Indias Natural Gas Tied Up In $17B Family Feud

MUMBAI: A Cinderella Anil Ambani, one of the world’s richest men, stood before a jumble of television cameras, close to tears.

“There is only pain, pain and emotion,” he said, his voice catches.

There is also, by some estimates, at least 17 billion U.S. dollars at stake.

His brother Anil and Mukesh – ranked by Forbes as the world, 34th and 7 richest people – are locked in an increasingly bitter struggle by the largest natural gas deposit in India.

The battle between the sons of one of the famous first capital of India has quickly become a favorite family feud in the nation. It has also exposed the flaws in the government’s management of the vital energy sector and the close relationship between officials and one of the richest families in India.

The case is scheduled to go before the Supreme Court of India on October 20.

Some politicians say the dispute, together with the global recession has also discouraged the much needed investment to help develop oil and gas resources for this energy-starved country of 1.2 million people.

After trying to recruit foreign investors from Houston to Perth, the government has deals last week only 36 of the 70 oil and gas blocks on offer. Only seven foreign companies participated.

Meanwhile, the brothers disputes have become more difficult for power to reach people in a country where more than 450 million struggle on less than $ 1.25 a day.

Each of the claims of the legal battle is preventing their companies from selling gas or construction of new power plants.

The point is that natural gas prices largest known deposit of India: Krishna Godavari basin, off the east coast, which would double the amount of natural gas produced in India.

An agreement signed by the family of the brothers in 2005 after her father, Dhirubhai Ambani died without a will, says Mukesh’s company, Reliance Industries, Anil sell the company, the confidence of Natural Resources, at least one third of the projected production of the basin. The price agreed at the time is much lower than the gas can be sold for now.

Both Reliance Industries and Government officials now argue that the 2005 agreement is void because the government never approved the below-market price.

Anil counters that Reliance Industries is trying to break a binding contract, instigated by Mukesh’s allies in the Ministry of Oil, which is headed by an old friend of his father.

In June, the Bombay High Court confirmed the contents of the agreement of the family. This ruling has been appealed to the Supreme Court.

Mukesh-making company is to have 11.5 billion U.S. dollars of gas if allowed to increase the price. But if Anil gets his way, which provides benefits could become a loss of $ 5.4 billion.

For Anil, the cost of losing the case could be even greater. Analysts, and Anil same, say the future of the dependence of Natural Resources is hanging by a thread. The gas supply contract, told shareholders in July, is “most important asset of our company and provides most of its value.”

Angel Broking analyst Deepak Pareek estimated price of the shares of the company, plunged by 76 percent if Anil loses the case.

The pressure has forced Anil cozy break the silence that usually clings to power in India.

It has taken not only his brother, but the government of India itself, issuing a series of week-page newspaper ads lambasting the government for allowing his brother rake in “super-normal “the benefits.

“RIL has tried every trick in the book – and apparently several outside the book – to withdraw from their solemn obligations, legal and contractual,” Anil told shareholders in July.

The enlargement of the attacks, the company of Anil in court documents accusing a top energy official, VK Sibal, to accept favors – including apartments and appliances for their daughters. The daughters reportedly stayed in guest houses elegant, owned by Mukesh company for several months during the time Sibal decided to adopt the rules of the new capital expenditures that increase the benefits of RIL.

Sibal, reports, currently under investigation, denies the allegations. “I fear a threat to my life,” he said in a letter leaked to the press.

Reliance Industries and the government have issued denials of other complaints Anil sober too.

Last week, Anil made a pilgrimage to two sacred sites in the Himalayas in search of divine inspiration and blessings, trying to heal the wounds “as he said in a statement released widely. He came home convinced that he and his brother could negotiate a settlement.

Mukesh company welcomed the overture, but said the controversy “is not merely a family matter” and should be resolved in court.

The dispute has put the government in a delicate position.

It is trying to strike a balance between maintaining control of a valuable natural resource to be used in the national interest and that do not appear to undermine the sanctity of a private commercial contract.

That may be an impossible juggling act and raises a question over how the government can solve the shortcomings in the dispute has highlighted.

Natural gas sector in India – from exploration to the pipelines – is dominated by a few players that are publicly owned or the Ambanis. Besides having the energy companies, the government through its Ministry of Petroleum and Energy Policy sets the prices that producers can sell oil and gas.

Some say the concentration of power along with the lack of transparency is a recipe for disaster.

Harinder Kohli, chief executive of Washington-based Emerging Markets Consulting Centennial Group, said that an independent regulator should be established quickly to investigate wholesale gas prices so the government is constantly embroiled in accusations of favoritism and corruption .

“There is too much arbitrary power,” he said. “It corrupts. There is a larger lesson, whether the brother is right: This is not the way the game should be played.”

Tags: $17B, Family Feud, India, Natural Gas, Tied Up