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ONGC not to sell Sakhalin crude in open market

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India's largest upstream company, Oil and Natural Gas Corporation (ONGC), has ruled out selling its share of crude oil from the rich Sakhalin oilfields in the open market. Instead, it has decided to refine the entire crude at its subsidiary in Mangalore.

"The current plan is to bring the entire crude from Sakhalin to Mangalore Refinery and Petrochemicals Ltd (MRPL)," said a senior ONGC official.

ONGC, through its wholly owned subsidiary ONGC Videsh Ltd (OVL), holds a 20 per cent stake in Sakhalin-I, which translates to a share of 50,000 barrels per day at peak production.

This decision, however, could change if the price of crude oil in the international market falls further from the current 18-month lows.

"Transportation and logistic costs will then come into play and we may sell that crude in the global market," the official said. The company has not yet fixed the floor price below which it will sell crude abroad.

The first batch of Sakhalin crude will reach MRPL on November 30, 2006, while the second batch is expected by end-December, officials informed. The first two cargoes will be almost 700,000 barrels each.

Sakhalin-I is one of the six OVL projects which are already under production, out of the 26 projects that it part-owns across 15 countries. The producing assets yielded 6.34 million tonnes of oil equivalent (mtoe) in the last financial year. This is expected to go up to 7.5 mtoe in the current year, according to company officials.

Sakahlin crude oil is expected to perk up refining margins at MRPL from the current level of $5 per barrel, the official said.

© Business Standard

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