The instalment includes the premium amount of $225 million and $92.3 million for past expenditure incurred on exploration of the oil field, company sources said.

ONGC Videsh Ltd (OVL), the overseas subsidiary of ONGC, would acquire half of Rosneft's 40 per cent stake in Sakhalin-I, which is likely to be developed by 2005, for 1.4 billion dollar consideration.

The upfront payment would be made after Exxon Mobil of USA, the other partner in the field, approves OVL's participation in the joint venture later this month, sources said.

While Rosneft-Sakhalin Morneftegaz combine holds 40 per cent stake in the around four billion dollar project, Japanese Sodeco and Exxon Mobil of USA have 30 per cent each.

The agreement would ensure an equity of about 2-4 million tonne besides 5-8 million cubic meter per day of gas, sources said.

Exploration is likely to be completed by the middle of next year and development would begin soon after. The Russian Far East Sakhalin oilfield is estimated to have 2-8 billion barrels of oil reserves.

ONGC was advised by JP Morgan and Rosneft by ABN Amro in a deal which started last year.

As part of the agreement, ONGC would invest in development, financing Rosneft's participation in the project until it generates positive cash flow, sources said.

The consortium of Rosneft-Sodeco and Exxon Mobil have already invested $200 million on evaluation of drilling and seismic operations, sources said, adding oil production from the field would begin by 2005 while gas would start flowing by 2006.

At peak plateau production, the oil production from the field was expected to work out to about 8-12 million tonne per annum and that of gas production to about 20-30 million cubic metres per day, sources said.

The Sakhalin-I project would focus on the development of the Arkutun-Dagi, Chaivo and Odoptu fields, which range from 20-600 metres in depth, and are located off the eastern coast of Sakhalin Island.