The Hindu Business Line : Doubts cloud ONGC's plan to bring LNG from Sakhalin-I

ONGC sources feel that the final outcome would depend largely on Exxon Mobil's ongoing negotiation with the natural gas buyers from Japan vis-a-vis the prices offered by Shell.

Kolkata. Sept. 26

, The grand Indian plan to bring ONGC's share of natural gas from the giant Sakhalin-I oilfield in liquefied natural gas (LNG) form is hinging on many ifs and buts. A decision on the same, which is likely to emerge shortly, would depend largely on the bargaining skills of Sakhalin-I operator Exxon Mobil and Sakhalin-II operator Shell.

LNG sourced from Sakhalin is considered to be one of the lifelines for the LNG-based dual fuel petrochemicals complex proposed by ONGC-MRPL combine in Mangalore. The company's efforts to source LNG from Qatar has not borne any fruit as yet.

Sakhalin-I is being commissioned in phases and would be producing up to 250,000 barrels of oil per day, with the start-up of the onshore processing facility in late 2006. The gas production is expected to plateau at 270 million cubic feet (7.65 million cubic meters) per day. Shell has invested in two trains with a total liquefaction capacity of 9.6 million tonne per annum in Russia.

While pinning their hopes on Shell's requirement of natural gas, ONGC sources feel that the final outcome would depend largely on Exxon Mobil's ongoing negotiation with the natural gas buyers from Japan vis-a-vis the prices offered by Shell. To add to the problem, ONGC would have to factor in the freight cost in bringing LNG to India. "The pricing issue would determine which way the consortium would move. In case of a more viable proposition, the consortium would prefer to sell it to Japan in natural gas form," an ONGC official said.

While negotiating with Shell separately, ONGC now hopes that Shell would emerge victorious in this bargaining to help them realise the dream of bringing their own LNG to Mangalore.