India in talks with Russia for $2-3 bn investment in upstream oil assets

Tie-ups in Arctic projects also being evaluated

India is in talks with Russia for a fresh investment of at least $2-3 billion in its upstream assets. According to officials in the know, the Russian government has offered some oil and gas fields to ONGC Videsh (OVL) and any consortium they stitch together.

A possible investment by India into the prolific, but contentious, oil and gas exploration projects within the Arctic Circle is also being discussed.

“This will be for exploring and producing oil and gas in Russia. While the project and scope have not been finalised, talks have begun and the Russian government has offered some fields,” a senior oil ministry official told Business Standard.

Oil major Rosneft, controlled by the Russian government, said in February that it had held talks with India and China for an investment in the Vostok Oil project -- considered one of the largest oil projects in Russia. The project is strategically important because it allows access to the Asian markets through the Arctic North Sea route. This is a shorter route compared to the one through the Suez Canal.

In March, India inaugurated a first-of-its-kind India Energy Office in Moscow. An official statement said this was done to further business ties with the Russian energy sector. Last month, Rosneft said it sold a 5 per cent stake in the Vostok Oil project to a consortium of Vitol and Mercantile & Maritime. It had earlier sold a 10 per cent stake to Trafigura for $8.5 billion.

Vostok Oil, like other oil and gas projects in the Arctic region, is marred by environmental concerns. Some parts of the project are also said to be under a protected nature reserve in the Taymyr Peninsula.

According to officials in the know, three regions of the Far East -- Yakutia, Sakhalin, and Amur -- had expressed interest in the Indian investment in oil and gas projects. The two countries also discussed the prospects of cooperation in the field of petrochemicals and for the development of the Far East and the Arctic region.

OVL, the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), has three major Russian investments at present. These include Sakhalin-1, a large oil and gas field in the Far East offshore; Imperial Energy, an independent upstream oil exploration and production company having its main activities in the Tomsk region of Western Siberia; and the Vankor field, located in the north-eastern part of West Siberian Basin.