Cairn boss to brief govt on stake sale, as ONGC cries foul
Bill Gamell, chief executive of Edinburgh-based Cairn Energy Plc will have to do a tough convincing act when he visits India on Tuesday to meet Petroleum Minister Murli Deora and Petroleum Secretary S. Sundareshan to give details of Cairn India's deal with Vedanta. HT reports.business Updated: Aug 17, 2010 01:38 IST
Bill Gamell, chief executive of Edinburgh-based Cairn Energy Plc will have to do a tough convincing act when he visits India on Tuesday to meet Petroleum Minister Murli Deora and Petroleum Secretary S. Sundareshan to give details of Cairn India's deal with Vedanta.
Both the government (petroleum ministry) and ONGC, Cairn's partner in the Barmer oilfield in Rajasthan are unhappy about the deal. Most senior management executives of ONGC that HT spoke to, requesting anonymity, expressed their unhappiness over the deal.
ONGC, which has a stake in nearly all of Cairn Energy's Indian operations, should have been given the right of first refusal if Cairn had decided to sell its stake to Vedanta, sources said. The company may seek legal opinion about the options available, they added.
"We always knew that Cairn Energy is not here to stay," said an ONGC executive. "But selling its majority stake to Vedanta Resources, which has no expertise at all in the oil and gas operations, makes it clear that Cairn was only keen to make the most of its investments in India."
Speaking to reporters from London, Bill Gammell said, "It's the right time to realise some of the value we have created." However, he maintained that Cairn Energy was not exiting India. "This isn't an exit from India for Cairn Energy Plc."
When contacted, R.S. Sharma, chairman and managing director, ONGC, refused any official comment. "We are watching the developments closely but owing to the sensitivity, I cannot comment at this stage," he told HT.
The deal needed government approvals and was likely to face legal hurdles, petroleum ministry sources said.
Petroleum Secretary S. Sundareshan had said on Friday that Cairn Energy would need approval from the government to sell a stake in its Indian arm.
Cairn India is the country's second-biggest private sector crude oil producer after Reliance Industries, operating three oil fields in Barmer namely Mangala, Bhagyam and Aishwariya (MBA).
Together, they have recoverable oil reserve of one billion barrels, with the Mangala field in Rajasthan producing 1.25 lakh barrels a day, with a potential to be raised up to 2.4 lakh barrels a day.
Under Cairn India's assets in the country, state-owned ONGC has a 30-per cent interest in the Rajasthan operations and has a working interest in Ravva oil and gas field in the Krishna-Godavari Basin along with Videocon and Ravva Oil.
Cairn India also has a joint venture with ONGC and Tata Petrodyne Limited for gas production in the Lakshmi gas field, situated in Block CB/OS-2 in the Cambay offshore Basin on the west coast of India in the Gulf of Khambat.
Following the sale stake, Cairn Energy is expected to have a residual interest of between 10.6 per cent and 21.6 per cent in Cairn India.