Cairn India seeks RoFR through New Shale Gas Policy

June 5, 2013

Cairn India has requested the Petroleum and Natural Gas Ministry to ensure that the proposed new shale gas exploration policy offers the right of first refusal (RoFR) to all currently operating blocks without discriminating b/w NELP and pre-NELP blocks.
Currently, the draft shale gas policy being prepared by the government has a mechanism to give the first right of refusal to existing contractors holding oil and gas blocks.
Cairn India has urged that the RoFR should be available to all currently operating blocks, irrespective of pre-NELP or NELP, to ensure consistency and uniform implementation of the shale gas policy. Besides, it also wants existing licences/leases to be given the exclusive rights to explore and develop all hydrocarbon resources encountered in a block and/or shale to avoid over-lapping licences/leases pose significant risks and operational conflicts, leading to conflicting claims to resource ownership, sub-optimal utilisation of capital, hampering development of hydrocarbon molecules present in multiple forms.
What is RoFR?
Right of first refusal (ROFR or RFR) is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party. In brief, the right of first refusal is similar in concept to a call option. An ROFR can cover almost any sort of asset, including real estate, personal property, a patent license, a screenplay, or an interest in a business.
How ROFR is different form Right of First Offer (ROFO)?
An ROFR differs from a Right of First Offer (ROFO, also known as a Right of First Negotiation) in that the ROFO merely obliges the owner to undergo exclusive good faith negotiations with the rights holder before negotiating with other parties. A ROFR is an option to enter a transaction on exact or approximate transaction terms. A ROFO is merely an agreement to negotiate.