Reuters today reported a top Indian oil ministry official as saying that ONGC had the backing of the petroleum ministry but needed the approval of the Cabinet Committee on Economic Affairs before going ahead.

Another official said ONGC was likely to acquire 16-17% equity in Yuganskneftegaz, the Yukos unit that was bought for US$9.3 billion by an unknown Russian group, Baikal Finance, which was in turn bought by state-run oil producer Rosneft.

ONGC chairman Subir Raha said he was negotiating "variants" of the deal in which Chinese state firm China National Petroleum Corporation (CNPC) lent Rosneft US$6 billion guaranteed by future crude oil deliveries.

The government official said ONGC wanted the proposed loan to be guaranteed by the Russian government but Moscow would not agree.

Government-owned ONGC and Rosneft are partners in the ExxonMobil-led Sakhalin-1 project in Russia’s Far East.

Meanwhile, confusion reigns about the role Chinese banks are playing in the sale of Yuganskneftegaz.

EnergyReview.Net yesterday reported that China, which wants to cut its reliance on Middle Eastern oil, helped Russia's state-run Rosneft fund a US$9.3 billion purchase of Yukos Oil's biggest unit in exchange for five years’ oil supplies.

Today Bloomberg reports Russia as denying the US$6 billion Chinese loan is linked to the sale of Yuganskneftegaz.

“Rosneft in fact agreed to supply oil to China through 2010 for an advance payment of US$6 billion, and the transaction in fact involves Russian and Chinese financial institutions, including Vnesheconombank," Rosneft said today in an e-mailed statement.

“But this money, which has been received already, isn't linked to the Yuganskneftegaz acquisition."

However, Rosneft has repeatedly declined to say how it funded the Yugansk purchase.