OVL, partners who buy a 49 pc stake in the Vankor cluster oil fields

New Delhi, September 1 () A preliminary agreement for a consortium of Indian companies led by ONGC Videsh (OVL) to acquire approximately 49 percent stake in Russia's Vankor cluster oil fields can be signed during the annual summit of the first Minister Narendra Modi with Russian President Vladimir Putin this week.

The oil minister, Dharmendra Pradhan, was in Moscow last week in preparation for the prime minister's visit.

Modi will be the main guest at this year's Eastern Economic Forum in Vladivostok between September 4 and 6 and will also meet with the Russian President for his annual summit.

A series of agreements are expected to be signed during the visit and one of them could be about oil and gas cooperation, sources with direct knowledge of the matter said.

This cooperation agreement may include Indian state firms that acquire a 49 percent stake in the Vankor cluster oil fields, they said.

Indian companies have been in dialogue with Russia since 2017 for a possible participation in the oil fields that will consolidate their presence in the Arctic region rich in energy.

Halfway through the negotiations, Rosneft had offered to group five more camps in the same region to the three that were already on the table, sources said.

OVL, the foreign arm of the state-owned Oil and Natural Gas Corp (ONGC), can have a 26 percent stake in the Suzunskoye, Tagulskoye and Lodochnoye fields, collectively known as the Vankor cluster, while Indian Oil Corp (IOC), Oil India Ltd and Bharat PetroResources Ltd (a unit of Bharat Petroleum Corp Ltd or BPCL) would divide the rest by 23 percent, they said.

Rosneft, the Russian national oil company that owns the fields, wants to retain a majority stake and is willing to sell only up to 49.9 percent.

India, hungry for energy, is interested in obtaining one million barrels per day of oil and gas equivalent to Russian oil and identified Sakhalin-3 in the Far East, Vankor in Eastern Siberia and the Terbs and Titov oil fields in the Timan Pechora region as fields for potential collaboration But for Vankor, so far he has not succeeded in his attempts.

OVL already has a 20 percent stake in the Sakhalin-1 oil and gas field in the Far East of Russia, and in 2009 it acquired Imperial Energy, which has fields in Siberia, for USD 2.1 billion.

Russia is attracting Indian investments in its Far East region before Modi's visit to Vladivostok to balance China's growing presence in the resource-rich region.

The OVL stake in the Vankor cluster will be proportional to the 26 percent that it had purchased in the main Vankor oil field. OIL-IOC-BPRL has 23.9 percent in the main Vankor field.

Vankorneft, a Rosneft subsidiary, is developing the Vankor oil and gas condensate field, located in the northern part of Eastern Siberia.

In 2013, Vankorneft was chosen as operator in the development of new fields of the Vankor cluster: the Suzunskoye, Tagulskoye and Lodochnoye fields, located near the Vankor field.

Suzunskoye field reserves exceed 56 million tons of oil and condensate, and 35 billion cubic meters of gas.

In 2016, OVL first acquired a 15 percent stake in Russia's second largest oil field, Vankor, for USD 1,268 billion and then bought another 11 percent for USD 930 million. The 26 percent stake would give OVL 7.31 million tons of oil.

The OIL-IOC-BPRL consortium acquired a 23.9 percent stake in the field at a cost of USD 2.02 billion, which gave them 6.56 million tons of oil.

Rosneft continues to hold the remaining 50.1 percent shares of JSC Vankorneft. The field has recoverable reserves of 2.5 billion barrels.

In addition, the OIL-IOC-BPRL consortium has acquired another 29.9 percent stake in a separate Taas-Yuryakh oil field in Eastern Siberia for USD 1.12 billion. The investments had brought the total disbursement in Russia in that year to USD 5.46 billion.

These investments will give India 15.18 million tons of oil equivalent. The investment made is compared to the investment of USD 28.48 billion of Indian oil and gas companies abroad in the last 50 years, which gives it approximately 10 million tons of oil equivalent. While Vankor produces about 442,000 barrels of oil per day (4 percent of Russian crude oil production), Taas currently produces about 21,000 barrels per day of oil, and a peak of 1.00,000 bpd is expected by 2021. ANZ ABM