Atul Chandra deserves praise, not criticism

Vol 5, PW 20 (21 Nov 01) Exploration & Production

No longer must ONGC Videsh managing director Atul Chandra justify his massive $1.7bn investment in Russia's Sakhalin-I oilfield - the largest ever outside investment by an Indian company! On 29th October and two months ahead of schedule the Exxon-led Sakhalin-I consortium declared commerciality and released startling figures illustrating that far from being cheated - as some politicians and media are suggesting - OVL acquired its stake at a bargain price!! "The first phase of exploration has been completed and found successful," reveals a source.

"Development activities have started in full." Upgraded project financials from a commerciality document handed over to Russian president Vladimir Putin show massive upside on earlier (outdated) figures presented last year to India's Cabinet Committee on Economic Affairs when OVL first sought permission to invest. These figures should be enough to neutralise any criticism from opposition MPs in parliament.

See below: Assumptions in note to CCEA Current figures in commerciality document Recoverable oil reserves 1.7bn barrels 2.3bn barrels Recoverable gas reserves 12 trillion cubic feet 17 trillion cubic feet Plateau oil production 196,000 b/d 250,000 b/d Plateau gas production 1bn cf/d 1bn cf/d Rate of return 14% >15% NPV@10-12% $2.0bn $4.5bn OVL is naturally jubilant at these revised figures. "The NPV for us is now $900m against the earlier $350m," PETROWATCH was told.

"We can borrow internationally at annual interest rate of 4.0%. This means we are providing between 5% and 6% for any risk."