Cairn Energy finally seeks government nod for stake sale
26 November 2010
British energy major Cairn has finally sought the Indian government's approval for the sale of a majority stake in its India unit to UK-based NRI businessman Anil Agarwal's Vedanta group.
Cairn Energy wants to sell a controlling stake in its India operations to Vedanta for about $9 billion. The deal got stuck with Cairn maintaining that it did not need the government's approval for the sale of a controlling stake relating to three, pre-NELP (New Exploration Licensing Policy) blocks.
State-owned energy giant ONGC Ltd, which has a 30-per cent stake in Cairn India, claimed the right of first refusal if the Edinburgh-headquartered Cairn wanted to sell the stake.
The British company informed the government that the new owner would retain the management team, process and structure of the India unit, which operates three oil and gas blocks, producing about 160,000 barrels of oil equivalent per day.
The production fields are located in Barmer in Rajasthan, Cambay in Gujarat and Ravva in Rajasthan. Cairn also has seven other blocks acquired under the various rounds of the NELP; the company has already sought the government's permission to sell these blocks as well.
Petroleum secretary S Sundareshan said the government would take about three months to decide on Cairn's application for transfer of equity.
ONGC has argued that Vedanta, which is a metals major, has no experience in energy and should not be given preference over it. Vedanta has already arranged for $6.5 billion in funding for the Cairn acquisition, which could cost it more than $9 billion.
The Cairn India stock, which is listed on the Bombay Stock Exchange, has been under-performing. It closed at Rs.313.25 on Thursday.