In a strong rebuttal, Cairn Energy Plc has told Oil and Natural Gas Corp (ONGC) that its decision to sell majority stake in its Indian unit to Vedanta Resources does not trigger the state-owned firm's pre-emption rights.
The proposed transaction, valued at USD 8.48 billion, "is at shareholder level involving sale of (40 to 51%) shares of Cairn India (and) there will be no change to, or assignment of, the participating interest" in any of the 10 properties held by the the company, Cairn Energy wrote on October 29.
ONGC had, on October 21, written to Cairn Energy saying the "change of control of Cairn India and acquisition of majority stake therein by Vedanta Resources amounts to an effective assignment/transfer of participating interest" (or sale of stake in the asset like the Rajasthan block).
ONGC is partner in all the three producing fields held by Cairn India and has interest in most of its seven exploration blocks awarded under the New Exploration Licensing Policy (NELP).
While the NELP blocks have explicit provisions for seeking government and partner nod for transfer of control in the company, the contracts for the three producing properties make that necessary only in case Cairn India was to sell its stake in them, individually, to a third party.
{{/usCountry}}While the NELP blocks have explicit provisions for seeking government and partner nod for transfer of control in the company, the contracts for the three producing properties make that necessary only in case Cairn India was to sell its stake in them, individually, to a third party.
{{/usCountry}}"As previously stated, following review of contractual documentation, we have been advised by external legal advisers and senior counsel in India that the provisions you refer to in both the pre-NELP and NELP joint operating agreements do not apply in respect of a proposed sale of shares in Cairn India," Cairn Energy said.
As requested by ONGC, Cairn Energy provided a complete copy of the sale and purchase agreement. ONGC, on October 21, wrote to Cairn Energy, saying it had preemption rights and asked for value of each of the 10 assets held by the British firm's Indian unit so as to enable it "decide on the future course of action."
"As you will see from the agreement, there is no value assigned to individual (assets): the asset that is the subject to the agreement is the shareholding in Cairn India, not the individual licence interests," Cairn Energy wrote.
It said "all of the Indian operating expertise of the Cairn Group resides within Cairn India, and not (in) Cairn Energy Plc. This will remain the case even if Cairn Energy Plc ceases to be the controlling shareholder."
"We can also confirm that there are no planned changes in the organisation, standards, policies and systems of the Cairn India Group," it further said.
"The transaction will have no effect upon the knowledge and experience of the Cairn India Group as a PSC contractor, or that of Cairn India Group, operating in line with accepted international petroleum industry practice."