Cairn India today said the government’s stand to put conditions to the Cairn-Vedanta deal, including Oil and Natural Gas Corp’s (ONGC) royalty issue, will negatively impact the valuation and was not acceptable.
“The Cairn India board of directors has said any condition tied to the approval of the transaction which can negatively impact the value of the company cannot be accepted,” the company said in a statement today.
After a meeting with Cairn Energy Chief Executive Bill Gammell on Tuesday, Petroleum Minister Jaipal Reddy had told reporters the “government would support the deal in-principle, but some of the concerns of ONGC need to be addressed before clearing the deal”.
ONGC insists that issues related to royalty and cess payment from Cairn’s Rajasthan block is ‘cost recoverable’ and must be sorted before the deal was cleared.
Last month, an ONGC board resolution had urged the ministry not to clear the Vedanta deal till Cairn resolved the royalty issue. ONGC will end up paying Rs 14,000 crore as royalty for the life of the Rajasthan block.
According to licence conditions for the Rajasthan block, ONGC has the right to take 30 per cent in any discovery free of cost but the state-run firm has to pay not only its share of royalty but also the 70 per cent share of the operator. Royalty of 20 per cent has to be paid to the Rajasthan government on the price the crude may fetch.
Cairn India profit rises seven fold
Riding on increased oil production from its Rajasthan fields, Cairn India today reported nearly a seven-fold rise in consolidated net profit to Rs 2,010 crore for the quarter ended December 2010. The company had reported a consolidated net profit of Rs 291 crore in the same period last year. Income from operations also jumped to Rs 3,096 crore from Rs 495 crore a year ago.
Cairn began crude oil production from its Barmer oilfields in Rajasthan in August 2009. It is currently producing at an approved plateau of 125,000 barrels per day of crude oil from the Mangala oilfield, the largest among 24 oil and gas finds it has made in the Barmer district in Rajasthan. This was the first full quarter of plateau production from Barmer.
A further increase hinges upon regulatory approvals. “Mangala production has consistently delivered at the currently approved plateau rate of 125,000 barrels per day. A further production increase to 150,000 bpd remains subject to joint venture and Government of India approval,” said Rahul Dhir, managing director and chief executive officer.
