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Vedanta attached a summary of the deal where Cairn Energy is selling a 40-51 percent stake in its Indian arm to Vedanta Resources Group for up to $8.48 billion.
he Oil Ministry has shown signs of discomfort at a non-oil firm taking control of a company whose main property is the Barmer district oilfields in Rajasthan
Cairn India's contract with the government for three oil and gas producing properties including the one in Rajasthan, do not provide for prior government approval in case of a change of control happens at the corporate level.
The only contracts that provide for government permission in case corporate ownership of Cairn India changes are seven exploration blocks the company had won under New Exploration Licensing Policy.
"Hypothetically speaking, if the oil ministry was to act tough, Vedanta can tell the ministry to keep the exploration blocks and walk away with the Rajasthan oilfield, the Ravva oil and gas field (in eastern offshore) and the Cambay block," he said.
"The $9.6 billion that Vedanta is paying is for these three fields and not for the exploration areas."
Oil and Natural Gas Corporation (ONGC) declared that without its approval UK's Cairn Energy Plc can not sell its stake in Cairn India to London based Vedanta Resources.
The state owned company's (ONGC) claim is based on the pre-emptive rights in oilfields like Rajasthan, where it is an equity partner with Cairn India.
The pre-emptive right is to maintain current shareholder's fractional ownership of a company by buying a proportional number of shares of any future issue of common stock.
ONGC, which owns 30 percent in the 6.5 billion barrels Rajasthan block, believes that with the stake, it has the pre-emptive right of first refusal to buy Cairn India in case the company's ownership changed.
ONGC owns 30% in Cairn India’s prolific Rajasthan oilfields, which is at the centre of the $ 9.6-billion takeover deal by London-based Vedanta group.
The petroleum ministry says the deal needs the ‘prior written consent’ of the government according to the requirements of the production sharing contract (PSC).
ONGC’s right of first refusal in the case of sale of an asset cannot in any way help in blocking the deal as ownership-change in a company cannot be equated to the sale of assets. The government can shoot down the deal only if the PSC allows it to, they said.
Anil Agarwal owned Vedanta Resources on Aug 16 had offered to take over 60 percent in Cairn India for $9.6 billion.
Though the offer sparked objections from sections of the government that are seemingly reluctant to part with a profitable oil producing asset to Vedanta.
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