Russia pledges crude oil to India

India may have to contend with Russia supplying about 5 million tonnes of crude oil annually instead of equity in Yuganskneftegas, the main unit of Yukos, that has been acquired by Rosneft.

Unconfirmed reports today said ONGC Videsh Ltd had lost out to China National Petroleum Corporation in the race for equity in Yuganskneftegas.

Commenting on the reports, Petroleum Minister Mani Shankar Aiyar told reporters, "There are no full stops and dialogue is continuing." Senior ONGC executives , when contacted, said negotiations were still on.

The China National Petroleum Company had offered a $6 billion loan to fund Rosneft's purchase of Yuganskneftegas against 48 mt of crude supply over the next five years. Rosneft, a state-owned Russian company, was also looking at a similar loan from ONGC Videsh. But the finance ministry had reservations on such a loan.

Officials said India wanted a 15-20 per cent stake in the firm and was also considering offering debt to Rosneft. ONGC Videsh is likely to be accommodated in the Vankor oil and gas field or three other exploration blocks of Rosneft. It is also looking at a 10-20 per cent stake in Sakhalin-3. OVL has a 20 per cent stake in Sakhalin-1 project.

A team from OVL was in Russia earlier this month to study the Vankor fields, which have 125 mt of oil reserves and 75 billion cubic meters of gas reserves.

Aiyar will be visiting Moscow on February 21 for a roadshow inviting bids for 20 oil and gas blocks under the fifth round of New Exploration and Licensing Policy. He is also likely to take up the issue of equity in Yuganskneftegas with the Russian government.

Rosneft, through front company Baikal Finance, pledged $9 billion for Yuganskneftegas, which produces 1 million barrels per day of crude oil. It was nationalised by the Russian government after its owner Yukos was found to be having over $27-billion in tax arrears.

By giving loans against future supplies, China wants to end the uncertainty over oil supplies from Yukos. Yukos was selling China 7 mt of crude oil.

India does not buy oil from Russia and is seeking an equity hold.

There are reservations within the government over whether ONGC Videsh should take the risk of investing in Yukos assets since they are mired in litigations within Russia and outside.

Yukos had filed for bankruptcy in the US, which led to another Russian-owned company Gazprom not bidding for Yuganskneftegas.