New Delhi: Outraged at Cairn Energy Plc’s refusal to recognise its pre-emptive rights, Oil and Natural Gas Corp (ONGC) is upping its ante against Vedanta Resources by buying stake in UK-based firm’s Indian unit.
The state-owned firm feels Cairn Energy is skirting real issues like Vedanta’s lack of experience in oil and gas sector in its haste to collect up to $8.48 billion from its stake sale in Cairn India, an official in know of details said.
It now wants to test Vedanta’s technical expertise.
ONGC by virtue of its stake in several of Cairn India’s 10 properties, including the giant Rajasthan oilfields had asserted its preemptive or right of first refusal and as per legal requirement sought to know Vedanta’s technical expertise and experience in exploration and production of oil/gas.
Cairn Energy in its 29 October letter said nothing on ONGC’s request for information on new buyer, he said.
“All that they say is that operating expertise of Cairn Group resides within Cairn India. But does that mean expertise of people like Mike Watts (Cairn Energy’s exploration director who sniffed oil below Thar desserts in Rajasthan) will continue to be available to Cairn India. The answer is no,” the official said.
“What if Cairn India’s CEO Rahul Dhir who is face of the company and runs operations now, quits and goes back to being a banker?” the official asked.
Dhir’s contract as CEO of Cairn India is expiring next year and Cairn Energy has so far not initiated its renewal.
“What will be the fate of Cairn India then (when Dhir exits)? It will definitely be run by someone from Vedanta and so logically ONGC wants to know the expertise of Vedanta before allowing it to take over the operations.”
ONGC has legal opinion from the Solicitor General of India, the nation’s second-highest legal officer, to back its claims.
SGI in its opinion has stated that sale of 40 to 51% stake in Cairn India is effective transfer of operating control of a field like Rajasthan, the mainstay property of Cairn India, and so requires government nod and partner ONGC’s approval.
Cairn India’s main asset is the Rajasthan block that currently produces 1,25,000 barrels per day (bpd). At peak output of 2,40,000 bpd, it will account for one-fifth of the nation’s domestic oil production.
“We are not inclined to agree with your position that our consent and pre-emptive rights are not required/triggered in relation to the sale of up to 51% of the equity shares of Cairn India by Cairn Energy Plc and Cairn UK Holding Ltd (collectively, Cairn Energy) to Vedanta Resources,” ONGC had written to Cairn on 21 October.