Finally, ONGC gives nod for Cairn-Vedanta deal
The board of Oil and Natural Gas Corp has decided to issue a no-objection certificate for London-based miner Vedanta Resources' deal to buy a majority stake in oil and gas explorer Cairn India, state-run ONGC said today.business Updated: Sep 27, 2011 20:33 IST
The board of Oil and Natural Gas Corp has decided to issue a no-objection certificate for London-based miner Vedanta Resources' deal to buy a majority stake in oil and gas explorer Cairn India, state-run ONGC said on Tuesday.
The approval moves the long delayed stake sale, one of the largest deals in India's energy sector, close to conclusion and gives London listed Vedanta a slice of India's oil reserves and exposure to surging energy demand.
The nod from state run ONGC, which has a 30% holding in the Cairn operated oil and gas fields in western India, comes after India granted conditional approval to the $6 billion deal in June, after a delay of more than 10 months.
The transaction had been held up mainly over the disagreement on royalty payments between the two partners, and had undermined investor sentiment in Asia's third largest economy.
The conditions, which included an undertaking from Cairn India that it will share the burden of royalty payments currently paid by ONGC, were approved by Cairn shareholders earlier this month.
ONGC said in a statement Cairn India had sought its nod for five blocks, including the western Rajasthan block, and had agreed to the conditions related to sharing of royalty burden and also to withdraw an arbitration over cess payment.
Cairn India currently pays 70% of cess liability under protest and had filed an arbitration case.
ONGC said it would issue the no-objection certificate after Cairn, Vedanta, and their affiliates execute a formal agreement with the state-run oil explorer over the conditions.
Vedanta and its units already hold 28.5% in Cairn India, including 10% that it acquired from British explorer Cairn Energy in July this year.
It will now buy another 30% from Cairn Energy, which currently owns 52% of its Indian unit.