Oil firms explore using stranded $600 mn to buy Russian oil

Indian Oil Corporation (IOC), a unit of Bharat Petroleum Corporation Ltd, Oil India Ltd and ONGC Videsh Ltd — haven’t been able to repatriate dividend income they accrue from their investments in Russian oil and gas fields. That money is lying in their bank accounts in Russia but could not be brought to India due to tough Western sanctions that followed Moscow’s invasion of Ukraine.

This is at a time when Russia has emerged as the top crude oil supplier to India, accounting for more than a third of all purchases New Delhi makes from overseas.

Officials said one of the options could be to loan the money lying in Russian bank accounts to entities buying oil. These entities could repay the loan in India. The entities that buy oil from Russia include IOC and BPCL.

Soon after Russia’s invasion of Ukraine in February last year, several major Russian banks were banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial transaction processing system, constricting Moscow’s ability to access the global payments system.

Also, the Russian government has put restrictions on the repatriation of dollars from that country to check volatility in foreign exchange rates.This led to a situation of dividend money getting stranded in Russia.

ONGC Videsh Ltd (OVL), the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), holds a 26 per cent stake in Suzunskoye, Tagulskoye and Lodochnoye fields — collectively known as the Vankor cluster in the north-eastern part of the West Siberia.

Indian Oil Corp (IOC), Oil India Ltd (OIL) and Bharat PetroResources Ltd (a unit of Bharat Petroleum Corp Ltd or BPCL) hold another 23.9 per cent in the same project. Russia’s Rosneft is the operator with 50.1 per cent interest.

The consortium of OIL, IOC and Bharat PetroResources has a 29.9 per cent stake in TAAS-Yuryakh Neftegazodobycha.

Separately, OIL chairman and managing director Ranjit Rath said about USD 150 million of dividend income of OIL is lying in bank accounts in Russia. The total for its consortium (IOC and BPRL included) is about USD 450 million, he said.

OVL has another USD 130 million of dividend income.

Other officials said the options being explored includes using the stranded money to buy oil.

The dividend is lying with the Commercial Indo Bank LLC (CIBL), which was a joint venture of the State Bank of India and Canara Bank. Canara Bank in March sold its 40 per cent stake in CIBL to SBI.

The dividend from TAAS was paid on a quarterly basis, while Vankorneft’s earnings were paid half-yearly.

All dividend income prior to the Ukraine war was repatriated but the one that accrued after that is stuck.

The operations of the fields have not been impacted and they continue to produce as normal, he added.

OVL also has a 20 per cent stake in the Sakhalin-1 oil and gas field in Far East Russia, and in 2009 acquired Imperial Energy, which has fields in Siberia, for USD 2.1 billion.

Tags: BPCL, IOC, Oil firms, Oil India, ONGC Videsh, Russian Oil