Cairn deal: more riders for Vedanta
The group of ministers, while recommending a conditional approval for the $9.6-billion deal between Cairn Energy Plc and Vedanta Resources, has drastically limited the powers of the mining firm in crucial decisions after it completes the acquisition of Cairn India. Anupama Airy reports. Curtailing powersbusiness Updated: Jun 06, 2011 00:56 IST
The group of ministers (GoM), while recommending a conditional approval for the $9.6-billion deal between the UK-based Cairn Energy Plc and non-resident Indian Anil Agarwal-promoted Vedanta Resources, has drastically limited the powers of the mining firm in crucial decisions after it completes the acquisition of Cairn India.
The GoM’s decision, to be ratified by the Cabinet Committee on Economic Affairs (CCEA) this week, clearly says that London-based Vedanta (the new promoter of Cairn India Ltd) will “guarantee that technical capability of Cairn India is kept undisturbed failing which the government of India is entitled to change the operatorship.” Hindustan Times is in possession of the minutes of the GoM meeting of May 27, during which this was agreed upon.
At present, Cairn India is the operator of the prolific oil producing field in Rajasthan and any changes by Vedanta could lead to change of guards to the other promoter — ONGC, which holds a 30% stake in the oil block (RJ-ON-90/1).
The GoM has also decided that Vedanta will provide “the parent financial and performance guarantee besides ensuring adherence to approved field development plans” in respect of the 10 oil and gas blocks being transferred to it under the deal.
In addition, Vedanta will have to take a no objection certificate from ONGC and the director general of hydrocarbons (DGH).
Another condition specified by the group of ministers states that the clearance to the Cairn-Vedanta deal is subject to “necessary security clearance by the ministry of home affairs to Vedanta Resources to acquire the shareholding.On the issue of payment of royalty on the crude oil produced from Rajasthan oil fields, the group of ministers has decided to make royalty cost recoverable.
Presently, ONGC — the 30% shareholders and also the licensee of the block —picks up the entire royalty tab.