimir Putin abolished Exxon Neftegaz, a regional affiliate of ExxonMobil, as operator of the Sakhalin-1 and handed the project and all of its assets and equipment to a new operator.

The project's other previous foreign shareholders, Japan's Sodeco consortium and ONGC Videsh, were requested to appeal to the Russian government to reclaim their stakes.

According to the official, OVL applied and was granted the same shareholding as before.

Exxon Neftegaz declared force majeure at the Sakhalin-1 project in April 2022 in reaction to international sanctions imposed on Russia following its invasion of Ukraine.

The Sakhalin-1 project and operatorship were entrusted to a regional unit of Russian oil company Rosneft by Moscow. Russia subsequently requested the project's foreign shareholders, ExxonMobil, Sodeco, and ONGC Videsh, to apply to reinstate their stakes in the project by mid-November.

The Sodeco consortium has preserved their stake as well, however it is unclear what will happen to ExxonMobil's stake.

ExxonMobil previously declared that it had completely departed Sakhalin-1 following asset confiscation and has no plans to run the project.

Before the Ukraine war, Sakhalin-1 was producing 220,000 barrels of oil per day. OVL's contribution was 44,000 bpd, or 2.2 million tonnes per year. However, Western sanctions imposed in the aftermath of the Russia-Ukraine war hampered oil evacuation.

Production began in November and has reached 140,000-150,000 bpd, according to the official, who added that output is expected to return to normal levels by the end of March.

Sakhalin-1 is a huge oil and gas field in Russia's far east that spans 1,140 square kilometres and contains three offshore fields: Chayvo, Odoptu, and ArkutunDagi. In July 2001, OVL purchased a 20% share in the project.

Exxon Neftegas Limited (ENL) and Sodeco each owned 30% of the company. The remaining 20% is owned by Russia's Rosneft through its subsidiaries SMNG (11.5%) and RN Astra (8.5 per cent).

Almost all of Sakhalin-1's oil production is transported to international markets via the De-Kastri terminal, which is located on the Russian mainland in the Khabarovsk region and is linked to Sakhalin-1 via a dedicated pipeline.

On October 7, 2022, the Russian President issued a decree transferring the consortium's rights and duties under the Sakhalin-1 production sharing agreement (PSA) to a new firm, Sakhalin-1 Limited Liability Company.

According to the official, OVL and Rosneft both own 20% of the new business, with Sodeco owning 30%. Russia has still to determine what to do with its 20% investment in ExxonMobil.

The parties are now debating a joint operation arrangement for the fields.