Cairn Energy once again in sell-out talks with ONGC

Vol 9, PW 22 (23 Feb 06) People & Policy

Once again the oil industry grapevine is abuzz with news that Edinburgh-based Cairn Energy is in talks with ONGC to sell all of its south Asian assets.

PETROWATCH learns Cairn initiated the talks some time back when CEO Bill Gammell spoke to ONGC chairman Subir Raha and offered to sell the entire company. On offer, we hear, were the entire companys assets in India, Bangladesh and Nepal.

Raha accepted the offer and ONGC immediately began the process of due diligence. A special (not so) secret team was set up within ONGCs business development group to pursue the opportunity.

We learn Gaffney, Cline & Associates were hired to carry out technical due diligence. PriceWaterhouseCoopers and Desai and Dewanchand were hired for commercial and legal due diligence.

GCAs assessment broadly matched those given by Cairn itself, we are told. Due diligence was completed about a month or so ago and, we hear, ONGC informed Cairn of the price it was willing to pay.

Cairn apparently disagreed and wanted a better price. Matters have not progressed much since, says a source.

But the talks have not been called off. Cairn, it seems, put a separate value on each of its assets: Rajasthan, Ravva, CB-OS/2, KG-DWN-98/2, Bangladesh, Nepal and the NELP blocks.

The highest price was on Rajasthan, which the company considers the jewel in its crown but which has yet to begin producing. This was followed by Ravva, which produces 50,000 b/d and 2.3m cm/d gas.

Ravva is Cairns oldest producing asset in India but oil production has reached a plateau and will soon begin to decline, unless extra efforts are put in. From block CB-OS/2 offshore Gujarat, Cairn is producing gas from the Lakshmi fields while Gauri produces oil and gas.

In Nepal, Cairn has an exploration block and in Bangladesh a gas producing block. Production has yet to begin from either KG-DWN-98/2 or the other NELP blocks with Cairn.

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