State-run energy firms backtrack

New Delhi: State-run energy firms Oil and Natural Gas Corp, GAIL India and Oil India will not make a counterbid for Vedanta Resources' $9.6 billion (Dh35 billion) stake purchase in Cairn India, a senior official in India's oil ministry said.

"There is no chance for a counter bid by Indian firms as the valuation done by Vedanta for Cairn India is already very high," the official said yesterday. He declined to be named as he was not authorised to speak publicly.

Last week, India-focused miner Vedanta said it agreed to spend up to $9.6 billion to buy a majority stake in Cairn India from its UK-based parent Cairn Energy.

Previously, an oil ministry source had said all options were open for Indian state-run firms on Cairn India and domestic media reported the firms had held informal talks on a joint bid.

ONGC, Oil India and GAIL declined comment yesterday.

Contracts

The deal needs Indian government approval because Cairn India has production-sharing contracts (PSCs) with the government for oil and gas exploration blocks and the agreement says any ownership change would need federal approval.

Cairn India shares ended 2.8 per cent lower on the Bombay Stock Exchange after rising more than 3 per cent on Tuesday on market chatter of a likely counter offer by the state firms.

Approval from state-run explorer ONGC, which has a 30 per cent stake in Cairn India's oil block called RJ-ON-90/1 in the western Indian state of Rajasthan, is also crucial for any change of ownership.

India's trade minister said on Tuesday Oil and Natural Gas Corp should have a say in the deal.

Vedanta, in its first move into the energy sector, is buying a controlling stake in India's No. 4 oil and gas company from Cairn Energy to capitalise on rising energy demand, economic growth and an expanding population. On Tuesday, the Indian government rejected a plan by Vedanta to mine bauxite in an eastern state over environmental concerns, a blow to the firm already facing hurdles to its planned energy deal in the country.

Cairn Energy Chairman Bill Gammell arrived in New Delhi last week and held talks with Indian officials for the acquisition.

Vedanta has offered 405 rupees a share to buy between 40 and 51 per cent of Cairn India. The final stake bought would depend on the response to an open offer for a 20 per cent stake made to minority shareholders at 355 rupees a share. That offer opens on Oct 11.