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Indian government warns Ambani brothers over gas find

The Indian government on Sunday fired a warning shot in a long-running dispute between the billionaire Ambani brothers linked to the split of their late father’s Reliance business empire three years ago.

Murli Deora, minister of petroleum and natural gas, signalled the government would not allow any loss to the state from the row between elder brother Mukesh and his estranged younger brother Anil over the pricing of the country’s largest gas find, the KG Basin D-6 field.


The most important thing is that this gas belongs to the government, Mr Deora told the Financial Times.

Any move by the government to enter the dispute would further complicate what is already India’s biggest and fiercest business family succession battle.

The gas dispute has its roots in a 2006 settlement between the two siblings, under which they divided between them the Reliance oil and petrochemical business empire of their late father, Dhirubhai Ambani.

As part of the agreement, the pair signed a memorandum of understanding that Mukesh Ambani’s Reliance Industries would develop the group’s KG Basin discovery, but would sell much of the gas to Anil’s new power station business.

The MOU set a price of $2.34 per million metric British thermal units for the gas. But Mukesh later disputed this after the government set a price of $4.20 per mmbtu for the gas.

Last week, the Bombay High Court supported Anil’s claim to the gas as outlined in the MOU, including the lower price of $2.34 per mmbtu.

It ordered the two brothers to hold out of court talks and consult their mother if they could not reach an agreement.

Analysts believe an out of court settlement is unlikely and expect them to take the matter to the Supreme Court, in New Delhi.

Mr Deora said he could not comment on legal issues relating to the suit.

However, he said that while the government was helpless to bring about a resolution between the two brothers, under Indian law, natural resources were the property of the state and must be utilised in the interests of the country.

The KG Basin gas was covered by a contract between Reliance Industries and the government that was designed to maximise the returns to the Indian state. Reliance Industries is only the contractor and that is why we have a production-sharing contract, Mr Deora said.

Analysts said this meant the government was likely to oppose any resolution of the dispute that resulted in it receiving lower revenue.
Source:ft

June 22, 2009 · Filed Under Ambani Family 
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