Cairn applies to Govt for approval of Vedanta deal

The company on September 9 wrote separate letters to Oil Ministry for specific approvals in respect of seven exploration blocks Cairn India had won in New Exploration Licensing Policy (NELP) rounds and concurrence in case of three producing properties including the giant Rajasthan oilfields that were awarded to it prior to NELP.

"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 40 to 51 per cent stake in its Indian arm to Vedanta Resources Group for up to USD 8.48 billion, the company's 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 oilfields do not have such provision.
In respect of the seven NELP areas including the gas discovery block KG-DWN-98/2 that sits next to Reliance Industries' prolific D6 fields 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, Ravva oil and gas field in the eastern offshore and 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 sated that both Cairn Energy Plc and its Indian arm, Cairn India 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 NELP blocks.

Sources said a separate letter had been sent to ONGC,  a partner of Cairn India in all its three producing blocks besides five others. ONGC had earlier informed the Bombay Stock Exchange and the National Stock Exchange that the Cairn- Vedanta deal required its consent.

Cairn had previously written to the Oil Ministry on August 26 introducing Vedanta Group and its financial capabilities.

In September 9 letter, it said as the proposed sale "is at 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 organization, 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."

Oil Ministry had on August 31 written to Cairn Energy asking it to apply for approval in respect of all the properties.

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