India's Oil and Natural Gas Corp (ONGC) will pay into Russia's Sakhalin-1 oil and gas field abandonment fund in roubles, using Indian companies' frozen dividends to retain its 20% stake in the project, three sources familiar with the matter said.

ONGC Videsh Ltd, the overseas investment arm of India's top explorer ONGC, and other state-run Indian companies have not been able to repatriate about $800 million in dividends from stakes in Russian energy assets due to sanctions, the industry sources said. Ahead of Russian President Vladimir Putin's visit to New Delhi, the Indian companies agreed to give ONGC Videsh a loan from those stuck dividends so it can make a contribution to the abandonment fund, the sources added.

"ONGC would not like to respond to market speculations," the company said in response to a Reuters email.

Other Indian companies did not respond to Reuters' requests for comment, nor did Rosneft, whose Sakhalinmorneftegaz-shelf subsidiary now operates Sakhalin-1.

An abandonment fund is used for decommissioning activities to ensure that wells are properly shut in and that the process will not affect the environment.

A raft of Western sanctions, imposed over Russia's invasion of Ukraine in February 2022, has made it difficult for ONGC Videsh to transfer funds to Russia in dollars, and payment in roubles requires approval from the Russian authorities.

ONGC Videsh has been trying to retain its 20% stake in the Sakhalin-1 project since October of that year, when Putin ordered the seizure of the project and allowed the Russian government to decide foreign investors' ownership rights in the project.

Russia has allowed ONGC Videsh to contribute roubles to the fund using the pending dividends of Indian companies, said the sources, who spoke on condition of anonymity as they are not authorised to speak to the media.

In August Putin signed a decree that allowed foreign investors to regain shares in the Sakhalin-1 oil and gas project.

The decree stipulated that foreign shareholders must undertake actions to support the lifting of Western sanctions if they want to regain their share.

They must also conclude contracts for supplies of necessary foreign-made equipment to the project, and transfer funds to Sakhalin-1 project accounts.

Reuters