JP Morgan to Investigate Sakhalin

India's ONGC Videsh Ltd (OVL) is expected to hire JP Morgan Chase to examine the reasons behind the 45 percent cost escalation in the $ 1.74 billion Sakhalin-1 oil and natural gas project.

The ExxonMobil led consortium has asked OVL for an additional $800 million for the project. OVL has so far invested $ 921.31 million in the Sakhalin-1 project.

JP Morgan advised OVL in 2000 to invest $1.74 billion in the project, and had projected a 10 percent decrease in capital expenditure. OVL's investment included a one-time payment of $225 million premium, past cost of $94.243 million to Rosneft and a $711.2 million loan to Rosneft. OVL expects to get about two million tonnes of crude oil annually for 15 years, and two million tonnes per annum for the first five years against its loan to Rosneft. It will also get 5-8 million cubic metres of gas per day for 15 years, and another 5-8 million cubic metres per day in the first five years from Rosneft's share.