Cairn / Vedanta: a test of faith

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“It will all be over by Christmas” is a punch-line to a corporate transaction in India that Cairn Energy executives, like those in the trenches of Flanders who bet on quick victory, dare not utter.

The oil and gas explorer has now received all the clearances it needs to execute a $6.5bn deal to pass control of oil fields in Rajasthan to London-listed Vedanta Resources. The way should be clear to complete the transaction in the current calendar year and share the wealth among relieved shareholders.

But months of regulatory twists and turns will ensure the bunting won’t come out at the company’s Edinburgh headquarters until the approvals are stamped and issued in triplicate.

When Vedanta Resources launched its bid for control of Cairn’s Indian assets in August last year, executives of both companies could not have imagined that 15 months on they would still be working on the paperwork.

Then, when Anil Agarwal, Vedanta’s chairman, dropped in for tea in the Scottish capital with Cairn’s Sir Bill Gammell, the offer probably felt almost too good to be true.

And it was. Months on, Vedanta is buying less of Cairn India from its parent, and at a lower price. The Indian government is also in a lesser place. It endures a slew of corruption scandals, a hostile opposition and weakening markets.

Some might say the bid for Cairn’s Rajasthan fields was hexed from the start soon after a leak about Agarwal’s ambitions surprised officialdom in New Delhi, and invited woe for Sir Bill.

Both will look enviously at their counterparts at BP. In appearance at least, BP’s $7.2bn investment alongside Reliance Industries, led by Mumbai-based Mukesh Ambani, in gas production in the Bay of Bengal was a far smoother affair. Not for it the regulatory hurdles and long silences. Final approval came in just five months.

No, Bob Dudley, BP’s chief executive, was publicly feted in New Delhi in a way that might have even taken him by surprise.

But who’s telling the difference?

Certainly not Jaipal Reddy. India’s petroleum minister in Doha on Monday spoke of Vedanta and BP in the same breath. They were, he said, examples of renewed “faith” in the attractiveness of India’s hydrocarbons potential.

A test of faith, maybe.

Related reading:
Vedanta / Cairn India, Lex
Cairn: giving up on India deal? beyondbrics
Cairn-Vedanta: in limbo in India, beyondbrics

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