OVL, Rosneft sign Vankor oil field deal

A deal to allow ONGC Videsh Limited to pick up 15 per cent stake in Russia's second biggest oil field of Vankorneft and three other major pacts between Indian and Russian companies in oil and gas sector have been struck during Prime Minister Narendra Modi's visit here which is expected to boost bilateral trade significantly.

India has been pressing for access to its companies in Russia's lucrative hydrocarbons sector and the pacts finalised are likely to facilitate their significant presence in oil and gas exploration in the Eurasian country.

As per the deal between ONGC Videsh Ltd (OVL) and Russian oil behemoth Rosneft, the former will pick up 15 per cent stakes in Vankorneft oil fields in Siberia for USD 1.3 billion.

OVL and Rosneft also signed a Memorandum of Understanding for cooperation for geologic survey, exploration and production of hydrocarbons onshore and on the continental shelf of the Russian Federation.

As per another pact, Oil India Ltd and Indian Oil Corporation signed a non-binding agreement with Rosneft setting time-frame for concluding due diligence and finalising a pact to pick up stakes in Taas-Yuryakh Neftegazodobycha oil field, which another major oil fields in Siberia.

India's Ambassador P S Raghavan said OVL signed another MoU with Rosneft expressing interest in a number of oil fields both in arctic shelf and in other parts of Syberia near Vankorneft and the intention for striking a deal.

He said Indian oil major Essar has concluded some details of a deal under which they will pick up 10 million tonnes of crude from Roseneft. Roseneft will pick up 49 per cent stakes in India's second largest oil refinery in Vadinar in Gujarat. As per the deal, the crude oil that goes from Russia will be refined at Vadinar.

Energy-starved India, the third largest oil importer after the US and China, has been pushing for greater involvement in major gas and oil exploration projects in Russia. Russia is one of the top oil producers globally and has huge reserves of natural gas.

The volume of current bilateral trade between the two countries is around USD 10 billion and both sides were of the view that deeper engagement in hydrocarbons sector will boost bilateral trade significantly and help them achieve the target of USD 30 billion in annual trade over the next 10 years.

A joint statement issued after Modi's summit talks with Russian President Vladimir Putin welcomed the deals in the oil and gas sectors.

The two sides welcomed the announcement of several major bilateral investment proposals and called on companies in both countries to finalise new and ambitious investment proposals in promising sectors such as oil and gas besides in some other areas.

"With one of the world's largest reserves of hydrocarbons, Russia can be a critical source of energy security for India, especially because of our strategic partnership. With President Putin's support, we are enlarging Indian investments in Russian hydrocarbon sector," Modi said at a joint media briefing with Putin at Kremlin last night.

Putin said an agreement between Rosneft and Essar envisaged large-scale deliveries of oil and petroleum products to Indian refineries – up to 10 million tonnes a year over a period of 10 years.

The two sides noted the continued interest of Indian companies in investing in the hydrocarbon sector in Russia, in particular discussions between Rosneft and Oil India limited on promising investment projects, and called for early finalisation of new investment proposals.

They welcomed the key terms of oil and oil products supplies signed by Rosneft and Essar group in December 2014 as well as the contract for oil supplies for the Vadinar refinery (India) -- which also provides stakes for Rosneft in the refinery -- concluded between these businesses on the margins of the BRICS Summit in Ufa on July 8, 2015, the joint statement said.

The two countries expressed satisfaction over cooperation between Gazprom Group and its Indian partners in LNG trade.

"The Russian side welcomes the interest and involvement of Indian partners with regard to cooperation in joint projects stipulating the possibility of LNG supply to India from JSC NOVATEK project Arctic LNG on the resource base of the fields located on the Gydan Peninsula and partly in the Gulf of Ob," the statement said.

Rosneft said the agreement confirms the intention of parties to continue cooperation in the named areas and expands the sphere of the potential partnership to include Russian onshore hydrocarbon development projects.

Commenting on the agreement, Sechin said: "We appreciate the pragmatic approach of our Indian partners demonstrated within the preparation of the implementation of this high-scale deal, which will bring the cooperation between Russia and India, both in the corporate and intergovernmental sectors, to a whole new level".

ONGC Chairman and MD and OVL Chairman Dinesh K Sarraf said the signing of the agreement takes the cooperation between the two companies to a whole new level and lay strong foundation for enlarging the energy cooperation between the two nations.

Vankorneft was established in 2004 for development of Vankor oil and gas condensate field – the largest of the fields, discovered and put into operation in Russia in the last 25 years.

The initial recoverable reserves of the Vankor field by January 1, 2015 are estimated at 476 million tonnes of oil and condensate and 173 billion cubic meters of gas. The acreage of the field is 447 square km.

In 2014, Vankor produced 22 million tonnes of oil which exceeds the results of 2013 by more than 3 per cent. The daily output is more than 60,000 tonnes.

IOC in a statement said the agreement with Rosneft will give additional impetus to the development of one of the largest oil assets in East Siberia.

The MoU document was signed by IOC Chairman B Ashok, OIL Chairman & Managing Director UP Singh and Sechin.

"The three parties are determined to continue active joint work aimed at implementation of the terms of the MoU," the statement said.

IOC, the nation's biggest refiner, and OIL, India's second largest state explorer, are jointly seeking to acquire prospective oil & gas assets overseas to boost the country’s oil & gas equity and energy security.