[INDIA] Reliance Industries Ltd., won't be able to sell KG basin gas till July

The Bombay High Court has maintained status quo in the long-drawn out legal battle between Reliance Natural Resources (RNRL) and Reliance Industries (RIL). The court on Tuesday adjourned the case till July 22. The development is significant since Reliance Industries will not be able to enter into gas sale agreements with third parties, though gas production from the Krishna Godavari (KG) basin may commence by July-end, 2008. It’s not clear if either RIL or the government will move the Supreme Court to vacate the stay.

On Tuesday, the proceedings began with Reliance Industries’s counsel Harish Salve seeking vacation of the stay. “We are suffering with a wrong order. Please vacate the stay as commercial production of the gas will commence from July 2008 and we need to firm up gas supply agreements for the 40 mmscmd (million standard cubic metre per day) of gas to be produced in the initial stage.

The appeal for Reliance Natural Resources’s right over 40 mmscmd can be heard till we ramp up our production to 80 mmscmd in December 2008,” said Mr Salve. He added the unit mmscmd denotes a rate of gas excavation and it is not possible to curtail the flow of gas to leave out the share claimed by Reliance Natural Resources.

However, Reliance Natural Resources’s counsel, former law minister Ram Jethmalani, argued that the stay should continue. Mr Jethmalani said if Reliance Industries is allowed to get into agreements with third parties and the final judgement is in Reliance Natural Resources’s favour, then the third parties will again come to the court and the matter will be further delayed.

After hearing both counsel, the Bombay High Court division bench decided to maintain status quo in the matter till the next hearing on July 22.

Speaking to ET, Mr Salve said, “The court has maintained status quo in the matter.” Though the HC order appears to be a setback for Reliance Industries, industry sources said in reality it is unlikely that gas production could have begun in July ‘08.

Instead the gas might start flowing only towards the end of 2008. Because Reliance Industries’s pipeline network to transport the gas is not fully ready. Further, connecting pipeline networks, which will be built by PSU companies like GAIL is also not ready. Also, shortage of drilling equipment is believed to have caused further delays.

Vacating the HC order would have rendered the entire proceedings infructuous. The next crucial legal development is what view the HC takes of the Indian government’s application to become a party to the proceedings.

In this context, the Government of India will be filing a rejoinder to Reliance Natural Resources’s reply on Government of India’s move to implead itself as a party to the case. Earlier, Reliance Natural Resources had opposed the Government of India’s appeal asking to vacate the stay on Reliance Industries selling gas to third parties.

Reliance Natural Resources, in its reply, had said the Government of India application is highly “motivated” and has been filed only with the intention of helping one party as the Government of India is neither a necessary nor a proper party to the present proceedings.

In its earlier order, the court had restrained Reliance Industries from selling any gas to third parties to protect the interests of Reliance Natural Resources. According to the earlier order, the entire gas from the block has been committed to Reliance Natural Resources and National Thermal Power Corporation (NTPC) and for Reliance Industries’s captive use.

Both the Ambani brothers, Mukesh and Anil have been engaged in litigation since the past one year over the agreement under which Reliance Industries will be supplying gas to Reliance Natural Resources for various power projects as part of the Reliance de-merger deal.
INDIA: Reliance Industries Ltd.,  won't be able to sell KG basin gas till JulyReliance Industries
Source: India Economic Times

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