Dispute at Reliance holds up gas contract with NTPC

Vol 9, PW 8 (28 Jul 05) Midstream & Downstream

Expect more delay before Reliance signs its contract with NTPC for the supply of deepwater Krishna Godavari gas to its Kawas and Gandhar power plants.

Despite reports that the Ambani brothers have settled their dispute and carved up the Reliance group with help from their mother, tension and bitterness continue; directly impacting the pending gas contract with NTPC. One issue dominates: a proposed 7480-MW power plant at Dadri in Uttar Pradesh, promoted by Reliance Energy, controlled by younger brother Anil Ambani.

According to a well-placed source, Anil wants Reliance Industries, controlled by elder brother Mukesh, to supply gas from its deepwater Krishna Godavari discovery to Dadri at exactly the same price that it agreed to sell to NTPC: $2.97 per mmbtu. But Mukesh, it seems, is unwilling to oblige.

NTPC was a one-off deal with an anchor customer, we learn. In todays market conditions such a low price is unimaginable.

Reliance agreed many things with NTPC which it would not offer to any other customer. Things would have been different, we learn, had the brothers not been in dispute.

If the group had stayed united, Reliance Industries might indeed have offered its KG gas to Reliance Energy at the NTPC price. But for now, theres no immediate solution in sight.

Not much will happen on the Reliance contract with NTPC until this problem is sorted out, we hear. Reliance Energy announced its decision to set up a power plant at Dadri when Reliance won the NTPC contract.

Gas supply bids were invited but most companies stayed away, seeing it as a ploy to uncover competitor prices with Reliance knowing full well that its own KG gas would supply the plant. When news of the Anil and Mukesh feud began to emerge, it was alleged that Anil had announced the Dadri power project without consulting Mukesh and under the influence of his friend Amar Singh of the Samajwadi Party, which later nominated him as MP.