Cairn moves to allay India fears over sale to Vedanta

27th August 2010, Comments 0 comments

British oil explorer Cairn Energy moved Friday to allay India's worries about its proposed sale of a majority stake in its Indian energy unit to mining giant Vedanta Resources.

Vedanta announced earlier this month it would buy 51 to 60 percent of Cairn India for up to 9.6 billion dollars, adding to its assets that already include aluminium, copper, iron ore and zinc mines.

The transaction requires the Indian government's blessing because it has oil production-sharing contracts with Cairn India.

Cairn Energy said the proposed sale "will not adversely affect the performance or obligations under the various production sharing contracts (signed by Cairn India) nor be contrary to the interests of India."

Cairn Energy Chief Executive Bill Gammell gave the assurances in a letter to Indian Oil Secretary S. Sundareshan, the Press Trust of India reported.

Cairn India, the country's fourth-largest oil and gas company, owns a 70 percent stake in the Mangala oil field -- part of what is known as the Rajasthan block.

The state-owned Oil and Natural Gas Corp holds the rest of the oil field.

Billionaire tycoon Anil Agarwal, who controls Vedanta, has said he wants to create an "Indian natural resources champion" out of the India-focused company.

But the Indian government has reservations about the deal as the takeover would mark Vedanta's first foray into the energy field and it is worried about its lack of experience in the sector, according to the Indian media.

"The transaction will have no effect upon Cairn India's knowledge and experience as a contractor, operating to accepted international petroleum industry practice," Gammell wrote.

Earlier in the week, Vedanta suffered a stinging rebuff when India's environment ministry rejected plans by the company to start a giant open-caste mine on a hill in the eastern state of Orissa considered sacred by the local Dongria Kondh tribe.

Vedanta had wanted to start the mine in the Niyamgiri Hills to feed a nearby aluminium refinery.

The ministry threatened to scrap approval for the refinery, saying it had violated environmental regulations by building on forest land without permission.

Ramesh also accused Vedanta of starting a six-fold expansion of the aluminium project without approval, showing "the contempt with which this company treats the laws of the land."

© 2010 AFP

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