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INVESTIGATION: ONGC VIDESH'S
SAKHALIN PROJECT
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QUESTIONABLE
POINTS IN THE ONGC VIDESH'S RUSSIAN VENTURE
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# The biggest overseas
investment of Rs 8,136 crore by an Indian company was finalised
within six months of its being proposed.
# The Empowered Committee of Secretaries
(ECS) which forwarded the proposal to the CCEA had surprisingly
no Finance Ministry representative.
# Rules were bent to allow ONGC to fund
the project. Its Rs 7,500-crore modernisation plan for Bombay High
may suffer because of this huge investment.
# Significantly, US oil giant Texaco had
refused to buy a stake in the Sakhalin project in 1999.
# The Rs 3,342-crore loan given by OVL
exposes it to a 40 per cent project risk for a 20 per cent return.
# Premium on the equity was inexplicably
hiked from Rs 211 crore to Rs 1,057 crore.
# Experts say projections of the output
from the Sakhalin-I are too optimistic.
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SIX SUSPICIOUS MONTHS
JUNE 1, 2000: JP Morgan makes presentation to
ONGC Videsh Ltd (OVL) for a 20 per cent stake in Sakhalin-I oilfield.
JUNE 9: OVL decides to offer Rs 211 cr as premium,
Rs 376 cr as past costs, Rs 3,290 cr as cash on call and Rs 3,342 as loan.
This is the biggest investment by an Indian company abroad.
SEPTEMBER 9: Empowered Committee of Secretaries
(ECS) clears proposal though no Finance Ministry (MoF) representative
is present.
SEPTEMBER 25: OVL submits another bid that inexplicably
hikes the premium to Rs 470 cr and past costs to Rs 446 cr.
SEPTEMBER 26: A Petroleum Ministry note to OVL
clarifies that the bid will not get any budgetary support from Government
or from ONGC.
 OCTOBER
16: ONGC CMD wanted Principal Secretary to PM Brajesh Mishra to intervene
to scale down Russian demand. Mishra denies any involvement in the
negotiations.
NOVEMBER 7: Rosneft wants premium raised. Advised
by JP Morgan, OVL agrees to a questionable hike in premium to Rs 1,057
cr.
DECEMBER 29: ECS meets and approves the deal.
Significantly, the MoF representative is again not present. Petroleum
Ministry seeks MoF views.
JANUARY 5, 2001: MoF raises questions about
project viability especially the huge hike in premium and wants to
know if ECS has gone into the workings.
JANUARY 6: The Petroleum Ministry slams the
MoF's objections stating that its representatives kept away from two crucial
ECS meetings. Shockingly, the biggest overseas investment in India's
history is finalised without 'the benefit of the views of the MoF'. Petroleum
Minister Ram Naik defends the deal.
 JANUARY
6: In a major departure ECS and Petroleum Ministry advise the Cabinet
Committee on Economic Affairs (CCEA) to modify a critical clause that
prevents ONGC from funding any overseas venture of OVL. CCEA agrees
to modify the rule.
FEBRUARY 10: OVL signs deal with Rosneft. The
question remains, did India have to invest such a huge sum in a risky
venture that will ensure only 1 per cent of its oil needs?
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