With the government flexing its muscles, UK-based Cairn Energy has now sought approval of the Union ministry of petroleum and natural gas for selling stake in Cairn India to Anil Agarwal-controlled Vedanta Resources for seven non-producing exploratory blocks awarded under the new exploration licensing policy (NELP).
For the three producing blocks, including its mainstay Barmer block in Rajasthan, it has only sent “responses” instead of seeking any approval.
Cairn has also dismissed its partner, government-controlled Oil and Natural Gas Corporation (ONGC)’s claims of “pre-emptive” rights under production sharing contracts (PSCs) and joint operating agreements for the producing fields in Barmer, Ravva and Cambay.
In its letter to petroleum secretary S Sundareshan, Cairn Energy chief executive Bill Gamell said “the proposed transaction (with Vedanta) is a sale of shares in Cairn India Ltd and there will be no change in the parties holding the Participating Interests” under the PSCs. “We reiterate that the Cairn India management team and organisation will continue to focus on maximising the potential of its asset portfolio in India,” said the letter.
‘Your okay needed only in part’
While Cairn sought formal applications seeking permission under the relevant provisions of the PSCs for blocks where it was required, it provided only “responses” from relevant subsidiaries which hold participating interests (in blocks) where, it believes, consent was not required under the terms of the relevant PSCs.
The average crude oil production from Cairn India’s Barmer block is 120,000 barrels a day. Cairn is also the operator of the Ravva oil and gas field and Cambay Basin (CB/OS-2) which produces 37,043 and 13,527 barrels of oil equivalent per day. ONGC is a partner with Cairn India in all its three producing blocks.
More From This Section
Cairn’s latest communication to the ministry comes after the government had asked it to apply for permission under the PSCs it had signed with the government. The latest letter, sent on September 9, comes within days of the government referring the issue to the Securities and Exchange Board of India, the equity markets regulator, and cancelling the production sharing contract in a similar case involving Canda-based Canoro Resources. Cairn Energy had earlier, on August 26, only “informed” the government about the deal that would see Vedanta spending up to $9.6 billion in acquiring 51-60 per cent in Cairn India.
In a letter to Cairn Energy on August 30, ONGC had affirmed its pre-emptive rights in relation to Cairn’s participating interest under the various agreements with the government and ONGC. When asked, ONGC chief R S Sharma declined to comment.
Brush-off for ONGC
“The transaction is a sale of shares in Cairn India Ltd, rather than an assignment of any Participating Interest under the various PSCs and Joint Operating Agreements (JOAs). We believe that the various pre-emption rights under each of the JOAs only apply when there is an assignment, by a party to that PSC, of part or all of that party’s Participating Interest,” Simon Thomson, legal and commercial director, Cairn Energy, said in a letter to ONGC.
Simon added that there is no change to the Participating Interest in any of the PSCs to which the Cairn India Group is party.