ONGC Videsh seeks legal advice to tackle sanctions on India-funded wells

NEW DELHI: ONGC Videsh Ltd (OVL) has sought legal opinion after the United States imposed sanctions on a Russian oilfield in which a consortium of Indian companies holds a 49.9 per cent stake, sources said.

US President Donald Trump on October 22 announced new sanctions against two of Russia’s largest oil companies, Rosneft and Lukoil, in a bid to pressure Moscow into ending its war with Ukraine.

As part of these, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a number of Russia-based Rosneft and Lukoil subsidiaries in which they, directly or indirectly, held a 50 per cent or more stake.

The list of subsidiaries blocked includes CJSC Vankorneft, in which OVL has a 26 per cent stake, and an Indian consortium comprising Oil India Ltd (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources Ltd, which holds 23.9 per cent. The remaining 50.1 per cent is with Rosneft.

While a plain reading of the OFAC sanctions indicates that the restrictions do not apply to Indian companies, OVL is seeking legal opinions from domestic and international law firms to ensure it does not violate any sanctions, two sources with direct knowledge of the matter said. The OFAC sanctions should not apply to Indian companies, as they do not hold a 50 per cent stake in Vankorneft, designated as a sanctioned entity, they said. Additionally, Indian firms do not receive any equity oil, a share of the oil and gas produced from the field in proportion to their equity stake. Instead, they are entitled to dividends from the joint venture’s earnings from oil and gas sales. Also, Indian companies are not the operators of the fields, they said, adding the oil produced from the field is sold to traders who, in turn, sell it to refineries globally.