Petroleum Ministry has sought Law Ministry's opinion to ascertain if Mukesh Ambani-run Reliance Industries' [Get Quote] move to assign first right on gas produced from KG fields to a firm run by younger brother Anil violated the official contract for the fields.

The family agreement that split Dhirubhai Ambani empire between the two brothers, as has been upheld by the Bombay High Court, had created rights including claim over majority of the output from RIL's KG-D6 field, in favour of Anil's RNRL.

The Petroleum Ministry now wants to know if such a move amounted to Assignment of Participating Interest in the gas rich block, official sources said.

As per the Production Sharing Contract for KG-DWN-98/3 or KG-D6, assignment of any interest in the contract without prior consent of the Government may result in termination of the contract.

RIL is to start producing natural gas from KG-D6 in July but has not been able to sign contracts with consumers due to a restraint order from the Bombay High Court. The ministry sought Law Ministry's opinion if the Government should intervene and become party to the court case between the two brothers over implementation of the family demerger agreement, in the national interest of starting gas output in time.

The start of 40 million standard cubic meters per day of gas production from KG-D6 may be delayed if the court ordered restraint on creation of third party interests was not lifted. RNRL claims right of 28 mmscmd as part of the demerger and another 12 mmscmd but will have no plants to utilise gas in July 2008. Trading of gas is not allowed as per Government policy.

Sources said the Petroleum Ministry was of the view that the Government's Gas Utilisation Policy may impact on the commitments made by RIL.

The Policy lists out sectors for gas sales in order of priority and new power plants figure last in that order. It fixes priority for gas sales from fields like that of RIL to fertilizer, petrochemical, existing power plants and city gas ventures in that order. RNRL is to use the KG-D6 gas at its proposed power plant at Dadri in Uttar Pradesh.

Sources said the Petroleum Ministry also wanted the Law Ministry to give views on "whether it would be relevant to examine the actual copy of family demerger agreement from the angle of permanent entitlement of RNRL in RIL oil and gas fields, to ensure that RIL has not made any agreement contrary to the provisions of PSC."

"Does the Government need to intervene to protect its own interests if it is found that RNRL is also a successor to the PSC?" the oil ministry wondered.