ONGC Videsh Ltd (OVL) had made an initial indicative bid of only $45 million for a 20 per cent stake in the Sakhalin-1 project in Russia. OVL later increased its offer by 400 per cent to $225 million to clinch the deal.
When the initial offer was rejected by the Russian company, Roseneft-S, OVL revised it to $100 million "based on updated data studied by OVL," according to documents acquired by Business Standard.
However, at that time the results of a new well in one of the fields had come in and the drilling of a high-tech well in a nearby field had been completed.
Though these developments enhanced the value of the project substantially, OVL was advised by the empowered committee of secretaries to submit the bid based on the previous data.
That bid was also rejected by the Russian company. Finally, OVL raised its bid to $225 million and acquired the 20 per cent stake in the project.
The Sakhalin-1 project entails the development of three hydrocarbon fields--Arkuntun-Dagi, Chayvo and Oduptu--on the offshore of the Sakhalin Island, around 840 km north of Japan.
A consortium comprising Exxon-N, Sodeco, Roseneft-S and SMNG-S entered into a joint operating agreement on May 11, 1995, and signed a production sharing agreement with the Russian Federation and the administration of Sakhalin Oblast on June 30, 1995, for the Sakhalin-1 project.
OVL became a partner after acquiring a 20 per cent participating interest in the project from the Russian partners on July 31, 2001.
At present the consortium includes Exxon (30 per cent), Sodeco (30 per cent), OVL (20 per cent), SMNG-S (11.5 per cent), and RN Astra (8.5 per cent).
According to the latest estimates, the three fields have in-place reserves of 8.4 billion barrels of oil and condensate and 24 trillion cubic feet of gas with additional upside potential.
Oil production from these fields is expected to start in 2005, increasing to about 250,000 barrels of oil plus condensate per day during plateau production of around 15 years.
Gas production is expected to commence in 2008.
