Cairn claims red tape may hold up deal

 
City A.M. Reporter
TOP executives from Cairn Energy met Indian government officials yesterday to seek approval of its plans to sell a controlling stake in Cairn India to Vedanta for up to $9.6bn (£6.1bn).

Cairn Energy chief executive Bill Gammell flew to New Delhi to meet oil minister Murli Deora and other officials to discuss implications of the deal involving the British company’s India unit.

The deal needs Indian government approval because Cairn India has production-sharing contracts with the government for oil and gas exploration blocks. According to the agreement, any ownership change will need federal approval.

Approval from state-run explorer ONGC, which has a 30 per cent stake in Cairn India’s Rajasthan oil block called RJ-ON-90/1, is also crucial for any change of ownership.

Gammell said: “We will work with the government. The process will continue over a period of time. I am sure there will be bumps along the road in terms of different interpretations. So, we are working constructively with the government.” He added. “I think working with the government as we always do will find a win-win situation. We will obviously respect all rights and approvals.”

ONGC has not yet raised concerns on the deal, Indian oil secretary Sundareshan said yesterday.

“We will certainly take into account views of ONGC before a decision is taken. ONGC has not raised any concerns with us yet for the reason that there is no official proposal before us.”

ONGC chairman R.S. Sharma said the company was examining the implications of Vedanta’s stake purchase and would respond appropriately later. He declined to comment on market talk ONGC might make a counter-bid for Cairn India’s stake.

Vedanta Resources announced Monday it would buy a controlling stake in Cairn India for up to $9.6bn, adding to its assets that already include aluminium, copper, iron ore and zinc mines.