* Cairn India sale to Vedanta seen proceeding as planned
* Vedanta's valuation of Cairn dissuades counterbid - source
* Vedanta shares fall 2.3 percent after rising on Tuesday
* Cairn Energy shares rise 0.9 percent
(Adds analyst comment, Cairn share rise)
By Nidhi Verma
NEW DELHI, Aug 25 (Reuters) - State-run Oil and Natural Gas Corp, GAIL India and Oil India will not make a counterbid against Vedanta Resources' $9.6 billion stake purchase in Cairn India, a senior official in India's oil ministry told Reuters on Wednesday.
The decision makes it likely that Cairn Energy's planned sale of up to a 51 percent stake in its Indian unit will proceed, analysts said, and boosted the Edinburgh-based company's shares.
"There is no chance for a counterbid by Indian firms as the valuation done by Vedanta for Cairn India is already very high," the oil ministry official said. He declined to be named as he was not authorized to speak publicly.
Previously, an oil ministry source had said all options were open for Indian state-run firms on Cairn India and domestic media reported the firms had held informal talks on a joint bid.
ONGC, Oil India and GAIL declined comment on Wednesday.
Last week, India-focused miner Vedanta said it agreed to spend up to $9.6 billion to buy a majority stake in Cairn India from Cairn Energy.
"I think it is very likely to go through," said Will Armstein, oil analyst at brokerage Finncap, adding that since it was a corporate transaction rather than the sale of an individual field, the government had few mechanisms available to block the deal even if it sought to.
"The price is extraordinarily high," Armstein said.
Nonetheless, some analysts said the official's comments did not necessarily mean Vedanta had a clear shot at the deal.
"The threat of a counterbid seems to have reduced, but I think the market will be satisfied only if they (the government) come straight out and say it publicly," said Deepak Pareek, sector analyst with Angel Broking.
"There is still speculation on this despite what the sources are saying," he said. "But I think the government will weigh whether the $10 billion or so needed for the counterbid cannot be better utilised in securing India's energy security by buying assets globally," Pareek said.
GOVERNMENT APPROVAL
The deal needs Indian government approval because Cairn India has production-sharing contracts (PSCs) with the government for oil and gas exploration blocks and the agreement says any ownership change would need federal approval.
Cairn India shares closed down 2.8 percent on the Bombay Stock Exchange after rising more than 3 percent on Tuesday on market talk of a counterbid by state firms.
Cairn Energy shares closed up 0.9 percent at 447.23 pence, outperforming a 1.1 percent drop in the STOXX Europe 600 Oil and Gas index.
State-run explorer ONGC has a 30 percent stake in Cairn India's oil block called RJ-ON-90/1 in the western Indian state of Rajasthan. India's trade minister said on Tuesday Oil and Natural Gas Corp should have a say in the deal.
Vedanta, in its first move into the energy sector, is buying a controlling stake in India's No. 4 oil and gas company from Cairn Energy to capitalise on rising energy demand, economic growth and an expanding population.
On Tuesday, the Indian government cited environmental concerns to reject a plan by Vedanta to mine bauxite in an eastern state, a blow to the firm already facing hurdles to its planned energy deal in the country.
Cairn Energy Chairman Bill Gammell arrived in New Delhi last week and held talks with Indian officials on the acquisition.
Vedanta has offered 405 rupees a share for between 40 and 51 percent of Cairn India. The final stake bought would depend on the response to an open offer for a 20 percent stake made to minority shareholders at 355 rupees a share. That offer opens on Oct. 11. (Additional reporting by Tom Bergin in London, Writing by Jui Chakravorty; Editing by Surojit Gupta, David Holmes and Michael Shields)