ovl: OVL putting alternative channel in place after traders shun its Russian offering


NEW DELHI: ONGC Videsh Ltd (OVL) is lining up alternative channels to sell its share of oil from Sakhalin-I project in Russia’s Far East after traders developed cold feet — after initially warming up — over its first offering since Moscow sent troops into Ukraine.
OVL’s offering of a 700,000-barrels cargo of Sokol crude did not get any bid, with traders expressing ‘regret’ at the last moment, Reuters reported on Friday.
People aware of the development described it as a “hiccup” said measures to work around the problem are expected to be in place “within a few days”. They, however, admitted OVL, which in 2001 acquired 20% stake in the project, will have to take a hit on the shipment in the “current environment” arising from the US sanctions.
“Oil is not under sanctions. The only US has stopped Russian oil imports. But banks are wary of handling transactions involving Russian commodities. Traders nervous about the US penalising them on some flimsy ground,” one trading house executive told TOI, requesting anonymity.
OVL has smaller ‘Ice Class’ vessels of 110,000 deadweight tonnage Aframax tankers for delivering Sakhalin crude from De-Kastri terminal at Khabarovsk to Asian buyers such as South Korea, Japan and China.
“The crude can be transferred to larger vessels at South Korea’s Yeuso port for other destinations. Not all Russian banks are under sanctions. India has banks without western exposure. They can handle the payments,” the executive said.
One option could be OVL approaching the oil ministry for a directive to Indian refiners, including its refining sibling MRPL — both subsidiaries of explorer ONGC — to buy Sakhalin crude.
Sokol and Urals, the other Russian benchmark crude, have seen discounts deepening up to $14 per barrel against Brent or Dubai markers as trader wariness over being implicated, irrespective of the port of load, by the US spreads to eastern ports.
Sokol is a light sweet crude similar to US West Texas Intermediate oil, while Urals is a mix of mix of heavy sour oil of Urals and the Volga regions with light oil of Western Siberia. Sokol is shipped from Khabarovsk and Urals is transported through the Baku-Novorossiysk and Druzhba pipeline system.


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