New Delhi, Jan 30 (PTI) ONGC today said UK-based CairnEnergy contractually needs its approval for selling majoritystake in its India unit to Vedanta Resources and the state-runfirm will want the issue of excess royalty it has to pay onRajasthan crude sorted out before such a nod.
"ONGC has categorical right of first refusal. We hadtaken the opinion of the Solicitor General of India (SGI)...
it is not our personal opinion but as per the unequivocallyopinion of SGI," company Chairman and Managing Director R SSharma told reporters here.
Cairn Energy is selling most of its 62.4 per cent inCairn India to billionaire Anil Agarwal-run Vedanta.
"They do need ONGC''s consent for going ahead with thistransaction," Sharma said.
Oil and Natural Gas Corporation has interest in sevenout of the 10 properties held by Cairn India and by virtue ofthis it claims pre-emption or right of first refusal.
"We did not give a counter offer as we do not findthat the valuations (put by Vedanta) suit us," he said.
ONGC wants that the government should not approve thedeal until the issue of excess royalty it pays on Rajasthancrude oil is sorted out.
The state-owned firm holds a 30 per cent stake inCairn India''s mainstay Rajasthan oilfields, but is liable topay royalty on all the crude oil produced from the fields,making the nation''s largest onland field a losing propositionfor the PSU.
Sharma said its board yesterday recommended to thegovernment that the royalty it pays on not only its share, butalso on the 70 per cent share of Cairn India, should bededucted from the price realised on the sale of crudeoil from Mangala and other oilfields in the Rajasthan block.
"We are of the opinion that royalty as per contractualprovision is cost recoverable," Sharma said.
The ONGC board''s resolution will be added to thepreconditions that the Oil Ministry has imposed for approvingthe Cairn-Vedanta deal.
The pre-conditions, including resolution of ONGC''sroyalty liability, have been vetted by the Law Ministry andthe same are being sent to the Prime Minister''s Office.
Sharma said ONGC wants Cairn to come to thenegotiating table and sort out the royalty issue.
"As per our interpretation of the contract, royalty iscost recoverable," he said.
ONGC''s board yesterday noted that the SolicitorGeneral of India has opined that the state-run firm''s preemption rights will be triggered upon UK''s Cairn Energyselling up to 51 per cent of its stake in Cairn India toVedanta. .