Petrol Stop - Oil PSUs not to make counter-bid for Cairn India

Oil PSUs not to make counter-bid for Cairn India

Thursday, 26 August 2010

26 August 2010;dailypioneer.com:New Delhi: Contrary to reports, oil PSUs will not make a counter bid to Vedanta Resources’ $9.6 billion offer to buy Cairn India, with Oil Ministry now disinclined to a rival bid. “There is no counter bid,” a top oil ministry official said. “The price at which Vedanta is acquiring Cairn India already is too high.” The change in stance possibly came about after Vedanta Resources Chairman Anil Agarwal spoke to Oil Minister Murli Deora at least on a couple of occasions this week. There were also reports that Agarwal met Congress President Sonia Gandhi on Tuesday on issues relating to his India projects, but no confirmation could be obtained. Also, the Prime Minister’s Office is believed to have discussed the issue, sources said, adding that Cairn Energy is likely to respond to the ministry’s queries by Friday. The ministry, which till early this week was nudging state-owned Oil and Natural Gas Corp (ONGC) to cobble up an alliance with Oil India and gas utility GAIL for a rival bid, says that it is only awaiting clarifications from UK’s Cairn Energy Plc on it selling majority stake in Cairn India. This is what ONGC has been contending from August 16 when the deal was announced, but the ministry was pushing it to examine a counter bid. “We are awaiting response to certain clarifications sought from Cairn Energy and will decide (on giving approval to the deal) after that,” the official said. Meanwhile, the board of ONGC, which is a 30 per cent partner of Cairn India in the prolific Rajasthan oilfields that are at the centre of its parent Cairn Energy’s deal with Vedanta, is likely to be briefed about the possible scenarios. “The matter is being taken to the board as a non-agenda and a status (report) would be presented,” a source said. Cairn Energy chief executive Bill Gammell had on Tuesday stated that his firm would seek “Government of India’s endorsement and any necessary consent” for the Vedanta deal. Cairn Energy is selling up to 51 per cent out of its 62.37 per cent stake in Cairn India to Vedanta, the mining company controlled by NRI billionaire Anil Agarwal. The firm had last week written to the Oil Ministry detailing the Vedanta deal. The Ministry was not satisfied with the details and wrote to Cairn Energy seeking explanation on provisions of the production sharing contract (PSC) in case of stake transfer. The letter states that certain PSCs 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 of change of ownership. Sources said the ministry feels government approval is pre-requisite for conclusion of Cairn-Vedanta deal. On the other hand, Cairn Energy fells the Vedanta deal is a corporate transfer and not sale of stake in an oil field that would have triggered need for regulatory approvals. Had Cairn Energy sold its shareholding in the stock market, Government could not have done anything, they said, adding that Cairn India as a company continues to exist and only its shareholding is changing. Cairn India holds 70 per cent operator interest in the 6.5 billion barrels Rajasthan block. 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. 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.