OVL to get first Sakhalin oil by Q2 06

New Delhi, Nov 23 | Updated: Nov 24 2005, 05:37am hrs
ONGC Videsh Limited (OVL) will receive its first shipment of oil from Russia's Sakhalin-I fields, where it is investing more than $2.7 billion,from the second quarter of 2006.

The Sakhalin-I fields, where ONGC Videsh Ltd has 20% stake, began producing oil and gas earlier this month. This would be India's first shipment of equity crude oil from the Russian fields,officials said.

"Currently, the limited production from the fields is being sold locally (in Russia). From Q2 2006, we expect 50,000 barrels a day (bpd) of output and we plan to ship our share of production to India," OVL managing director R S Butola said.

Sakhalin crude, which is low in sulphur, can either be shipped directly to India or be swapped with Gulf oil destined for Japan or Korea. OVL had given loans to Rosneft to fund the Russian company's 20% stake in the project as well as paying for its own 20% share of development costs.

"Our share of 20 % entitles us for 50,000 bpd of crude oil from peak output of 250,000 bpd. But since we have also financed rosneft's share, we would get their share of oil as well till the loan is repaid," he said.

India, which imported 76% of its crude oil requirement last year, is seeking stakes in overseas fields such as Sakhalin to feed the nation's 7 % annual economic growth.

Mr Butola said the field was initially producing 23,000 bpd of oil and about 58-59 million standard cubic feet of gas per day. Oil production would rise to 50,000 bpd by April 2006 and hit the peak level of 250,000 barrels per day by 2006 end.

Gas production will rise to 200 million standard cubic feet per day by next year, he said.

OVL, the overseas arm of oil and natural gas corp, purchased a 20% stake in Sakhalin-I project for 1.7 billion dollars in 2001.

In November 2003, India had approved 1.1 billion dollar of additional investment in Sakhalin-I. OVL plans to ship around 7,00,000 barrels of oil from Sakhalin-I fields to India every 70 days from April 2006.

The Sakhalin-I consortium, comprising exxon neftegas ltd. (the operator) 30%, Japanese sodeco - 30 per cent, Russian rn-astra llc - 8.5% and Russian Sakhalinmorneftegaz-shelf - 11.5%, has already hired five ice class tankers on long-term charter.