OVL, partners to pay $230 million in out of court settlement with Rosneft

New Delhi: ONGC Videsh Ltd and its partners in Russia’s Sakhalin-1 project have agreed to pay Russian giant Rosneft $230 million to settle an oil production dispute out-of-court, its Managing Director N K Verma said.

OVL, partners to pay $230 million in out of court settlement with Rosneft

Rosneft had dragged the Sakhalin-1 consortium to court alleging “unjust enrichment and interest gained by using other people’s money” and claimed $1.4 billion in damages. The allegations were denied by the consortium.

“We have agreed for an out-of-court settlement and the consortium has agreed to pay $230 million,” Verma told reporters here.

OVL holds 20% interest in Sakhalin-1 oil and gas fields and its share would be $46 million.

“We have already paid the money,” he said.

ExxonMobil is the operator of the project with 30% interest. Japan’s SODECO has 30% interest and Rosneft the remaining 20%.

Rosneft had demanded Rouble 89 billion from the consortium for oil that flowed to Sakhalin-1 from its controlled Northern Chayvo oilfield.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had bought 20% stake in 2001 for $1.7 billion. The project started production in 2005.

Since that time, the consortium faithfully executed its obligations under the Production Sharing Agreement (PSA) and the Russian government in 2017 extended the pact by a further 30 years, until 2051, Verma said.

In December 2011, Rosneft Oil Company was granted a Licence for the North Chayvo License area. Effective August 2013, the Sakhalin-1 consortium and Rosneft entered into a Drilling Services Agreement, under which the consortium provided certain drilling services for the North Chayvo license to Rosneft Oil Company.

In September 2014, the Sakhalin-1 consortium and Rosneft Oil Company entered into a Production Handling Agreement, under which the Consortium provided certain production services for the North Chayvo license.

In June 2018, the consortium received the “Statement of Claim” dated 31 May 2018, containing Rosneft’s allegation of “unjust enrichment” and demand of Rouble 89 billion from the consortium. Rosneft claimed compensation included alleged damages for the period 2005-2011 during which Rosneft did not hold the North Chayvo license.

Verma said production at Sakhalin-1 reached 250,000 barrels per day, up from some 200,000 bpd, after Russia lifted output restrictions as part of a global deal with OPEC.

source: livemint


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