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A Foreign Investor for Sakhalin 3

image The Indian company ONGC is joining Gazprom and Rosneft as a contender for the Sakhalin 3 project. Director of the Ministry of Industry and Energy department of state energy policy Sergey Mikhailov said at the Russian-Indian business forum in New Delhi yesterday that a decision would be made soon on the sale of a share in the project. Sources say the Indian company has a good chance of success.

ONGC already has a 20-percent share in Sakhalin 1. It has repeatedly stated its intention of acquiring a 49-percent share in Sakhalin 3. (That is the maximum share allowed under Russian law.) Sakhalin 3 consists of four blocks with total reserves of more than 600 million tons of fossil fuels. Rosneft is already developing the Veninsky block.

Hydrocarbon production is falling in Russia, as production costs are rising. Therefore, the sector badly needs investment. Rosneft needs modernization of its existing infrastructure, but it already has a heavy debt load. Therefore, investment in it can only be long-term. Sources at both Rosneft and Gazprom said that there has been interest in working with INGC, but no plans have been realized yet. A year ago, ONGC and Rosneft signed a memorandum of intent to exchange assets and file a joint application for Sakhalin 3, but no final agreement has been reached.

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