Sources say that India's ONGC is moving closer to retaining 20% of the Sakhalin-1 project in Russia.

Three sources familiar with this matter have confirmed that India's Oil and Natural Gas Corp. will pay into Russia’s Sakhalin-1 abandonment fund using the frozen dividends of Indian companies to retain a 20% stake in the Sakhalin-1 project.

ONGC Videsh Ltd., the overseas investment arm for India's largest explorer ONGC and other state-run Indian firms, have been unable to repatriate around $800 million of dividends on stakes in Russian assets, according to industry sources.

Sources said that ahead of the visit by Russian President Vladimir Putin to New Delhi, this week, Indian companies had agreed to lend ONGC Videsh a portion of those dividends to make a contribution towards the abandonment fund.

The Indian companies did not immediately respond to ' requests for comment, nor did Rosneft, whose Sakhalinmorneftegaz-shelf subsidiary now operates Sakhalin-1.

A fund for abandonment is used to decommission wells and ensure the process does not harm the environment.

ONGC Videsh has been unable to send funds in dollars to Russia due to Western sanctions imposed in response to Russia's invasion in Ukraine in February 2022. Payments in roubles require approval from Russian authorities.

Since October 2010, when Putin ordered that the Sakhalin-1 Project be seized and the Russian government was allowed to determine foreign investor ownership rights, ONGC Videsh had been trying to maintain its 20% stake.

Sources who spoke under condition of anonymity because they were not authorised by the media to speak publicly said that Russia had allowed ONGC Videsh, a subsidiary of ONGC, to contribute roubles into the fund, using the pending payments of Indian companies.

In August, Putin signed a decret that allowed foreign investors the opportunity to recover their shares in Sakhalin-1's oil and gas project.

In order to recover their shares, foreign investors must support the lifting Western sanctions.

The project must also transfer funds into Sakhalin-1 accounts and conclude contracts to supply necessary foreign-made machinery to the project. (Reporting and editing by Andrew Heavens; Nidhh Verma)

(source: Reuters)