A family feud that is threatening Asia's energy needs

       As the global economy gets back on track after a prolonged period of instability and uncertainty, demand for energy is set to explode, particularly in Asia's export-driven economies. This presents challenges for Asia, and particularly countries such as Thailand.Stable and reliable sources of energy are the lifeblood of thriving economies.Asia would do well to ensure that its regional supplies are secure and attractive to investors.
       Consider Thailand, whose hunger for natural gas is immense, with imports doubling since 2004. Thailand imported 9.8 trillion cubic metres of natural gas in 2007(the latest available numbers)making it the 5th largest importer within Asia. This represents a 30% increase from 2006. And those import demands are rising still more.
       The demand for energy by Asia is so pronounced it has prompted some nations to seek complex energy deals in volatile and unsavory regions of the world, particularly resource-rich nations in Africa and the Middle East. This is not a sustainable or advisable strategy for the long term.
       Instead, it is important that Asian nations maximise the resources in their own backyards. North Asian countries such as Mongolia are trying to develop more of their geological endowments.And India holds great potential to emerge as a major Asian energy force, provided it can overcome some of the short-sighted views of its business oligarchs.
       India could be a major source of gas for the broader Asian market, including Thailand. A huge gas discovery in India's massive Krishna Godavari basin could well transform the country and the region.
       The development and production of gas from this field, made possible with an investment of about US$6.5 billion (220 billion baht), is India's first. It is also one of the world's most complex deep-water fields - with the gas lying 3,000m under the sea bed in extreme weather conditions - and was completed in a record time of less than seven years from discovery.
       There are very few gas fields of such depth and complexity in the world which have reached the stage of production.Already in less than six months of its life, it is producing 36 mmscmd (million metric standard cubic metres per day)of gas, which is an achievement with few parallels in the global E&P industry.At full capacity this field holds the potential to satisfy many of India's and the region's increasing gas needs. And there are other areas of India, such as throughout the Bay of Bengal, that are ripe for exploration.
       But business bickering in Mumbai threatens the expansion of the Indian sources. Two of the world's wealthiest men, the Ambani brothers, Mukesh and Anil, have locked horns in a battle over the price and distribution of Indian gas.If Indian gas development gets bogged down in a family feud, it will undermine Asia's broader energy needs.
       Here is what has happened. The Ambani brothers control the legacy assets of Reliance Industries, the highly successful industrial conglomerate built by their late father. Mr Mukesh controls the gas that can be developed in the Krishna Godavari basin, the market price of which is set at $4.20 per MMBTU (million British thermal units).
       Mr Anil is suing his brother, demanding he hand over gas supplies at roughly half the market price. The reason? A family agreement, brokered years ago by Mr Mukesh and Mr Anil's mother,stipulates that Mr Mukesh hand over gas to his brother to power his electricity business at below-market rates.
       There are two major problems with Mr Anil's demands.
       The first is the power plants to be fired by the gas don't exist - Mr Anil hasn't built them. So he is demanding gas his company can't use.
       The second reason is Indian law. The Indian government has developed a sensible policy to encourage the distribution of its gas. Its gas utilisation policy stipulates that gas "consumers should be in a position to actually consume gas as and when it becomes available". These measures are to prevent the development of excessive reserves and gas hoarding.
       Handing gas over to Mr Anil at half the market price so he can simply resell it on the market adds no value to Indian consumers or to Indian public coffers.And it does nothing to help long-term energy investment in India which is vital to meeting Asia's rising energy needs.Indeed, the legal uncertainty spooks investors who wonder why they want to plough capital into a market plagued by such nonsense.
       It should be embarrassing that a country as strategically important as India has its energy future held hostage by the petty manoeuvrings of one of its richest men.
       The good news is the Indian Supreme Court has agreed to hear the case, something it will do tomorrow. One reason for having an independent judiciary is so that an impartial bench can weigh the interests of an entire people to make sure those interests are not trampled by the narrow interests of a powerful few.
       The Indian Supreme Court can send a powerful message to global energy investors next week - that the old way of doing business in which family ties take precedence over markets and the public interest is over, and that a modern India is a safe place to invest. This will be a victory for India, for Asia, and for a thriving Asian economic region.
       The author is a global energy consultant who worked for 25 years with Unocal, an international oil and gas company, which made the first gas discovery in Thailand.