Flagship explorer Oil and Natural Gas Corporation on Tuesday decided to allow NRI metals tycoon Anil Agarwals Vedanta Resources to acquire control of Cairn India,a subsidiary of Scottish explorer Cairn Energy Plc.The decision,however,came with the rider that Cairn will have to sign a legally-binding agreement with ONGC before the NOC (no-objection certificate ) is issued.
Cairn will have to commit on paper two things: The royalty paid on crude will be added to the costs of operating the Barmer fields before calculating profit;and it will pay Rs 2,500 per tonne cess on its share of the production.The issues of royalty and cess have been vexing the deal ever since it was announced over a year ago.Though ONGC holds 30% interest in the Barmer fields,it has been paying royalty on the entire production due to a historic policy anomaly.Cairn has been paying its share of cess under protest and had launched arbitration proceedings.
ONGC had threatened to block the deal by asserting it has the first right of refusal and hence Cairn Indias control cannot change hands without its consent.ONGC had said it would not allow the deal unless the two companies agreed to equitable sharing of levies.The government cleared the deal only after Vedanta and Cairn relented.
The ONGC board,however,on Tuesday felt there was a need to pin Cairn and Vedanta down with a legal document on the issue of equitable sharing of royalty and cess before their deal could be cleared.This was felt because Cairn has been insisting on ONGC giving NOC before Cairn India formally agrees to share royalty and cess.
This insistence has in recent times vitiated the relationship between the two companies.The legal document envisages Cairn giving in writing that it will pay Rs 2,500 per tonne cess on its share of production from the Rajasthan oilfields and also make royalty payments cost-recoverable.After such an undertaking,ONGC will agree to issue NOC.An executive said the NOC can be given in a weeks time.
Cairn will have to commit on paper two things: The royalty paid on crude will be added to the costs of operating the Barmer fields before calculating profit;and it will pay Rs 2,500 per tonne cess on its share of the production.The issues of royalty and cess have been vexing the deal ever since it was announced over a year ago.Though ONGC holds 30% interest in the Barmer fields,it has been paying royalty on the entire production due to a historic policy anomaly.Cairn has been paying its share of cess under protest and had launched arbitration proceedings.
ONGC had threatened to block the deal by asserting it has the first right of refusal and hence Cairn Indias control cannot change hands without its consent.ONGC had said it would not allow the deal unless the two companies agreed to equitable sharing of levies.The government cleared the deal only after Vedanta and Cairn relented.
The ONGC board,however,on Tuesday felt there was a need to pin Cairn and Vedanta down with a legal document on the issue of equitable sharing of royalty and cess before their deal could be cleared.This was felt because Cairn has been insisting on ONGC giving NOC before Cairn India formally agrees to share royalty and cess.
This insistence has in recent times vitiated the relationship between the two companies.The legal document envisages Cairn giving in writing that it will pay Rs 2,500 per tonne cess on its share of production from the Rajasthan oilfields and also make royalty payments cost-recoverable.After such an undertaking,ONGC will agree to issue NOC.An executive said the NOC can be given in a weeks time.
No comments:
Post a Comment