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ONGC raises estimate of equity oil in Russia

Exploration firm ONGC Videsh has upgraded its estimates of equity oil in Russia's giant Sakhalin-1 oil as new data showed oil reserves were 12-14 per cent more than initial estimates, officials said.

The firm's chairman, Subir Raha, said Russia had recently issued a decree to give ONGC Videsh Ltd a 20 per cent stake in the Sakhalin-1 field, where production is expected start in 2005.

ONGC Videsh, a wholly owned subsidiary of state-run Oil and Natural Gas Corporation, will invest about $1.7 billion in the venture, company officials said.

Raha said data from exploratory wells drilled in the field last November had shown the field's hydrocarbon reserves were 12-14 per cent more than what was initially estimated.

"Because of this data some of the terms (of the contract) were revisited," Raha told Reuters on the sidelines of a ceremony for signing contracts for exploration blocks in India.

ONGC had earlier estimated its stake in the project would help it acquire equity oil of about two to four million tonnes a year and five to eight million cubic metres of natural gas a day.

The company signed an agreement on February 10 this year to buy a 20 per cent stake in the project, but this had to be followed up with an approval from the Indian government and a decree from the Russian government, officials said.

"The Russian government has issued the decree," Raha said.

ONGC Videsh, which is engaged in acquiring equity oil abroad to augment depleting domestic reserves, had paid the first tranche of $339 million for the project in June and will be paying the balance in an agreed payment schedule, he said.

Officials said ExxonMobil Corp and Japan's Sodeco held a 30-per cent stake in the venture while Russia's national oil company, Rosneft, and OVL had 20 per cent each.

The deal is expected to give ONGC more opportunities in Russia, which has historically had close ties with India.

ONGC produced 25 million tonnes of crude oil a year. India's domestic crude oil production has declined to about 30 million tonnes a year from 34 million tonnes six years ago, forcing the country to import about 70 per cent of its oil needs.

Falling output and rising global prices have encouraged India to offer exploration blocks to private firms and acquire equity oil abroad through ONGC Videsh.

ONGC has entered into an exploration agreement in Iraq and has memorandums of understanding with Indonesia's Pertamina and has a 45-per cent stake in a gas field in Vietnam.

It has also signed memorandums of understanding with PDVSA, the national oil company of Venezuela and Sonatrach, the national oil company of Algeria.

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