ONGC to get dividend from Russian field; repatriation of income an issue

Oil and Natural Gas Corporation (ONGC) is not receiving its share of oil from Russia's Sakhalin-1 oil field anymore, an Economic Times (ET) report said. However, ONGC will continue to receive dividends from the field, said the report.

Notably, ONGC holds a 20 per cent participating interest in Sakhalin-1 and it used to get one-fifth of the oil production from the field. However, with the onset of war in Ukraine last year, all the oil produced at Sakhalin-1 is being sold to a new company set up by Russia last year.

The field is operating at its normal capacity after a stoppage for several months due to the war. The field is producing 200,000 barrels of oil every day, the ET report said.

ONGC is receiving dividends proportionate to its 20 per cent stake in the new Russian company. However, payment in the form of dividends has changed the equation for ONGC. Earlier, it could sell oil from Sakhalin-1 and get cash quickly. However, there are gaps in dividend payments which are paid only once or twice a year in this case, according to ET.

Indian public sector undertakings (PSUs) have found it challenging to repatriate their dividend incomes from some other Russian oil and gas fields as well, thanks to the Western sanctions.

It is important to note that Indian public sector companies including ONGC, Oil India, and BPCL have ownership in a few other Russian fields which only pay dividends and do not supply oil. However, the situation with Sakhalin-1 has changed in the aftermath of the war in Ukraine.

As a result of this, PSUs have been unable to repatriate around $300-400 million in dividends from Russia, an official from the petroleum ministry was quoted in the report. This is also affecting Indian companies' ability to invest more in the capital expenditure and operational expenditure of these projects.