News: 'Mukesh can't sell gas meant for Anil'

(DNA 04/05/2007) The Bombay High Court on Thursday restrained Mukesh Ambani's Reliance Industries Ltd (RIL) from selling or pledging to others the K-G basin natural gas that it had originally committed to sell to Reliance Natural Resources Ltd (RNRL). RNRL is a group company belonging to younger brother Anil Ambani's R-ADA group. RNRL had moved the Bombay High Court seeking to restrain RIL from entering into any contract and from using or supplying to any third party the gas it committed to supply to RNRL under the demerger scheme reached in 2005. In an ad-interim order, Justice A M Khanwilkar directed RIL not to create third party interests or rights in respect of the 28 million standard cubic metres of gas to be supplied daily to RNRL. The court also restrained RIL from selling off 12 million standard cubic metres of gas per day to be supplied to RNRL in case RIL's deal with NTPC fell through. An RIL spokesperson said the company will appeal to the division bench of the high court against the order. The Anil Ambani group officials declined to comment saying they are yet to see a copy of the order. As per the Gas Supply Master Agreement signed on January 12, 2006, between RIL and RNRL, RIL is obliged to supply gas from certified proven reserves in accordance with an approved development plan to RNRL's affiliate owning a gas-based power plant. A gas sale purchase agreement between the two parties for gas up to 28 MMSCMD (million metric standard cubic meter per day) was then signed, which gave RNRL this right after NTPC got its quota of 12 MMSCMD. As per the agreement, RNRL also had the option to get the first 16.67 MMSCMD and for 40% of the quantity of gas available beyond the said 16.67 MMSCMD in terms of the agreement. After the agreement was signed, the petroleum ministry objected stating that reserving such huge gas quantities for RNRL at pre-determined prices will affect the government's revenues by way of royalty payments and that any sale should be at market determined prices. The agreement had envisaged selling the gas at $2.34 per MMBtu, which is less than half the current market price. When the Letter of Intent with NTPC was signed crude oil in the spot market was quoting around $27 per dollar against the current price of $64 per barrel.