Cairn India revamp: ONGC withholds consent

Oil and Natural Gas Corporation has withheld consent for internal restructuring of Cairn India Ltd for a year.

Cairn wants the stakes that its different subsidiaries, including those registered abroad as well as showpiece Rajasthan oilfields, hold in oil and gas properties, to be transfered into one India-based company.

Since ONGC is partner in six of those properties, Cairn procedurally sought a no-objection from ONGC, but the state-run oil major has so far not agreed to the proposal, sources privy to the development said.

The restructuring is separate from London-listed mining group Vedanta Resources' $9 billion buyout of Cairn India.

While the Vedanta deal, where Edinburgh-based Cairn Energy Plc is selling 40 per cent of its interest in Cairn India, was announced in August, 2010, the restructuring began in 2009.

Two top ONGC officials, however, when contacted, could not reason why the consent was withheld.

The restructuring, which was approved by the board of Cairn India and boards of its subsidiaries in December, 2009, has no bearing on the Vedanta deal, sources said.

In December, 2009, Cairn got no-objection certificates for the restructuring from the National Stock Exchange and Bombay Stock Exchange, where it is listed.

The company's shareholders also approved the scheme in February, 2010.

In April last year, the Chennai high court nodded the restructuring and Bombay high court sanctioned the scheme in June, 2010.

But ONGC, which holds up to 90 per cent interest in the Cairn properties, has not given its no-objection certificate yet, they said.

Cairn wants the interest held by its unit, Cairn Energy India Ltd, and other group companies

in six assets to be transferred to Cairn India Ltd.

The objective behind this exercise is to bring the Indian oil and gas exploration and production business of some of its group firms incorporated abroad directly into Cairn India.

Cairn India, spun off from Cairn Energy Plc, listed on the Indian stock exchanges on January 9, 2007, although a number of its Indian assets were still held by overseas subsidiaries.

The restructuring proposed would do away with the existing multi-layered structure, involving various foreign subsidiaries and Cairn India Ltd, which is avoidable and administratively burdensome.

Cairn said the proposed scheme and assignment of participating interest would have no impact on any of its joint venture partners in the relevant blocks as the process was merely an internal reorganisation and there is no third party involved.

Half of Cairn's 70 per cent interest in the Rajasthan block is held by its subsidiary, Cairn Energy India Pty Ltd.

The same subsidiary also holds its 22.5 per cent interest in the eastern offshore oil and gas producing Ravva field.

Its 40 per cent interest in Cambay basin CB/OS-2 block is held through Cairn Energy Pty Ltd (6.7 per cent), Cairn Energy India West BV (13.2 per cent), Cairn Energy Gujarat BV (10 per cent) and Cairn Energy Cambay BV (10 per cent).

Cairn Energy India Pty Ltd also holds interests in three exploration blocks.

The restructuring would become effective once all the requisite approvals are obtained.

Cairn requires a no-objection certificate and a board resolution approving the change in operatorship from all joint venture partners.

Its other joint venture partners -- Videocon, Ravva Oil Singapore and Tata Petrodyne -- have completed the necessary formalities and only ONGC's response is awaited, sources said.