New Delhi: Having twice “let go” the opportunity to acquire Cairn India, state-run Oil and Natural Gas Corp is unlikely to exercise its pre-emption rights to stop UK’s Cairn Energy Plc from selling majority stake in its Indian arm to Vedanta Resources, a company source said.
ONGC chose not to exercise its pre-emption rights when in 2002 Cairn Energy bought out Royal Dutch Shell’s stake in the prolific Rajasthan block for just $11 million.
In 2004-05, it again let go an opportunity to acquire the company, which by then had discovered the giant Mangala oil field in the Rajasthan block, for about $4 billion.
“ONGC feels Vedanta is paying too high a price. It will not like to match it,” the highly placed source said. “Internally, ONGC have decided not to exercise its pre-emption right but it wants Cairn Energy to recognise its rights as a partner.”
ONGC holds 30% interest in the Rajasthan block, which is at the centre of the $9.6 billion Cairn-Vedanta deal. Cairn India holds the remaining 70%.
“ONGC does not see logic in paying nearly $10 billion for a resource which will remain within the country. It can use that kind of money to buy assets abroad that will help add to the energy security of the country,” he said.
The soruce said ONGC only wants Cairn Energy to recognise its rights as partner and seek its no-objection before going ahead with selling most of its 62.38% stake in Cairn India to Vedanta.
ONGC, which partners Cairn Energy’s India unit in all its three producing properties and most of its seven exploration acreage, also wants to vet mining giant Vedanta’s technical competence before allowing it to take over operations.
While ONGC’s contention of having a pre-emption or right of first refusal may get acceptance, its assertion of vetting technical competence may find few takers.
Cairn originally started as an Australian company which was taken over by Edinburgh-based Cairn Energy Plc. And in 2007, it again changed its character to become an Indian firm by listing on Bombay and National Stock Exchange. All this while the core of the company has remained the same, while shareholdings has undergone changes.
Cairn Energy, which had on 16 August announced sale of its 40-51% stake in the Indian unit to London-listed Vedanta Resources, has so far held that the deal does not trigger ONGC’s pre-emption rights.
A company spokesperson had yesterday stated that “Cairn has always said that we will take the necessary consent and approvals, and work in a consensual way to progress this transaction.”
ONGC yesterday wrote to Cairn Energy Plc insisting that the Edinburgh-based firm submit agreement and other details of the deal with Vedanta and seek its consent before selling majority stake in Cairn India.
Cairn, on its part, has been maintaining that the deal with Vedanta is a corporate transaction involving share sale and not a sale of interest in an asset like the giant Rajasthan block that would have triggered ONGC’s ROFR.