New Delhi: After months of dithering, Cairn Energy on Thursday finally relented and applied for government nod to transfer control in its three producing assets, including crown jewel Rajasthan fields, to Vedanta Resources but stood firm on not conceding pre-emption rights to partner ONGC.
Three separate applications were made for the Barmer oil fields in Rajasthan, the eastern offshore Ravva oil and gas fields and the Cambay fields off the west coast, which had previously been omitted from the applications for government approval.
Sources privy to the development said the applications, made by subsidiaries of Cairn India holding interests in the three properties, were accompanied by a letter from Cairn Energy chief executive Bill Gammell.
Cairn Energy had on 16 August announced sale of its 40 to 51% stake in its Indian unit to London-listed Vedanta for up to $8.48 billion but has been selective in approaching government for approval for the deal.
The applications, sources said, stated that the company’s legal advisers have stated that consent of the government is not required for transfer of control in a company holding interest in the three blocks that were awarded prior to advent of the New Exploration Licensing Policy (NELP).
NELP explicitly has such provisions and so Cairn had sought government nod for seven exploration acreage it has.
Oil secretary S. Sundareshan had last week stated that Cairn has been dithering in making an application seeking the government approval and his ministry will take 2-3 months from the date such application is made to decide on the case.
Sources said Cairn in the application sent today stated it is applying for the government consent on being asked to do so by the oil ministry, which backed its claim for prior approval based on an opinion by the law ministry.
The law ministry had given the opinion that the transaction was nothing but transfer of control in all the 10 properties held by Cairn India and so requires government consent and trigger pre-emption or right of first refusal (ROFR) of ONGC, that partners the company in all the three producing properties and several of exploration acreage.
Sources said Cairn stated that the need for consent does not trigger ONGC’s pre-emption rights.
Cairn, they said, did not apply for consent under any specific provision of the Production Sharing Contract (PSC) that the company had signed for the three properties with the government.
The oil ministry too had not sought the application under any specific clause of the PSC.
The PSC has clause for prior government consent in case of one of the companies decides to sell its stake in the property (a situation referred technically as sale or transfer of Participating Interest).