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ONGC starts negotiations with Exxon Mobil consortium

Richa Mishra

To import LNG from Sakhalin fields

New Delhi , July 10

Oil and Natural Gas Corporation has kicked off negotiations with the Exxon Mobil consortium for importing eight million tonnes of liquefied natural gas (LNG) to India from the Sakhalin gas fields in Russia. In order to strike the deal, the company has set up a price negotiation committee.

Conflict of interest

Sources said the committee would discuss the deal with the Exxon Mobil consortium that includes ONGC Videsh Ltd (OVL), Sodeco and OAO Rosneft. The constitution of the committee was necessary as the deal had to be discussed between the buyer and the seller. OVL, the overseas arm of ONGC, was part of the seller consortium. Thus, in order to avoid any conflict of interest, the committee was set up, sources explained.

Apart from the issue of pricing, the committee is also discussing the options to bring the gas into the country. ONGC had earlier held discussions with Exxon Mobil for bringing in the gas as LNG instead of selling it through a pipeline to a captive single buyer. Declining to divulge any further details on the pricing of the gas, sources said the positive aspect was that the discussions had been initiated between the two commercial entities. Indications are that Exxon Mobil, which has 30 per cent stake and is also the operator of the field, is open to considering the option of shipping the LNG.

Largest investment

This is India's largest investment abroad in oil and gas production. OVL directly holds 20 per cent stake in the consortium. ONGC has been maintaining that it may not be viable to lock in the entire production to a single buyer. Sources also added that it would be important to invest upfront on the liquefaction facilities to get the gas deal in place. The total gas deal would work out to be a sizeable one if the prices are anything to go by. Spot gas prices are around $8 per million British thermal unit. Sakhalin crude

Apart from gas, ONGC plans to bring up to two cargoes of Sakhalin crude to India. One cargo would be up to seven lakh barrels. The oil production Sakhalin-1 block is expected to reach the optimum level in the first quarter of fiscal 2007-08 and fetch India 50,000 barrels per day of oil besides gas. Production in the block commenced in October last year.

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