ONGC finishes paying into abandonment fund, retains 20% Sakhalin-1 stake

MOSCOW. Feb 16 (Interfax) - India's Oil and Natural Gas (ONGC) has successfully completed payments to the Sakhalin-1 project's abandonment fund in order to retain a 20% stake in the Russian project, Rajarshi Gupta, Managing Director of ONGC Videsh Ltd, said on a call with analysts.

"Our interest in the Sakhalin-1 project is secured, and we are in the project, the productions and operations are normal," Gupta said.

ONGC CFO Vivek Tongaonkar said he hoped dividends from the project would be paid soon. "We continue to move ahead, along with the Russian government also, and with the help of the Russian and the Indian government, we are moving ahead. We have been advised that our share of equity has been secured in that company, so, which is a very positive step as far as ONGC OVL are concerned. And we are hopeful that, during this coming year, we should be in a position to have a share of our held up dividends, et cetera."

ONGC says in a published financial report for the third quarter of the fiscal year that it received its stake in the PSA project in December 2025. In keeping with a Russian presidential decree of September 1, 2025, authorizing the transfer of funds intended for the liquidation of the enterprise in rubles, OVL completed the transfer of funds to Sakhalin-1 LLC with accrued interest on December 3, 2025, using borrowed funds from VIPL, a Singapore joint venture, and accumulated dividends, including interest on bank deposits, held in the group's bank accounts in Moscow. Upon receipt of the shares of Sakhalin-1 LLC on December 5, 2025, the book value of the investment, as of December 31, 2025, amounted to Rs 15,814 crore ($1.759 billion) and was reported as "Investment in an associated entity."

OVL has not yet reflected profit from the project in its report, since it has not yet received the financial statements of Sakhalin-1 LLC - the annual statements of Russian companies are expected in March-April.

The Unified State Register of Legal Entities restricts access to information about the founders of Sakhalin-1 LLC, but on December 5, 2025, a third entry appeared in the section "Information about the participants/founders of the legal entity." Only Russian companies received stakes in a new Sakhalin-1 PSA operating company when it was set up. Sakhalinmorneftegaz-Shelf was due 11.5% of the new operator and JSC RN-Astra was due 8.5%. The foreign PSA participants Japan's SODECO (30%) and India's ONGC (20%) were supposed to confirm their consent to take up their pro-rata stakes in the new operator. ExxonMobil (30%) said it had decided to terminate its participation in the PSA and exit Russia entirely.

It was reported earlier that ONGC was having problems formalizing its stake in the new project operator due to sanctions imposed on Russian banks and Russian countersanction measures. Numerous Western sanctions have made it difficult for ONGC Videsh to transfer funds to Russia in dollars, and payment in rubles requires approval from the Russian authorities.

In August 2025, Russian President Vladimir Putin signed a decree that supplements the list of requirements for foreign participants of the project.

In particular, a foreign participant of the consortium must conclude supply contracts for foreign-made equipment necessary for the implementation of the production sharing agreement (psa) and spare parts for it, as well as contracts for technical cooperation.

Another condition is "the foreign party of the consortium taking actions that led to the cancellation of political and economic sanctions imposed by foreign states, which negatively affect the fulfillment of the PSA, including, if necessary, their judicial appeal."

The applicant must also, independently or through other persons, deposit funds into the liquidation account of Sakhalin-1 LLC in an amount equal to the sum of funds previously accumulated by this participant in the PSA abandonment fund.

Sakhalin-1 includes three oil and gas fields: Chaivo, Odoptu and Arkutun-Dagi off the northeast coast of Sakhalin Island. Their combined reserves are estimated at 307 million tonnes of oil and 485 billion cubic meters of natural gas. Production at Sakhalin-1 peaked at 12.96 million tonnes per year in 2019, after which it started to decline, dropping to 12.44 million tonnes in 2020 and 11.3 million tonnes in 2021. Exact production figures at the project for 2022-2024 have not been published.