State-owned Oil and Natural Gas Corp (ONGC) should exercise its preemption rights to takeover Cairn India's crown-jewel Rajasthan oilfields, CPI(M) MP Tapan Sen has demanded.
Sen, a member of the Parliamentary Standing Committee on Petroleum and Natural Gas and Committee on Public Undertakings (COPU), on June 3 wrote to Prime Minister Manmohan Singh saying the valuations ONGC used to justify not exercising its preemption rights were "totally opaque."
The Rajasthan fields are currently producing 125,000 barrels of crude oil per day and will reach 240,000 bpd (12 million tonnes a year) output in one years' time.
ONGC, having a 30% interest in the fields, has the first right of refusal or preemption rights which are triggered by Cairn India's parent company Cairn Energy Plc decision to sell majority stake to Vedatna Resources.
"It is really unfortunate that in spite of repeated persuasion, the core issue has not yet been clarified as to why ONGC having 30% participating interest in these fields, has not claimed its first right of acquisition," he wrote.
ONGC did not find exercising the prremptive rights as the acqusition cost offered by Vedanta to Cairn for the proposed transaction is much above the ONGC evaluated value.
He, however, countered this saying ONGC's overseas arm ONGC Videsh Ltd has acquired assets abroad with much lower reserves and the rate of production then the Rajasthan fields. He pointed out to OVL's 2009 acqusition of Russia-focused Imperial Energy Corp for USD 2.12 billion. Imperial was producing 9,067 barrels per day in 2009 and 14,724 bpd till August 2010, he said.
"I had therefore urged upon you repeatedly through my letters that valuation should be done in consultation with CAG, in national interest for rightful assertion of ONGC's right on these fields," Sen wrote to Prime Minister.
He decried the "lack of response and concern" to the issues on the USD 9.6 billion Cairn-Vedanta deal he had raised several times.
"I understand that Prime Minister's Office is not in favour of ONGC's investment in these assets on the plea of resource crunch. I am afraid, ONGC's present reserve and surplus of Rs 1.11 lakh crore and a profit of Rs 18,000 crore as on March 31, 2011 without any debt burden, does not give any scope of such apprehension," he said.
"I therefore urge upon you to please respond to the core issues raised in my letter with the seriousness they deserve and put them in the agenda of the Group of Minister (vetting the Cairn-Vedanta dea) to be taken on record and CAG be consulted before taking any final decision on this deal," he added.