New Delhi: More than three weeks after UK’s Cairn Energy Plc announced the sale of a majority stake in its Indian arm Cairn India to Vedanta Resources, it has formally applied to the government for approvals, saying it will meet all contractual requirements needed to fructify the deal.
The company, on 9 September, wrote separate letters to the oil ministry for specific approvals in respect of seven exploration blocks Cairn India had won under the New Exploration Licensing Policy (Nelp) rounds and concurrence in case of three producing properties that were awarded to it prior to Nelp, including the giant Rajasthan oilfield.
“We have received letters from Cairn and we are examining them. We will decide (on it) in due course,” a senior ministry official said.
Attaching a summary of the deal where Cairn Energy is selling a 40 to 51% stake in its Indian arm to Vedanta Resources Group for up to $8.48 billion, company chief executive Bill Gammell, in the covering letter, stated that the proposed transaction was a sale of shares in Cairn India and “there will be no change in the parties holding the participating interests under the production sharing contracts.”
Cairn maintained that only Nelp blocks required prior government consent for transfer of control, while pre-Nelp areas like the Rajasthan oilfield do not have such provisions.
In respect of the seven Nelp areas, including gas discovery block, KG-DWN-98/2, which sits next to Reliance Industries’ prolific KG-D6 field in the Krishna Godavari basin, Cairn subsidiaries made applications for approval under Article 28.1 of the PSCs signed with the government.
It said the PSCs for pre-NELP Rajasthan block RJ-ON-90/1, the Ravva oil and gas field in the eastern offshore and the Cambay basin CB/OS-2 gas fields off Gujarat coast “do not require prior consent” of the government.
“Even if there were to be a contractual requirement for seeking prior permission of the government for the transaction, we submit that the present transaction is one that would merit such consent,” Cairn said in letters seeking concurrence of the government on the three pre-Nelp blocks.
“PSCs that expressly provide for obtaining prior consent also stipulate that the consent would not be unreasonably withheld,” it said. “We have no doubt that in the present case the government should have no hesitation in granting such consent were such consent to be required.”
Gammell, in the covering letter, stated that both Cairn Energy Plc and its Indian arm and its subsidiaries are fully committed to complying in full with all contractual requirements needed to proceed with the deal.
“We believe that the Vedanta Group is of good standing, has the capacity and ability to meet its obligations under the PSCs and is willing to provide an unconditional undertaking as required in Article 28.1(a),” Cairn India’s subsidiaries wrote in letters seeking approval in respect of the Nelp blocks.
Cairn had previously written to the oil ministry on August 26 introducing Vedanta Group and its financial capabilities.
In a September 9 letter, it said as the proposed sale “is at the shareholder level of Cairn India, there will be no change to the participating interest in any of the PSCs.”
“We can also confirm that there are no planned changes in the Cairn India organisation, standards, policies and systems and that the transaction will have no effect upon Cairn India’s knowledge and experience as a PSC contractor, operating to accepted international petroleum industry practice,” it said.
“We believe that the proposed transaction will not adversely affect the performance or obligations under the PSCs, nor be contrary to the interests of India,” the letters stated. “Should it require, we are also happy to satisfy you on the appropriateness of the guarantees contemplated under the PSCs.”
The oil ministry had on 31 August written to Cairn Energy asking it to apply for approval in respect of all the properties.