Reliance imbroglio:Mukesh Ambani to back allocation of gas to Anil

The Supreme Court dictated negotiations between Mukesh and Anil Ambani over allocation of gas in terms of the family MOU -- that calls for setting aside a minimum of 28 mmscmd of gas for 17 years for Anil Ambani -- will have to look at possible apportionment from out of just 30 mmscmd of gas that remains unallocated, as and when RIL`s D-6 block chooses to raise its production capacity to 120 mmscmd.

At present the Empowered Group of Ministers (EGOM) has allocated a total of 91.611 mscmd of gas to priority sector consumers.

There is also the problem of ensuring an alignment of the objectives of the family MOU with the larger interest of the government. Even though the price is now settled at $4.20/mmbtu, the allocation of gas will have to be in accordance with the allocation priorities of the government.

In this context, the allocation of 27 mmscmd of gas from RIL`s D-6 block to Anil Ambani will have to be done in a coordinated manner. The increase in production of gas to 120 mmscmd of gas will have to dovetail with Anil Ambani`s ability to absorb the gas in his power plant or plants.

The allocation will also have to be ratified by the EGOM. If the two brothers agree to a settlement, sources said the government may have little trouble in ratifying the allocation of extra gas to production of power from Anil power plants.

Since the D-6 capacity can be raised to 120 mmscmd at a faster pace than at which Anil Ambani can set up his gas based plant or plants, it is possible that the extra 27 mmscmd of gas will have to be temporarily diverted to other consumers while the power plants are in a position to absorb the gas.

Well placed sources told that Mukesh Ambani would have no problems whatsoever in agreeing to a deal with his brother because the price of gas is fixed at $4.20/mmbtu. So it does not really matter whether the gas goes to his brother or to someone else. In the interest of resolving the family imbroglio, Mukesh is now willing to put his weight behind allocation of the spare gas to his brother.

Well placed sources said that Mukesh would even agree to allocation of gas from his other oil fields -- including the Mahanadi field or from his CBM blocks -- to his brother now that the price is not an issue.

The same souces said that Anil Ambani might go for allocation of gas in a phased manner, initially settling for a lower quantum of gas in order to ensure sanction from the EGOM. The government may find it difficult to allocate the entire 27 mmscmd of gas in one go to one private customer when there are many other byers of the gas.