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The recent India-Russia talks had big-bang announcements on energy cooperation but some key questions are unanswered.
The talks ended with no clarity on whether the Russian government was willing to extend the tax concessions sought by ONGC Videsh (OVL) for turning around its loss-making Imperial Energy project in that country or not. Or of the status of its much awaited acquisition in two major Siberian oilfields.
On Thursday, the two sides agreed, broadly, on joint exploration and production, liquefied natural gas supplies, a connecting gas pipeline and crude oil import. “Russia is the world's top source for hydrocarbon resources and India one of the world's largest importers. Yet, despite our close friendship, our collaboration in this sector has been disappointing,” Prime Minister Narendra Modi said on Thursday during the visit of Russian President Vladimir Putin.
He said the two sides had made a new start with some important agreements and would set an ambitious agenda for partnership in oil and natural gas. However, sources said the two sides were still working on the terms of engagement for the Vankor and Yurubchenko fields, crucial for OVL to expand its foray in Russia.
The talks had followed wide-scale speculation that OVL, the foreign arm of government-owned Oil and Natural Gas Corporation, would sign an agreement to take up to a 10 per cent equity stake in the already operational Vankor field, which produces about 400,000 barrels of oil a day. This followed Russia’s state-owned explorer, Rosneft’s offer for stake, extended in August this year.
Vankor is spread over 416 sq km and houses initial recoverable reserves of nearly 500 million tonnes of oil and 180 billion cubic metres of gas. “We are in talks for the deal and hope to sign an agreement soon,” said a senior executive from OVL.
The industry also expected clarity on talks over OVL’s plan to take up to 49 per cent equity in the new Yurubchenko-Tokhomskoye project, also in Siberia and with a potential to produce a billion barrels of oil.
India had also been expecting finality on its demand for a slew of tax concessions for OVL’s Imperial Energy project. OVL had in 2009 bagged the hydrocarbon assets of Imperial, a UK-based oil firm, in Russia’s Tomsk region in a $2.1-billion deal. However, output has fallen to less than 10,000 barrels a day from the 80,000-plus bpd expected initially. With taxes eating around 80 per cent of the earnings from Imperial, India was seeking exemption from the Mineral Extraction Tax that takes up around 20 per cent of the earnings from the project, apart from a 40 per cent export tax. An earlier request in 2012 by India for special concessions was rejected by the Russian government, which said these taxes applied uniformly to all companies.
The talk on cooperation on hydrocarbon projects between the two nations comes amid Western sanctions on Russia over its involvement in Ukraine. Russia has been on the lookout for newer markets, including in Asia, for its vast oil and gas resources, amid a squeeze on cash flows for its exploration companies.
