Mumbai: Indian state-run energy companies are considering bidding for a stake in Cairn India, countering Vedanta Resources Plc's $9.6-billion (Dh35.3 billion) offer for the explorer, according to two people familiar with the matter.

India's oil ministry has instructed Oil & Natural Gas to study the possibility of making a counter offer, one of the people said. GAIL India may join ONGC, another person said.

Vedanta, the mining company controlled by billionaire Anil Agarwal, agreed this month to buy as much as 60 per cent of Cairn Energy Plc's Indian unit to gain access to the country's biggest onshore oil field. ONGC has led India's search for oil assets overseas, competing with China as the world's two most-populous nations seek to secure energy supplies.

"From India's energy security point of view, this doesn't help India much as the money would rather be invested in overseas acquisitions," said Deepak Pareek, a Mumbai-based analyst with Angel Broking, who recommends investors "accumulate" ONGC stock. "This oil will anyway be used within India."

Production increase

ONGC owns a 30 per cent stake in the block and is seeking to increase production as output from ageing fields declines. The Indian company lost out to China in at least $12.5 billion (Dh45.97 billion) of contracts in the past year.

The Press Trust of India earlier reported ONGC, India's largest explorer, Oil India and GAIL have arranged $10 billion in funds from international banks to fund a possible bid.

R.S. Sharma, ONGC's chairman, and Oil Secretary S. Sundareshan, the senior-most bureaucrat in the ministry, declined to comment. Oil India Chairman N.M. Borah and GAIL Chairman B.C. Tripathi did not answer calls to their mobile phones. Gordon Simpson, a spokesman for Vedanta, declined to comment, while David Nisbet, the head of group corporate affairs for Cairn Energy, did not respond to an e-mail. The oil ministry and ONGC have to take a view, Trade Minister Anand Sharma said in New Delhi yesterday.

"It is not an issue of regulatory hurdles, it is a major decision which has to be taken," Sharma said. "This also involves national resources." ONGC shares fell 0.8 per cent to Rs1,272.60 (Dh106) at the close in Mumbai compared with a 0.5 per cent drop in the benchmark Sensitive Index of the Bombay Stock Exchange. Cairn India, which announced an oil and gas discovery after market hours yesterday, gained 3.1 per cent to Rs354.30.

Drilling: encouraging results

Oil explorer Cairn Energy said it was encouraged by drilling results in Greenland, despite failing to find oil.

Edinburgh-based Cairn said in a statement yesterday its T8-1 well in the Baffin Sea between Greenland and Canada — one of only seven ever drilled in Greenland — found small quantities of gas. The news disappointed investors who had hoped for a major oil find. Consultancy Wood Mackenzie previously said Greenland could have reserves of over 20 billion barrels of oil equivalent. However, analysts said the initial 4 per cent drop in the stock was "harsh" and noted Cairn's comments that the gas find proved the existence of a "working hydrocarbon system".