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Reddy views royalties as cost recoverable for Cairn-Vedanta

Reddy views royalties as cost recoverable for Cairn-Vedanta
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First Published: Mon, Mar 28 2011. 04 44 PM IST
Updated: Mon, Mar 28 2011. 04 44 PM IST
New Delhi: Union petroleum and natural gas minister S Jaipal Reddy on Monday said he views the $9.6 billion Cairn-Vedanta deal royalty issue as cost recoverable, raising hopes the long-delayed transaction may go through by the companies’ target date of 15 April.
Cairn Energy agreed in August to sell up to 51% in its Indian unit, Cairn India , to Vedanta Resources , but the deal has been delayed as the government looks into the issue of royalty payments.
“We are of the view that royalty should be treated as cost recoverable,” Reddy said, adding whether it should be a condition for the deal should be decided by the Cabinet Committee on Economic Affairs (CCEA).
Shares in state-run explorer Oil and Natural Gas Corp , which is in the centre of the royalty dispute, extended gains to as much as 2.1% before closing up 1.2%.
ONGC, which has a 30% stake in Cairn-operated Rajasthan fields and pays royalties on the entire output, had earlier threatened to block the planned deal but has now said it wants the royalty issue to be resolved at the earliest.
The petroleum ministry has maintained it has nothing against the deal but it would strive to protect ONGC’s interests. The cabinet is expected to discuss the transaction this week.
“It is to be considered by CCEA. It may be taken up any time now,” Reddy said.
Last week, Cairn’s chief executive Bill Gammell said the company expects to receive approvals for the deal by the 15 April, the deadline set by both companies.
An approval by the oil ministry is crucial for completion of the biggest merger and acquisition deal in the Indian oil sector and could boost investor sentiment about the business climate in Asia’s third biggest economy.
On Monday, the oil secretary said India had received 74 bids for 33 oil and gas exploration blocks in the ninth licensing round, aimed at boosting higher investment in the energy sector of Asia’s third-largest oil consumer.
India expects investments of $14 billion in this licensing round, which includes eight deepwater blocks, seven shallow water and 19 onshore. In its previous eight rounds of auctions New Delhi has awarded 235 blocks.
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First Published: Mon, Mar 28 2011. 04 44 PM IST
More Topics: Vedanta | Cairn Energy | Cairn India | Oil | Gas |