Cairn’s charm offensive fails to woo miffed govt

CEO Gammell Meets Oil Ministry Top Brass

CAIRN Energy has mounted a charm offensive to win over an oil ministry upset seemingly over the UK oil firm's failure to keep it and state-owned ONGC in the loop over the proposed sale of its Indian unit.
    Cairn's founder and CEO, Bill Gammell, flew into India on Tuesday and held meetings with oil minister Murli Deora, petroleum secretary S Sundareshan and ONGC chairman RS Sharma to apprise them about the deal involving the sale of up to 60% stake in Cairn India to London-listed miner Vedanta Resources for as much as $9.6 billion ( 44,890 crore).
    But the government showed little sign that it will bless the deal by the Scottish company, and officials kept up the pressure on the two parties, citing reasons ranging from Vedanta's "inexperience" in the oil business to national security.
    Emerging from one of the meetings, Mr Gammell told reporters that he had had "very friendly and open discussions" and Cairn would seek "necessary consents and approvals" vital for the consummation of the deal.
    Cairn also sought to defuse tensions saying the deal with Vedanta would allow its Indian arm "to chart out its future course independently, with an Indian group as the majority owner". The government can theoretically veto the deal on grounds the new owner does not have any oil exploration experience, although experts say chances of that happening are slim.
    Shares in Cairn India closed 1.74% up on BSE at 338.65.
    However, the government continued with its sabre-rattling, with one minister even going as far as suggesting a rival bid by a consortium of public sector oil firms led by ONGC, although the state-run firm's chairman said his company was a publicly-listed entity and would take decisions based purely on commercial reasons.
LIQUID WEALTH CAIRN INDIA ASSETS 1 Rajasthan oil fields (RJ-ON-90/1)—90% of company's asset value
Cairn India holds 70% interest and operator in the block
ONGC is 30% partner in the block
Current production 125,000 bpd Potential to achieve 240,000 bpd
2 Ravva (Block PKGM-1), KG basin, operator with 22.5% interest
Crude oil & natural gas production from Ravva commenced in 1993
3 Block CB/OS-2, the Cambay basin, 40% interest
Natural gas production commenced from Lakshmi in 2002 and from Gauri in 2004
Production of commingled crude oil from Gauri commenced in '05
4
Equity interests in eight exploration blocks: operator in 5 & 3 non- operated RIL rules out a counter-bid
AS OF today, there is no thinking of a counter-bid. We will not be swayed by sentiments. We have to take hard business decisions," Mr Sharma told ET.
    Another potential bidder, Reliance Industries, categorically ruled out a counter-bid, and investment bankers familiar with the transaction said Vedanta had decided to move ahead after satisfying itself that Mukesh Ambanicontrolled Reliance was not keen on doing a deal itself.
    ONGC, the country's biggest oil producer, has a 30% share in Cairn's oil fields in Rajasthan, the most notable among them being the Mangala field in Barmer where the discovery of oil in 2004 catapulted Edinburgh-based Cairn from a minnow to a significant player in the oil sector.
    Cairn is cashing out of India, where it is the second-biggest private oil producer with a daily output of 125,000 barrels, to concentrate on Greenland while Vedanta, controlled by London-based billionaire businessman Anil Agarwal, hopes to transform itself from a pure-play miner to a resources group of the likes of Anglo-Australian mining giant BHP Billiton.
    Oil ministry officials said the government was keen to ensure ONGC does not get a raw deal because of the proposed transaction, especially since it had invested more than $1 billion in developing the Rajasthan fields and to build a pipeline to carry oil to the Gujarat coast.
    Petroleum secretary Mr Sundareshan said the production-sharing contract stated that "any assignment of block to a different party would require concurrence of the government", although he added the ministry would study any proposal received from the parties "on merits and take a view".
    "ONGC has not raised any concerns yet as there is still no official proposal before us," he said, adding that the government would also have to take into account other production-sharing contracts that Cairn has in addition to the Rajasthan block. Cairn India has operations in a total of 12 blocks across India, including in Gujarat and Andhra Pradesh.