Both the law ministry and the Solicitor General of India have expressed the view that UK-based Cairn Energy requires the Indian government's approval for selling a controlling stake in Cairn India, which operates the Rajasthan and eastern offshore Ravva oilfields, to billionaire Anil Aggarwal- controlled Vedanta Resources.
A senior petroleum ministry official confirmed that according to the legal opinion specific government approvals are required for the sale of 10 oil and gas properties that Cairn India operates in India.
The Solicitor General has cited the recent Supreme Court judgment in the gas dispute between the Ambani brothers, which states that all the oil and gas fields in India are national assets, the ownership of which vests with the government.
Any transfer of assets, therefore, requires the approval of the government. Cairn Energy would also needs a noobjection certificate from partner ONGC for the sale of a majority stake in Cairn India to Vedanta Resources.
ONGC owns a 30 per cent stake in the Rajasthan oilfield and another 40 per cent share in the Ravva oilfields. The petroleum ministry's stand that government approval is required for the sale of these assets and ONGC has the first right of refusal has been backed by the opinion of the law ministry and the Solicitor General.
| Twists and turns|
- Specific govt approvals required for sale of 10 oil and gas properties that Cairn operates in India
- Cairn would also needs a no- objection certificate from ONGC for the sale of a majority stake in Cairn to Vedanta Resources
- Oilmin's stand backed by the lawmin and the Solicitor General
- Govt is uncomfortable with the fact that Vedanta has no expertise in the hydrocarbon sector
- Officials said the technical capabilities of the firm will be considered before taking a decision
- Petroleum secy S. Sundareshan had said that the govt will give its decision on the issue by December
- Cairn has claimed it does not require govt approval and ONGC does not have the right of first refusal as the sale involves a change of " corporate ownership"
Cairn Energy has floated a proposal to sell up to 51 per cent stake in Cairn India to Vedanta for around $8.48 billion. It has been claiming that it does not require the government's approval and ONGC does not have the right of first refusal as the sale involves a change of "corporate ownership".
Cairn Energy chief executive officer (CEO) Bill Gammel has admitted that the company jumped the gun by announcing the deal with Aggarwal before informing the government.
ONGC chairman R. S. Sharma, on the other hand, has been playing his cards close to his chest as there are serious legal implications involved in breaching the confidentiality clauses.
Cairn Energy has been claiming that the government's consent was not required in the case of producing properties like the RJ- ON- 90/ 1 block in Rajasthan, the Ravva oil and gas field in the eastern offshore and the CB/OS-2 gas field in the Cambay Basin, off the Gujarat coast, as they were awarded before the New Exploration Licensing Policy (NELP), which came into effect in 1999.
The huge Rajasthan oilfields holds 6.5 billion barrels of oil reserves and is currently producing 125,000 barrels per day and is estimated to have the potential to produce 240,000 barrels per day ( 12 million tonnes a year). The Ravva offshore fields are mid- sized.
The government is uncomfortable with the fact that Vedanta Resources does not have any expertise in the hydrocarbon sector. According to officials, the technical capabilities of the company will be taken into account before reaching a decision. Petroleum secretary S. Sundareshan had said last week that the government will give its decision on the issue by December.
Gammel on Monday told journalists that ONGC had preemption rights in the case of an asset sale while the deal with Vedanta is a corporate transfer.
"Any delay in approval of the deal would give international energy explorers a reason to shy away from making investments in the country," he added.
The Vedanta's group open offer for Cairn India was to commence on Monday. Chairman Anil Agarwal said he would now wait for Securities and Exchange Board of India's (Sebi) approval before it is launched.