CHENNAI: The remote Sakhalin-1 offshore field in Russia where production of oil and gas began on Saturday was the "zone of penal servitude and exile" in the 19th century. The group of islands, which lies just north of Japan, has a busy airstrip with flights coming in from Anchorage and Houston in the U.S., Tokyo in Japan and Seoul in South Korea. They bring in oil workers from around the globe.

Sakhalin-1 is ONGC Videsh Limited's (OVL) second project abroad to begin hydrocarbon production. The OVL's first project abroad, which started on December 18, 2002, was from its offshore project in Vietnam. On that day, the OVL started delivering gas from the Lan Tay gas field in offshore Vietnam to power utilities inland. Vietnam was OVL's first partner country. Officials of the Oil and Natural Gas Corporation (ONGC) called the production of oil and gas from Sakhalin-1 field "good news" and a "good development" in the context of ONGC's efforts to bridge the gap between the indigenous production of crude oil and the galloping demand. The OVL was set up to augment ONGC's production of hydrocarbons by sourcing equity oil and gas from abroad.

While the ONGC's indigenous production of crude oil is at present around 30 million tonnes, the demand stands at a massive 120 million tonnes. Hydrocarbons India Private Limited, which was set up in March 1965 as an ONGC subsidiary, was renamed OVL on June 15, 1989. The OVL created a wholly owned subsidiary called Sakhalin India Inc. based in Houston, U.S., in April 2002, which would help the ONGC and the OVL to access state-of-the-art technology.

The Sakhalin oil is bonny light and sweet similar to Nigerian crude. It sells for a dollar more a barrel than normal oil. According to Pallab Bhattacharya, deputy general manager (corporate communications), ONGC, the Sakhalin archipelago in the Sea of Okhotsk, which went down in the pages of history as the "zone of penal servitude and exile," now attracts the largest foreign investments in Russia. It is emerging as the largest oil hub in the Pacific Ocean. It has attracted oil workers from around the globe including a big contingent from India.

The islands are a bone of contention between China, Japan and Russia. An ancient Chinese geography tract called "Shan Khai Tsin" (Catalogue of mountains and seas) called the Sakhalin group of islands "Syuan Go Go" (Land of black-legged people), said Mr. Bhattacharya. The Soviet Union annexed the islands on January 2, 1947. The islands gained in importance after huge energy reserves were found there. The ONGC's share of the crude from Sakhalin has to be brought to an all-weather port as the islands become ice-bound during winter. After the crude is brought by tankers to an all-weather port, the ONGC can sell it to nearby countries such as Japan and China, bring it to India, or swap it. According to ONGC Reports, an ONGC publication dated August 2005, the OVL has exhibited a "spectacular performance." It has established a foothold in hydrocarbon acreage in various countries, including the Ivory Coast and Australia.

The OVL's investment commitment overseas, spread over 15 properties in 13 countries, stands at $4.3 billion, of which about 64 per cent has been invested till March 31, 2005. This makes the OVL the biggest Indian multinational corporate, says the publication. The Sudan Pipeline Project (which runs 751 km from the Khartoum refinery to Port Sudan) built at a cost of $194 million, is the first engineering project of the ONGC group abroad.

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