More than six weeks after Cairn Energy applied for government approvals for sale of stake in its Indian unit to Vedanta Resources, the Oil Ministry is yet to begin examining the merits of the transaction.
"Right now we are deciding on the jurisdiction issue. Once the jurisdiction issue is resolved, we will come to the merit of the issue," Oil Secretary S Sundareshan said at the Economic Editors' Conference here.
The ministry maintained that Cairn, which had on August 16 announced sale of 40 to 51 per cent stake in Cairn India to Vedanta for $8.48 billion, has to seek specific approval for transfer of control in each of the 10 properties it has in India.
Cairn had on September 9 applied for specific approvals in seven exploration blocks it had won under the New Exploration Licensing Round (NELP) since 1999 and sought an overarching consent in case of its three pre-NELP producing properties including the giant Rajasthan fields as contracts for them do not have specific prior-approval clause.
Sundareshan said Cairn must seek approval in all blocks and this was the jurisdiction issue that was being sorted out.
He read out the provision of the Production Sharing Contract (PSC) that stated that any company assigning or selling its interest in a block must seek prior government approval.
But when reporters asked if the PSC provision, as read out by him, only governed assignment or sale of interest in a particular block and was unlike Cairn-Vedanta deal where the ownership is changing at corporate level, Sundareshan said: "That is your interpretation. Not ours."
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Cairn maintains the $9.6 billion deal, including the open offer component, is a corporate transaction and Cairn India as a company continues to exit.
"We are completely neutral to the Cairn-Vedanta deal. The government has no particular views on merits of the deal," Sundareshan said, adding that the government will decide on the issue by December end.
Oil Minister Murli Deora, who has maintained stoic silence on the deal ever since it was announced, only said that the "matter is under examination. I can't just now comment on it."
"The (Petroleum) Minister (Murli Deora) has said this before and I will say it again that we will decide (on giving approval) by the year end," Sundareshan said.
Sundareshan said Oil and Natural Gas Corp (ONGC), which holds 30 per cent interest in Cairn India's showpiece Rajasthan oilfields, has written to Cairn Energy saying: "They will require" its permission before sale of stake to Vedanta.
Cairn Energy maintains ONGC's pre-emption or right of first refusal will not be triggered in a corporate deal as such rights come into force only when there is a stake sale in a particular block like say Rajasthan.
"So far no response has been received from Carin," he said.
"The government is absolutely neutral on the (Cairn-Vedanta) deal. We will examine it on the merits of it and come to a decision," Sundareshan said.
UK's Cairn Energy on August 16 announced a sale of up to 51 per cent stake in Cairn India to Vedanta Resources, but made formal applications for government nod only about a month later. Cairn Energy holds 62.38 per cent stake in its Indian unit.
"There is no delay on our part. Cairn applied for government approval only a few weeks back. The application is being examined by Petroleum Ministry and (oil regulator) Directorate General of Hydrocarbons (DGH)," he said.
Companies investing in India had a right to exit and that "right is well recognised," he said.
Sundareshan said the government will ascertain technical and financial capability of the new owner before giving a nod.
Only companies technically capable of carrying out complex oil and gas exploration and production are awarded blocks and Cairn Energy too was judged on this parameter, when in 2002 it bought out Royal Dutch Shell in the Rajasthan block, which is at the centre of its deal with Vedanta.
"We will examine (the Cairn application) absolutely on merit and come to a decision," Sundareshan said.
He said the jurisdiction issue was being examined in consultation with the law ministry.
Cairn India holds stakes in 10 oil and gas blocks in India. Its key asset is the RJ-ON-90/1 oil block in Barmer in Rajasthan, which currently produces 1,25,000 barrels of crude oil per day (bpd) and has potential to go up to 2,40,000 bpd or 12 million tonnes a year.
The company owns has a 70 per cent stake in the block and ONGC holds the rest.
Sundareshan said his ministry has so far not sought any more documents from Cairn and is acting on the applications that were submitted last month.