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Corporate Mar 23, 2013

Cairn offers ONGC,Oil Min position on company’s board

Barmer: Having faced regulatory hurdles in getting routine approvals, mining baron Anil Agarwal today offered Oil Ministry and state-owned ONGC board position on his group's subsidiary Cairn India to expedite nods for raising output.

Agarwal's Vedanta Resources in August 2011 proposed to buy Edingurgh-based Cairn Energy Plc's majority stake in its Indian unit but it took over 16 months for the $8.6 billion deal to conclude as it got stuck in regulatory hurdles and delays in getting partner ONGC nod.

Reuters

Besides, the government can appoint directors only on board of a company where it holds direct shareholding.Reuters

Thereafter, the government took more than a year to give nod to Cairn India to explore further within its producing Rajasthan oilfield. With Oil Minister M Veerappa Moily in attendance, Agarwal made the offer to give representatives of oil ministry and Oil and Natural Gas Corp (ONGC) board position at the beginning of commercial natural gas production from Cairn India's Barmer basin Block.

"Instead of having Management Committee and various levels (of approval), ONGC and Ministry of Petroleum and Natural Gas can put their nominee on board of Cairn to cut approval process and expedite decision making," he said.

However, the proposal may be easier said than done as Cairn India is a private listed company whose board like any other listed company is made up of representatives of its promoters. Though ONGC has 30 per cent stake in the Rajasthan block, the state-owned company does not have a stake in Cairn India which is the operator of the nation's largest onland field with 70 per cent stake.

Besides, the government can appoint directors only on board of a company where it holds direct shareholding. Even if exceptions are made, Cairn India shareholders are bound to object as such a position will give out confidential business information of Cairn, which has many businesses other than the Rajasthan fields, to outsiders.

Currently, Cairn and ONGC manage the Rajasthan fields through an unincorporated joint venture. This joint venture is represented on a block oversight committee, called the Management Committee (MC) headed by upstream regulator DGH and also having Oil Ministry representative.

Agarwal also sought operational freedom to raise output to block's potential of 300,000 barrels per day (bpd) from current 170,000 bpd. Cairn is seeking single window clearance for the Rajasthan project and plans to submit one integrated field development plan for all the finds instead of submitting separate development plans for different discoveries.

Also, it wants work programme and investment budget to be approved for a rolling three years to provide continuity. Currently, the government approves yearly work programme and budget.

PTI

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