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ONGC board approves Cairn-Vedanta agreement

ONGC board approves Cairn-Vedanta agreement
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First Published: Tue, Sep 27 2011. 11 05 PM IST
Updated: Tue, Sep 27 2011. 11 05 PM IST
New Delhi: The board of state-run Oil and Natural Gas Corp. Ltd (ONGC) on Tuesday decided to issue a no-objection certificate for Vedanta Resources Plc’s proposed acquisition of a majority stake in Cairn India Ltd.
Vedanta will buy a 58.5% stake in Cairn India for $8.71 billion (Rs 42,500 crore).
The cabinet committee on economic affairs (CCEA) in July approved the acquisition with riders to protect ONGC’s interest. The committee suggested that royalty on the Cairn-ONGC oil fields in Rajasthan be treated as cost-recoverable and the ongoing arbitration case on cess be withdrawn.
ONGC is Cairn India’s partner in a joint venture that runs the latter’s main oil asset, block RJ-ON-90/1, in Rajasthan. ONGC wanted to be compensated for royalty payments it has been making on the oil produced at this field.
The firm expects the royalty to be $2 billion over the life of the field. Cairn had earlier declined to make these payments. It had also challenged the cess dues, but is now paying these under protest.
The closure of one of the largest domestic acquisitions in India has been hanging fire since it was announced last August, with the state-owned company making the resolution of the royalty dispute a precondition for approval.
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First Published: Tue, Sep 27 2011. 11 05 PM IST