ONGC approval mandatory for Cairn
Aug-31-2010
State-owned Oil and Natural Gas Corporation (ONGC) has claimed that Cairn Energy cannot sell a majority stake in its Indian arm to Vedanta Resources without its consent.
ONGC’s claim is based on pre-emptive rights in Rajasthan oil fields where it is an equity partner with Cairn India.
“Based on this documentary examination, it is noted that ONGC has, inter-alia, pre-emptive rights in relation to Cairn’s participating interest under the various agreements with the Indian government and ONGC and that Cairn Energy Plc and/or its affiliates require consent of ONGC besides other government approvals to consummate the proposed transaction,” ONGC company secretary N.K. Sinha wrote to Cairn Energy CEO Bill Gammell.
ONGC has requested “full details along with the copies of the agreements and other arrangements entered into between Cairn Energy and/or its affiliates and the proposed buyer”. The UK-based explorer announced its plan to sell up to a 60 per cent equity stake in Cairn India to Vedanta for $8.5-9.6 billion and has initiated the process of getting approvals from Indian authorities and ONGC.
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 the case of change in corporate ownership, which is what is happening in the Cairn-Vedanta deal.
If Cairn Energy had offloaded its stake in the stock market, like it did while selling as much as 14 per cent in Cairn India to Petronas of Malaysia, ONGC could not have done much, industry observers said. Cairn Energy has informed the petroleum ministry that it will comply with all contractual obligations under the production sharing contract (PSC).
The proposed sale of majority stake “will not adversely affect the performance or obligations under the various PSCs (signed by Cairn India) nor be contrary to the interests of India,” Gammell wrote to oil secretary S. Sundareshan. Vedanta has promised continuity in operations at Cairn India, which will remain independent.
“We can confirm that there are no planned changes in the Cairn India organisation, standards and policies and that the deal will have no effect upon Cairn India’s knowledge and experience as a contractor, operating to accepted international petroleum industry practice,” Gammell wrote.
ONGC’s claim is based on pre-emptive rights in Rajasthan oil fields where it is an equity partner with Cairn India.
“Based on this documentary examination, it is noted that ONGC has, inter-alia, pre-emptive rights in relation to Cairn’s participating interest under the various agreements with the Indian government and ONGC and that Cairn Energy Plc and/or its affiliates require consent of ONGC besides other government approvals to consummate the proposed transaction,” ONGC company secretary N.K. Sinha wrote to Cairn Energy CEO Bill Gammell.
ONGC has requested “full details along with the copies of the agreements and other arrangements entered into between Cairn Energy and/or its affiliates and the proposed buyer”. The UK-based explorer announced its plan to sell up to a 60 per cent equity stake in Cairn India to Vedanta for $8.5-9.6 billion and has initiated the process of getting approvals from Indian authorities and ONGC.
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 the case of change in corporate ownership, which is what is happening in the Cairn-Vedanta deal.
If Cairn Energy had offloaded its stake in the stock market, like it did while selling as much as 14 per cent in Cairn India to Petronas of Malaysia, ONGC could not have done much, industry observers said. Cairn Energy has informed the petroleum ministry that it will comply with all contractual obligations under the production sharing contract (PSC).
The proposed sale of majority stake “will not adversely affect the performance or obligations under the various PSCs (signed by Cairn India) nor be contrary to the interests of India,” Gammell wrote to oil secretary S. Sundareshan. Vedanta has promised continuity in operations at Cairn India, which will remain independent.
“We can confirm that there are no planned changes in the Cairn India organisation, standards and policies and that the deal will have no effect upon Cairn India’s knowledge and experience as a contractor, operating to accepted international petroleum industry practice,” Gammell wrote.
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