ONGC says to issue view on Cairn’s India sale

Reuters | Oct 8, 2010 | 7:18pm IST

Oil and Natural Gas Corp said it would issue its response to Cairn Energy’s plans to sell a controlling stake in its Indian unit to Vedanta Resources "very soon.” The company is also in talks with the Indian government about the royalties it must pay on the fields it co-owns with Cairn India, and hopes that it will find an outcome, which limits its liability — potentially at the expense of Cairn or Vedanta.

"We have been raising that issue… we are in discussions with the Petroleum Ministry and the Finance Ministry," said Chairman R.S. Sharma. "I’m very positive that we will be able to get a solution to our satisfaction." Following an exemption offered some years ago to encourage companies to explore in India; Cairn is not liable for royalties, while ONGC must pay royalties on the oil blocks.

Indian media have reported that ONGC would, either like the royalties it pays to be reduced or for Vedanta to share the burden going forward. Any move to force Vedanta to pay royalties could prompt it to cancel or renegotiate the sale, which was approved by over 99 percent of Cairn shareholders who voted at an extraordinary general meeting on Thursday. Sharma said ONGC had been talking to its lawyers about the matter.

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