The KG gas muddle

It can't get messier than this. The fight for the natural gas bounty from the KG basin, off the country's eastern shores, has become the biggest and most controversial business dispute ever in this country.

The story has a bit of everything: A significant discovery of energy reserves that can materially influence economic growth of the country for several years, revenue potential of billions of dollars for both the government and the producer, large cost savings to contracted buyers of the gas if they can enforce deals struck several years earlier, a high-profile fraternal rivalry involving some of the largest companies in the country, a powerful minister who is personally close to a giant business family and several other politicians more than willing to fight for one side or the other.

Unfortunately, none of the protagonists seem interested in acquitting themselves responsibly and honourably.

The saga started with Reliance Industries (RIL) discovering a large gas reserve in the Bay of Bengal in 2002. It was the largest gas discovery anywhere in the world that year. The fact that the discovery was made in a field abandoned as worthless by a global oil major made it all the more striking.

When public sector power producer NTPC floated a global tender for gas, RIL's quote was the cheapest at $2.4 per mbtu (million British thermal unit). An agreement was signed between RIL and NTPC for supply of 12 mmscmd (million metric standard cubic metres of gas per day).

Then came the fallout between the Ambani brothers, which ended with the division of the Reliance group between them. Since splitting the core oil and gas business of group flagship RIL was undesirable, the next best option was to divide the prized gas find between the brothers. As part of the settlement, it was agreed that Mukesh Ambani-controlled RIL would supply 28 mmscmd of gas to Anil Ambani-controlled RNRL.