Ambanis agree terms on gas supply

India’s billionaire Ambani brothers have reached a new gas supply agreement, they said on Friday, settling for now the issue at the centre of a bitter family feud that echoed through the halls of power in New Delhi.

Younger brother Anil Ambani’s Reliance Natural Resources said it had reached an agreement to buy gas from elder brother Mukesh Ambani’s Reliance Industries.

Reliance Natural Resources “will now take appropriate steps requesting the government of India for expeditious allocation of natural gas,” the company told the Bombay Stock Exchange.

The dispute dates from a family agreement in 2005 dividing the business empire of the brothers’ late father, Dhirubhai Ambani, between them.

Mukesh won control of their father’s flagship company, Reliance Industries, including its most valuable assets – its giant oil refinery in Gujarat, western India, and the KG Basin gas field off the coast of eastern India.

Anil took over the group’s telecoms arm, Reliance Communications, India’s second-biggest mobile operator, as well as its financial divisions and its nascent power generation and energy arm.

As part of the family agreement, Mukesh agreed to supply his brother’s fledgling power plant business with gas.

But the pair fell out over the price of the gas. Mukesh’s Reliance Industries argued it had to conform to a government-approved price of $4.20 per million British thermal units, while Anil’s Reliance Natural Resources said it should sell for nearly half that.

The dispute became increasingly vocal with Anil publishing adverts in newspapers setting out his position and even visiting a Himalayan shrine to pray for a rapprochement with his brother.

But Anil’s Reliance Natural Resources was defeated in the Supreme Court, which ruled that only the government had the right to decide the allocation and price of the gas.

Announcements from both companies on Friday did not disclose any details of the terms of the new gas supply agreement.

“In terms of volumes, price and timing, till such time as the Ministry of Petroleum and Natural Gas approves it, it is not a valid agreement,” said Bhaskar Chakraborty, analyst with Mumbai-based brokerage IIFL.

The gas supply issue could yet prove contentious for the brothers. Anil Ambani’s business group will take several more years to build the power plants that will use the gas.

In the meantime, the price approved by the government of $4.20mmbtu will expire in four years, after which the minister will be free to set a new price.