ONGC asserts it has right to vet Cairn-Vedanta deal
21 October 2010
OIL & Natural Gas Corp Ltd (ONGC), on Thursday reiterated that UK's Cairn Energy Plc, had to take its approval before selling its controlling stake to Vedanta Resources Plc.
The state-owned energy major, which is Cairn's partner in all its three energy-producing assets and seven exploration acreages in India, sought further details from the UK-based firm on the proposed stake sale. It also wants information on the financial strengths and technical capabilities and experience of London-based Vedanta, owned by NRI businessman Anil Agarwal.
ONGC had legal opinion from the Solicitor General of India backing its claim that as a partner, Cairn had to seek its consent before proceeding with the sale of its majority stake to Vedanta. The government's top law officer referred to the Supreme Court ruling in the Ambani brothers' dispute, where it asserted that oil and gas assets were national resources and transferring the controlling interest needed approval from the government and other partners.
ONGC's letter to Cairn, which was released to the stock exchanges by the state-owned oil major on Thursday, also mentioned that it would have the option of exercising its pre-emption rights or the right of first refusal, across all oil and gas exploration block that Cairn had a presence in India.
The Edinburgh-headquartered energy giant argues that the deal with Vedanta specifically related to a majority share sale in Cairn India, and did not involve sale of an interest in its asset such as the Rajasthan block.
Cairn announced the sale of a controlling stake of up to 51 per cent, in the India unit to Vedanta in August for about $8.5 billion. The UK firm has a 62.38 per cent stake in Cairn India.
Last week, S. Sundareshan, the petroleum secretary, had asserted that the government was ''completely neutral'' to the Cairn-Vedanta deal and would take a decision on it by the end of the year. Sundareshan added that the government recognised the fact that international firms investing in India had the right to exit.
Bill Gammell, CEO, Cairn Energy, had pointed out earlier that delays by the Indian government in clearing the deal with Vedanta would hurt its international image as an investment decision, especially at a time when the country was launching the ninth round of bidding under its New Exploration Licensing Policy.