London-based Vedanta Resources — which has India-focused mining operations — is all set to make an entry into the lucrative oil and gas sector.
Controlled by Indian billionaire Anil Agarwal, Vedanta Resources is in an advanced stage of negotiations to buy a part of the 62 per cent stake held by UK-based Cairn Energy Plc in its Indian arm Cairn India Ltd.
"The board of Cairn Energy PLC confirms that discussions are taking place with Vedanta Resources Plc in respect of the disposal of an interest in Cairn India Limited," Cairn Energy said in its statement from London.
Vedanta Resources Plc also confirmed that it is in discussions with Cairn Energy Plc regarding an acquisition of an interest in India-listed Cairn India Ltd.
Both Cairn Energy and Vedanta Resources have a market value of about $10 billion (R46,000 crore) and are members of Britain’s blue-chip FTSE 100 index
The companies said discussions are ongoing and there can be no certainty the contemplated acquisition will occur. "A further announcement will be made when appropriate," they said in separate statements.
Sources said that Vedanta may acquire 15 to 20 per cent of Cairn Energy’s stake in Cairn India. Petronas of Malaysia already holds a 14.94 per cent stake in Cairn India.
Sources also said the two companies have also discussed options ranging from buying an equity stake or assets to a complete takeover.
If the deal is successful, Vedanta will be only the second large miner in the world after BHP Billiton to have an interest in oil. Vedanta currently has iron ore, zinc and copper mines besides interests in the power sector. The company is also pursuing acquisition of coal assets
An oil and gas expert, who did not wish to be identified said this will allow Cairn Energy to retain a controlling interest in Cairn India whilst raising more than £1 billion (R7,300 crore) for further exploration opportunities.
"Acquisition of a stake in Cairn Energy Plc will give Vedanta direct access to Cairn’s oil and gas operations in India and abroad."
Cairn Energy has oil and gas assets spread over six continents including Europe and Africa. It is currently drilling in the Baffin Sea between Greenland and Canada and has said that its prospects there could contain 4 billion barrels of oil.