Indian State-Run Companies Said to Consider Cairn Bid
Aug. 24 (Bloomberg) -- Indian state-run energy companies are considering bidding for a stake in Cairn India Ltd., countering Vedanta Resources Plc's $9.6 billion offer for the explorer, according to two people familiar with the matter.
India's oil ministry has instructed Oil & Natural Gas Corp. to study the possibility of making a counter offer, one of the people said. GAIL India Ltd. may join ONGC, another person said.
Vedanta, the mining company controlled by billionaire Anil Agarwal, agreed this month to buy as much as 60 percent of Cairn Energy Plc's Indian unit to gain access to the country's biggest onshore oil field. ONGC has led India's search for oil assets overseas, competing with China as the world's two most-populous nations seek to secure energy supplies.
"From India's energy security point of view, this doesn't help India much as the money would rather be invested in overseas acquisitions," said Deepak Pareek, a Mumbai-based analyst with Angel Broking Ltd., who recommends investors "accumulate" ONGC stock. "This oil will anyway be used within India."
ONGC owns a 30 percent stake in the block and is seeking to increase production as output from aging fields declines. The Indian company lost out to China in at least $12.5 billion of contracts in the past year.
The Press Trust of India earlier reported ONGC, India's largest explorer, Oil India Ltd. and GAIL have arranged $10 billion in funds from international banks to fund a possible bid.
R.S. Sharma, ONGC's chairman, and Oil Secretary S. Sundareshan, the senior-most bureaucrat in the ministry, declined to comment. Oil India Chairman N.M. Borah and GAIL Chairman B.C. Tripathi didn't answer calls to their mobile phones. Gordon Simpson, a spokesman for Vedanta, declined to comment, while David Nisbet, the head of group corporate affairs for Cairn Energy, didn't respond to an e-mail sent to him.
ONGC shares fell 0.3 percent to 1,280 rupees at 9:17 a.m. in Mumbai compared with a 0.1 percent increase in the benchmark Sensitive Index of the Bombay Stock Exchange. Cairn India, which announced an oil and gas discovery after market hours yesterday, gained 2.1 percent.
Cairn Energy gained 0.9 percent to 464.4 pence in London yesterday. Vedanta fell 0.2 percent to 2,037 pence, the lowest level since Oct. 5.
Vedanta, based in London, will pay a total of about $8.5 billion to $9.6 billion in cash, the company said Aug. 16.
The miner will buy at least 40 percent and as much as 51 percent of Cairn India from London-listed Cairn Energy. It will also make an open offer to Cairn India stockholders for as much as 20 percent of issued shares.
The final number of shares sold by Cairn Energy will depend on the results of the open offer, which could take Vedanta's stake to as high as 60 percent.
Cairn India acquired the stake in the Rajasthan field from Royal Dutch Shell Plc in 2002 and discovered oil in January 2004. The area called RJ-ON-90/1 consists of three fields named Mangala, Bhagyam and Aishwariya.
ONGC pays royalty on the entire production from the area, an incentive offered to attract overseas explorers to India before the government started auctioning fields in 1999.
The field produces about 125,000 barrels a day of crude oil, Cairn Energy said in a statement Aug. 16. That's equivalent to about 19 percent of India's output in the year ended March.
Cairn India started production a year ago from the Mangala field, selling to customers including Indian Oil Corp. and Reliance Industries Ltd. In March, the company raised its target from the field to 240,000 barrels a day.
India's energy use may more than double by 2030 to the equivalent of 833 million metric tons of oil from 2007, while China's demand may rise 87 percent to 2.4 billion tons, the Paris-based International Energy Agency said. The South Asian nation's oil import bill climbed sixfold in the past decade to $85.47 billion for the year ended March, equivalent to about 7 percent of gross domestic product.