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Business News/ Politics / News/  India leverages Sakhalin to cut transport costs of imported gas
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India leverages Sakhalin to cut transport costs of imported gas

India leverages Sakhalin to cut transport costs of imported gas

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Trying to reduce costs even as it seeks to tap gas from Sakhalin-I in Russia, India is exploring the possibility of swapping or selling ONGC Videsh Ltd’s gas blocks there in return for gas that Japan sources from West Asia.

“We are looking at an opportunity with Japan for sourcing our share of gas from Sakhalin-I either through direct purchase by Japan or through a swap deal. Under the swap deal, it is proposed that our share of Sakhalin gas will be supplied to Japan and Japan’s imports of gas from West Asia can be sent to India," said a senior petroleum and natural gas ministry official who did not wish to be identified.

If it happens, India—and Japan—could reduce transportation costs of gas. Japan is closer to the Sakhalin Islands and, in turn, India is closer to where Japan is sourcing West Asian gas from.

Sakhalin-I is an important chapter in India’s quest towards energy security. The Sakhalin-1 project includes three offshore fields: Chayvo, Odoptu, and Arkutun Dagi. Exxon Neftegas Ltd is the operator for the multinational Sakhalin-1 consortium with ExxonMobil Corp. having a 30% interest in the consortium. The other partners include SODECO of Japan, with 30% interest, RN-Astra of Russia with a 8.5% stake, Sakhalinmorneftegas-Shelf of Russia with 11.5% stake and ONGC Videsh with its 20% stake.

In return for its $1.7 billion (Rs7,140 crore) investment in the Sakhalin-I project, ONGC Videsh is expecting two to four million tonnes of crude oil annually and five to eight million cubic metres of gas per day. This is partially expected to meet India’s growing demand for petroleum products from the present levels of 112 million tonnes per annum (mtpa) to 135mtpa by 2012.

Says Arvind Mahajan, executive director at accounting firm KPMG: “Swaps are likely to be the order of the day. It makes great economic sense"

Japan is heavily dependent on the Persian Gulf countries such as the United Arab Emirates, Saudi Arab, Kuwait, Qatar and Iran to meet its energy needs. The island nation is a major energy importer and is the world’s third-largest oil consumer after the United States and China. India is the world’s fifth-largest oil importer. The gas is expected to be transported through a pipeline to Japan and the consortium has concluded that a pipeline would be the most cost-effective method to deliver gas to these export markets. The discussions on marketing of gas is still on with various Asian countries.

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ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Published: 04 May 2007, 12:21 AM IST
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