UK OIL and gas explorer Cairn Energy yesterday cast doubt on the planned sale of most of its Indian business to miner Vedanta Resources for up to $8.5bn (£5.4bn)?, but said it still hoped to seal the deal next year.
Cairn said there was no guarantee it would sell 40 to 51 per cent of its 62.4 per cent stake in Cairn India to London-listed Vedanta due to regulatory uncertainty.
Cairn investors had hoped the deal would close by the end of the year, but the government is still deciding whether to back it in the face of complaints from state-controlled ONGC, Cairn India’s partner in the massive Rajasthan oilfields. ONGC would like the tax rules changed to reduce its tax burden as part of the deal.
Cairn’s deputy chief executive Michael Watts told the Independent and Junior Oil Congress in London that the group still expected the deal to close in the first quarter of 2011, but he added: “You can’t guarantee these things because there are three parties: the government, ourselves and Vedanta.”
Watts said Cairn had not sought out the sale and that the company was happy to keep the 40 to 51 per cent stake in Cairn India that it agreed to sell.
“If it goes through or it doesn’t go through, it doesn’t change the reality that it’s a hell of a good project,” Watts said.
Vedanta, which mines zinc, aluminium, copper and iron in India, hopes to use the Cairn stake to expand in the oil and gas market.
Cairn plans to use the proceeds of the sale to return billions of dollars to shareholders and to fund exploration in Greenland.
Cairn India’s main asset is a 70 per cent stake in the Rajasthan oil development project with an estimated 6.5bn barrels of oil and gas.