Cairn Energy Says Delay in Vedanta Deal May Deter Oil Exploration in India
India’s next auction of oil rights may draw fewer international bids should the government delay Cairn Energy Plc’s plan to sell a stake in its local unit to Vedanta Resources Plc, the U.K.-based company said.
“Oil companies have the opportunity to invest anywhere in the world,” Bill Gammell, chief executive officer of Cairn Energy, told reporters in Mumbai yesterday. “In so far as there are delays, it doesn’t help India.”
India plans to offer 34 oil and gas fields in the nation’s ninth round of auctions starting Oct. 15, Oil Minister Murli Deora said last week. In last year’s round, the government received bids for just 36 of the 70 blocks on offer because of disputes over production-sharing contracts and the global recession, V.K. Sibal, former head of the country’s oil regulator, said on Oct. 12 last year.
“The issues are many, and Cairn-Vedanta is another issue that’s cropped up,” said Praveen Kumar, head of the south Asia oil and gas team at FACTS Global Energy, a Singapore-based consultant. This adds to concern that there’s regulatory uncertainty in gas taxation, a lack of new areas being offered and incomplete data on the blocks, he said.
Cairn Energy hopes to complete the stake sale in Cairn India Ltd., which operates the country’s largest onshore oilfield, to Vedanta this year, Gammell said. Cairn Energy and Vedanta are awaiting approval from the government and the market regulator Securities and Exchange Board of India for the deal, he said.
London-listed Vedanta has arranged overseas loans from a group of banks for the $6.5 billion of debt that will be used to finance the deal, billionaire Chairman Anil Agarwal said yesterday.
Vedanta, which mines copper and zinc and smelts aluminum, said on Aug. 16 it aims to buy as much as 60 percent of Cairn India Ltd. for $9.6 billion. The Indian government will decide on the deal in a “few weeks,” Oil Secretary S. Sundareshan, the top bureaucrat in the ministry, said on Oct. 6.
A unit of Vedanta, Sesa Goa Ltd., has deferred an offer for Cairn India shares pending approval from the stock market regulator, Managing Director P.K. Mukherjee said, without elaborating. It was due to make an open offer yesterday. The regulator takes 45 to 60 days to approve open offers, according to Agarwal.
Sesa Goa Offer
Sesa Goa has offered 355 rupees a share to Cairn India’s minority shareholders for a stake of as much as 20 percent, according to a statement to the Bombay Stock Exchange on Aug. 18. Separately, Vedanta Resources has offered Cairn Energy 405 rupees ($9.12) a share for a stake of up to 51 percent, including a non-compete fee of 50 rupees a share. Cairn Energy plans to retain a 20 percent stake in Cairn India, Gammell said.
The final number of shares sold by Cairn Energy will depend on the results of the open offer, which could take Vedanta’s stake to as high as 60 percent.
Cairn Energy plans to return a “very significant” portion of the proceeds, probably in the “billions of dollars,” back to its shareholders, Gammell said.
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