OVL's Sakhalin-1 project faces roadblocks

State-run ONGC Videsh Ltd's (OVL) mega Sakhalin-1 project in Russia is headed for trouble after Kremlin refused to approve its budget and work plans, leading to suspension of work on future phases.

The $17-billion Sakhalin-1 project, where OVL has 20 per cent stake, comprises three offshore fields - Chayvo, Odoptu and Arkutun-Dagi. Of these, Russian authorities have not approved work programme on the Odoptu and Arkutun-Dagi.

The authorised state body did not approve budgets and work plans, forcing Exxon Mobil, the operator of the Sakhalin-1 project, to suspend its work on the two deposits, sources said.

However, production from the Chayvo field, that started pumping oil in 2005, would not be impacted, they said, adding the Russian company may be wanting to confine the Sakhalin-1 consortium to just Chayvo field and snatch away the other two fields.

The Chayvo field has seen a 23 per cent fall in production since it started pumping oil. Output has tumbled to about 1,93,000 barrels of crude oil per day from a February 2007 peak of 2,50,000 bpd. Production may slid another 11 per cent in 2009.

The Sakhalin-1 partners are looking at untapped reservoirs in adjacent rock formations to maintain output.

The Odoptu and Arkutun-Dagi fields would have helped sustain production to 2050.