Cairn-Vedanta deal inconclusive
The stalemate over equitable sharing of royalty on the oil produced from Rajasthan oil fields - an issue that has blocked the $9.6-billion (R43,500- crore) takeover of Cairn India by billionaire Anil Agarwal-promoted Vedanta Resources - continued unabated. Anupama Airy reports.business Updated: Feb 07, 2011 01:39 IST
The stalemate over equitable sharing of royalty on the oil produced from Rajasthan oil fields - an issue that has blocked the $9.6-billion (R43,500- crore) takeover of Cairn India by billionaire Anil Agarwal-promoted Vedanta Resources - continued unabated. No decision was arrived after the crucial meeting called by the petroleum ministry with senior management of Vedanta Resources, Cairn Energy Plc and Cairn India on Sunday evening.
Informed sources told Hindustan Times that petroleum ministry has sought time till end-February to give its final verdict on the deal. The ministry also made it clear that the law ministry's opinion, expected by this weekend, will be "binding" on all stakeholders.The negotiations coincide with the government's global road shows to sell new oil and gas exploration blocks in India to international investors, slated for mid-February in Houston in the US and Calgary in Canada. "The ongoing negotiations are significant as any decision impacting the Cairn-Vedanta transaction will impact the investors confidence to invest in India's energy sector", the source said.
The issue - of royalty, to be paid to the government - is blocking the completion of the biggest merger and acquisition deal in Indian oil sector. State-owned ONGC, which has a 30% stake in Cairn India-operated Rajasthan oil field, is demanding equitable royalty sharing between all partners. Presently, ONGC pays royalty on the entire oil output from the Rajasthan oil field.
The only positive aspect of this meeting, sources said, was the beginning of "a formal dialogue" between the government, Cairn Plc, Cairn India and Vedanta, even as ONGC was conspicuous by its absence. The negotiations will continue on Monday.
This is the first time the petroleum ministry met Edinburgh-based Cairn Energy Plc Chief Executive Bill Gammell, Cairn India CEO Rahul Dhir and Vedanta representatives MS Mehta (Group CEO) and Tarun Jain (CFO) together.
Speaking to reporters after the meeting, petroleum secretary S Sundareshan said he was hopeful of finding a "positive solution".
Separately, Cairn India also termed Sunday's meeting as "constructive", adding that it hoped to seal the deal by April 15.