Cairn needs ONGC consent for stake sale

Written by fe Bureau | New Delhi | Updated: Feb 1 2011, 03:30am hrs
State-owned ONGC said on Sunday that UKs Cairn energy needs the Indian exploration majors consent for the proposed $9.6 billion majority stake sale in Cairn India to Vedanta Resources and that all disputes could be resolved through a trilateral talk involving ONGC, Cairn and the government.

ONGC CMD R S Sharma told reporters here that the company believes that ONGCs royalty burden of 20% on the entire production from the Cairn operated Barmer oil field in Rajasthan is a cost-recoverable item. Despite having only a 30% interest in Cairn operated fields in Rajasthan, ONGC has to pay the entire royalty on the crude oil output as per an agreement between the government and Cairn. This clause, aimed at attracting foreign capital and technology into the country, has made the project revenue neutral for ONGC. Sharma said ONGC paid Rs 812 crore so far this fiscal as royalty for the Barmer output. The company wants this clause to be modified to protect its interests.We are of the opinion that royalty as per contractual terms is cost recoverable. We will apprise the ministry of our view tomorrow, Sharma said. That is, the royalty paid to the state government should be allowed to be adjusted against the revenues before arriving at the net profit.