ONGC Videsh Ltd, the overseas arm of state-owned Oil & Natural Gas Corp (ONGC), is eyeing stake in Russia's ambitious Arctic Ocean oil and gas projects with US supermajor ExxonMobil and Italian energy giant ENI.
OVL on May 4 wrote to Russian state oil company Rosneft expressing interest in taking stake in one of the three joint ventures announced to explore for oil and gas beneath Arctic Ocean, sources privy to the development said.
Rosneft has signed separate deals with ExxonMobil, ENI and Norway's Statoil for three multi-billion dollar projects in coastal seas north of Russia.
Under the agreements, the foreign companies get about 33% stake in the joint project with Rosneft and pay for all of the initial exploration cost.
Sources said OVL wants Rosneft to give a part of its about 67% stake in one of the three projects.
In case Rosneft is not able to accommodate OVL in any of the three existing projects, the Indian flagship firm wants to join one of the 12 Arctic shelf fields that Russia plans to offer in near future.
For the future projects, OVL has proposed that if Rosneft is unable to give 33% stake like those offered to ExxonMobil or ENI, because of its lack of experience, it would settle for a 8% interest. Rosneft can offer 25% stake to any other foreign firm, they said.
In the Arctic projects, Rosneft would hold around 67% participating interest and the foreign partner - remaining 33%. All expenditure at the exploration stage shall be borne by the foreign partner.
In addition, the foreign partner shall be paying a premium to Rosneft based on the oil or gas discovered.
OVL, sources said, is keen to get a foothold in the Arctic projects and expand in Siberia and Far East Russia.
Foreign firms are seeking new deals after Moscow proposed to lift all export duties for new projects in the Arctic shelf that US Geological Survey estimates may be home to 30% of the planet's undiscovered natural gas reserves and 13% of its undiscovered oil.
According to a preliminary estimate, total operations in the Arctic might require $250-400 billion investment to tap up to 160 billion barrels of undiscovered oil.
The first stage of exploration for projects with Exxon Mobil will cost about $3.2 billion while Eni and Statoil will spend around $1 billion each.
Russia and Saudi Arabia are now roughly tied in oil production, each pumping around 10 million barrels a day. To maintain this level, however, Russia will need to develop new areas because its fields in Siberia are in decline.
The first exploration well in the Arctic Ocean blocks would be drilled only in 2020.
