Cairn Energy majority stake transfer decision by end-February: oil secretary
30 Nov 2010
According to a senior oil ministry official, a decision on London-based Cairn Energy's application to transfer a majority stake in its Indian arm that holds key energy assets, including India's largest onshore oil field, to Vedanta Resources would be taken by end-February.
''We just got the application (for three oil producing blocks) from Cairn Energy in the last working day... We will be able to take a decision before the end of February,'' oil secretary S Sundareshan said. He was speaking to newspersons in New Delhi on Monday, at the sidelines of a FICCI conference.
The oil ministry's earlier deadline of December-end could not be met as Cairn Energy was expected to submit application for all 10 blocks, but the company did not seek approval for three blocks. After the law ministry backed the oil ministry's view that Cain would require specific approvals for all 10 blocks, the British company submitted applications for the three oil producing blocks. According Sundareshan more time would now be required to process the application for all 10 blocks.
The three blocks in question include the oil-rich block in Rajasthan with an output of 125,000 barrels a day from the country's biggest privately-run oil field while the other two blocks, Ravva and CB/ OS-2 in Andhra Pradesh. The three blocks together constitute Cairn India's core assets and constitute key factors in its valuation.
State-run ONGC owns a 30-per cent stake in Cairn's Rajasthan block but is contractually bound to pay its partner's share of royalty for the oil produced.
The state-run firm is looking for an opportunity to review the contract, which, according to officials delivers negative returns to the national oil company. According to analysts, any change in royalty obligation of ONGC would significantly impact the valuation of Cairn's most lucrative asset therefore the entire deal.
