We have been keeping a constant watch on the Vedanta group of companies since this group has been at the forefront of flouting environmental laws of the nation as evident in Orissa's Niyamgiri, Tamil Nadu's Tuticorin and almost everywhere else it is in operation.
The following news would be of interest to those who are interested in eco-criminals like the Vedanta group.
Thanks and regards,
ONGC may stall Cairn-Vedanta deal; may claim Raj block
|Press Trust of India / New Delhi October 31, 2010, 13:33 IST|
But unless this jurisdiction issue was sorted out, the Oil Ministry was unlikely to begin processing Cairn's application for government nod to the deal, he said.
For ONGC, which stands to lose $2 billion on Cairn India-operated Rajasthan block, going this far in asserting its preemption rights and then withdrawing would be difficult.
Rajasthan block is a losing proposition for ONGC as it is liable to not only pay statutory levies on its share of 30 per cent interest but also those due on Cairn India. This position will be corrected if ONGC can acquire Cairn India's 70 per cent holding in the block, the official said.
Vedanta is paying such a high price only on the basis of the exemption it is going to get from paying of 20 per cent royalty and possibly Rs 2,500 per ton oil cess on the Rajasthan block, which is at the heart of its deal with Cairn.
"The fallout of the situation where a foreign seller is allowed to pocket a hefty premium for the burden a public sector company has to bear will be immense," he said.
Citing provisions of Production Sharing Contract and Joint Operating Agreements, ONGC in the letter said it had right of first refusal in all the three producing fields held by Cairn India including the 6.5 billion barrels Rajasthan block and Cairn Energy Plc needs its no objection before it can transfer ownership of these to Vedanta.
It asked Cairn Energy for details of "Vedanta Resources' financial strength, technical capability and past experience in the field of oil and gas" before deciding on its intervention in the deal.
Mining group Vedanta, which has no experience in oil and gas business, is buying Cairn Energy's 40-51 per cent out of 62.38 per cent stake in Cairn India. The deal, which was announced on August 16, will expire on April 15, 2011 if all necessary regulatory approvals and nods are not obtained.
ONGC asked Cairn Energy to give written notice to ONGC with complete terms of its Vedanta deal for it to "consider the matter of exercising its right to acquire (Cairn India's) interest (in a block like Rajasthan)."
Cairn, on its part, has been maintaining that the deal with Vedanta is a corporate transaction involving share sale and not a sale of interest in an asset like the giant Rajasthan block that would have triggered ONGC's ROFR.
ONGC in the letter countered this line by saying that "the change of control of Cairn India and acquisition of majority stake therein by Vedanta Resources amounts to an effective assignment/transfer of participating interest (or simply put sale of stake in the asset)."
"Therefore in accordance with the relevant provisions of the JOAs, consent of ONGC would need to be sought for the proposed transaction," it said.
Cairn India's main asset is the Rajasthan block that currently produces 1,25,000 barrels per day (bpd). At peak output of 2,40,000 bpd, it will account for one-fifth of the nation's domestic oil production.
"We are not inclined to agree with your position that out consent and pre-emptive rights are not required/triggered in relation to the sale of up to 51 per cent of the equity shares of Cairn India by Cairn Energy Plc and Cairn UK Holding Ltd (collectively, Cairn Energy) to Vedanta Resources," ONGC wrote.
ONGC said it being the licensee of Rajasthan and Cambay basin CB-OS/2 blocks has "additional roles and responsibilities to ensure satisfactory performance of the ongoing operations."
"We take this opportunity to remind you that the Government of India approved the award/transfer of the participating interest to affiliates/subsidiaries of Cairn Energy, on the basis that Cairn Energy shall stand guarantor to the government of India and ONGC, based on its financial strength, technical expertise, worldwide experience in exploration and production of oil/gas, including operatorship experience," it said.
Cairn had used the same corporate transaction logic to initially contest the government's right to approve the deal but with oil ministry standing firm, it relented and on September 9 applied for selective nod.
It made application for seven exploration acreage it won in New Exploration Licensing Policy (NELP) rounds while leaving out the three pre-NELP producing assets including the Rajasthan block.