Govt to scrutinise Cairn deal before deciding on okay

The government-owned Oil and Natural Gas Corporation (ONGC), Cairn India’s partner in the Barmer block in Rajasthan, is closely scrutinising the stake sale in Cairn India by Cairn Energy. R S Sharma, ONGC chairman and managing director, is learnt to have met Union petroleum secretary S Sundareshan today to discuss the implications.

ONGC has a 30 per cent interest in Cairn’s Rajasthan operations and a working interest in the Ravva oil and gas field in the Krishna-Godavari Basin, with Videocon and Ravva Oil. There are concerns over Vedanta’s acquisition of a majority stake in Cairn India, given its lack of expertise in exploration and production, said a senior executive in a partner company, who did not wish to be identified. 

After the deal’s announcement, Sundareshan told reporters the production sharing contract between Cairn, ONGC and the government meant it would require require government approval. He also said the government would consult ONGC before deciding. “We are not in a hurry. We have not firmed up our views about the deal. If they (Cairn Energy management) wish to meet us, we will meet. But we will not give any views,” said an official at ONGC.

Cairn Energy’s chief executive, Bill Gammell, said in a conference call that the management would speak to all stakeholders and seek support. Gammell is supposed to meet Sundareshan and the ONGC management tomorrow. “Cairn India is an independent company. From a business point of view, Cairn India will be business as usual,” Gammell said, when asked whether the change in shareholding meant a change in operatorship status. Gammell is expected to come here late tonight.

There are two views on whether ONGC or government approval is required, since each production sharing contract is structured differently and, technically, the composition of consortia managing the fields is not changing. It is a change of equity holding of one of the partners. Former director general of hydrocarbons, V K Sibal, told Business Standard government approval would be required, since oil and gas assets were being leased out (as opposed to being sold). “The government examines factors like whether a company taking over is financially capable of meeting the work programme commitments,” he said.