MUMBAI, June 25 (Reuters) - Anil Ambani's Reliance Natural Resources signed a revised gas supply agreement with energy major Reliance Industries controlled by his brother Mukesh, resolving a dispute that had been at the heart of a feud between the two billionaires.
The announcement on Friday pushed Reliance Natural shares up as much as 7.5 percent to their highest level in a week, while Reliance Industries rose 1.1 percent, helped by a government decision to raise state-set fuel prices and expose them to market forces.
The companies did not disclose the terms of the pact under which Reliance Industries supplies Reliance Natural Resources.
'People will now stop talking about conflict and uncertainty about the supply of gas,' said Arun Kejriwal, a strategist with research firm KRIS.
TV channels, citing sources, said that under the new pact Reliance Industries will supply 28 million metric standard cubic metres a day of gas for 17 years to Reliance Natural at a government-set price of $4.2 per million metric British thermal units (mmBtu).
The previous agreement between the two companies was based on a price of $2.34 per mmBtu the brothers agreed on in 2005.
India's top court had in May ruled in favour of Reliance Industries, ordering the two companies to renegotiate a pact within six weeks.
The brothers, who five years ago split the business empire they inherited from their father, had since taken a step towards reconciliation, ending an agreement that banned them from competing on each other's turf.
SUBSIDY SHIFT
Friday's move by the government, meanwhile, to raise the price of fuels including petrol and diesel makes the market more attractive for private oil retailers Reliance Industries and Essar Oil.
Together the two accounted for 10 percent of Indian gasoline sales by 2005, before heavily subsidised sales by state-run firms knocked them out of the arena.
'Now it makes sense for him to look at the fuel retail business all over again because the deregulation will allow him to sell at his own price,' Kejriwal said, referring to Mukesh Ambani. 'He has the infrastructure for this already in place.'
Reliance operates 653 fuel stations, fewer than half of the 1,420 such stations it owns after shutting down outlets because they could not profitably compete with state rivals such as Hindustan Petroleum and Indian Oil Corp selling subsidised fuels.
Reliance Natural shares ended 3.3 percent higher at 65.95 rupees, their biggest single day gain in more than week, in a main Mumbai market that fell 0.9 percent.
The gas supply row between the Ambani brothers has been closely watched by investors due to the lack of clarity over government energy policy and had raised concerns about the ability of the private sector to sell gas at market prices.
Ironically, the spat between two brothers, which led all the way to the Supreme Court, has unexpectedly allowed the government to assert its influence over energy supplies.
The Krishna Godavari basin, operated by Reliance Industries, is a find that could nearly double India's gas output when production is at full throttle at 80 mmscmd. It came on stream in April last year.
(Editing by David Holmes)
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