Govt seeks details of Cairn-Vedanta deal

The government has asked Cairn Energy Plc to submit details of its deal to sell its majority stake in the company that operates the giant Rajasthan oilfields.

Written by Agencies | New Delhi | Published:August 20, 2010 5:56 pm

The government has asked Cairn Energy Plc to submit details of its deal to sell its majority stake in the company that operates the giant Rajasthan oilfields,to London-listed Vedanta Resources,Oil Minister Murli Deora said.

Petroleum Ministry has written a two-paragraph letter to Cairn Energy Plc seeking details of its deal to sell up to 51 per cent stake in its Indian arm,Cairn India,for USD 8.48 billion.

“We have told Cairn to write to us. Then we will decide,” he said.

Cairn India holds 70 per cent operator interest in the 6.5 billion barrels Rajasthan block that is at the centre of its parent,Cairn Energy Plc’s USD 8.48 billion deal to sell its majority stake in the company to Vedanta Resources.

So far,Cairn Energy and Vedanta Resources have only submitted the press statements they issued on August 17,announcing the deal,to the government.

The ministry letter states that certain production sharing contracts (PSC) entered into by Cairn India for exploring for oil and gas,have parent company guarantees and some PSCs have explicit provision of prior government consent in case there is change of ownership of the company,sources said.

The PSC for the Rajasthan block provides for explicit government approval only in case of a party selling its interest in the block,but does not make the nod mandatory in case of change of ownership at corporate level like in the Cairn-Vedanta deal.

Similar is the case with Cairn’s Cambay basin block and eastern offshore Ravva oil and gas fields. But the seven exploration blocks it won in New Exploration Licensing Policy (NELP) rounds have provision for seeking prior government approval before ownership of a participating company is changed.

State-owned Oil and Natural Gas Corp (ONGC),which has 30 per cent interest in the Rajasthan block,believes it has the pre-emption or right of first refusal to buy Cairn India in case the company’s ownership changed.

But,the Joint Operating Agreement,between Cairn India and ONGC,gives partners pre-emption rights in case of sale of interest by either parties in the block but not in case of corporate ownership change,they added.

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