U.K.’s Cairn Energy has reluctantly acquiesced to the government’s view that prior consent is required for the sale of a majority stake in its Indian subsidiary to Vedanta Resources, but still maintains that partner Oil and Natural Gas Corp’s (ONGC) nod is not required.
In a November 23 letter sent through subsidiary companies holding a participating interest in the three producing blocks — which were previously omitted in the oil explorer’s applications seeking government consent for the Vedanta deal — Cairn said ONGC’s pre-emption rights were not triggered by the $9.6 billion deal.
“We must make expressly clear that we are acceding to the Government of India’s position (that the proposed transaction needs their consent), whilst we fully reserve our position regarding any rights available to our joint venture partner (ONGC),” a Cairn India subsidiary said in one of the letters seeking clearance for the transfer of stake in the Barmer oilfields in Rajasthan.
“Nothing in this letter may be construed as an acceptance of any claim to a requirement for consent or preemption rights of ONGC arising from the proposed transaction,” it said.
ONGC partners Cairn in all three of the UK—based energy company’s producing properties in the country, besides several exploration blocks, by virtue of which it claims to have pre-emption rights over the Vedanta deal.
Cairn had previously applied for permission only with respect to its seven exploration acreages in India, while leaving out the three producing properties.
However, the Oil Ministry told Cairn that it would have to apply for separate approvals for all 10 assets before the government could consider granting consent to the deal.
On November 23, Cairn made three separate applications seeking clearance for transfer of its majority stake in the Barmer oilfields in Rajasthan, the eastern offshore Ravva oil and gas fields and the Cambay fields off the West Coast to Vedanta.
“Even after acceding to the government of India’s position on this matter, our view and that of the senior counsel remains that the requirement for government consent does not trigger any rights of joint venture partners,” the applications stated.
In the covering letter accompanying the three applications, Cairn Energy Chief Executive Bill Gammell said the company and its subsidiaries “are fully committed to working in partnership with the Ministry of Petroleum and Natural Gas in effecting the proposed transaction.”
Cairn Energy, had on August 16, announced the sale of a 40 to 51 per cent stake in its Indian unit to London-listed Vedanta, but was selective in approaching the government for approval of the deal.
