The fine-lines emerging from the Supreme Court verdict on a dispute between the world's richest brothers over gas from a field with $38 billion of reserves and London-listed Vedanta Resources' $9.6 billion acquisition of Cairn India may determine whether the energy-starved nation will be able to attract explorers.
The apex court in May ruled in favour of Mukesh Ambani's Reliance Industries and said Anil Ambani's Reliance Natural Resources is eligible to get gas only at government-set prices that are higher than those in a 2005 family accord.
The ruling was also a shot-in-arm for Oil Minister Murli Deora who last year faced a blistering attack from Anil Ambani for allegedly siding with his elder brother Mukesh in the gas supply row between them.
The court upheld Deora's stand that the government had the right to approve price as well as fix users of natural gas.
The dispute contributed to the unease of energy majors over the lack of clarity in production sharing contracts between the government and explorers that govern pricing and revenue sharing from oil and gas blocks.
While the ruling settled the dispute, the robbing of marketing freedom will keep off big international names from investing in oil and gas hunt. Three months later, London-based mining group Vedanta Resources announced buying out of Scottish independent Cairn Energy Plc's majority stake in its Indian unit.
What was supposed to be a corporate transaction involving share transfer without impacting Cairn India's status, however, got mired in a regulatory approval mesh.
While Oil Ministry insisted Cairn needs government approval before transferring control in the 10 properties it has in the country, Oil and Natural Gas Corp (ONGC) insisted it had pre-emption by virtue of partnering Cairn in most of its properties including the mainstay Rajasthan oilfield.
The ministry wrote to market regulator SEBI which promptly stopped Vedanta's open offer for additional 20 per cent stake in Cairn India even as it delayed a decision on giving approval to the deal by 3 months to March, 2011.
As the fate of the deal, which expires on April 15, 2011, hangs in balance, the government decision will decide if investors like Cairn, who took the risk of investing in blackhole exploration business and gave the nation its largest onland oil discovery, have an exit option.
Also in June, the government took the bold move to free petrol prices from its control while announcing a phased deregulation of diesel rates. But it could not keep the promise as was evident from lesser than warranted increases when crude oil climbed to a two-year high of $90 per barrel.
State fuel retailers were not allowed to raise petrol prices in sync with cost, while diesel and cooking fuel prices were raised just once in June.
Deora let go off an opportunity to level domestic rates with their import parity when he became party to the decision to postpone a ministerial meeting this month that was to consider raising diesel and LPG prices.
The missed opportunity now means that the state exchequer will have to find ways to meet a staggering Rs 70,000 crore (Rs 700 billion) of revenue loss on selling fuel below cost. He continued with his policy of showing the finest public sector executives the door - first Sarthak Behuria was denied an extension as Chairman of IOC, then Ashok Sinha as the head of BPCL.
During his four year stint, he has shown Subir Raha, the flamboyant head of ONGC, and the articulate P Banerjee (of GAIL) the doors. The only silver-lining during the year was reforms in the price of natural gas produced by state-owned firm's like ONGC from fields given to them on nomination basis.
Rates of gas from these were more than doubled to $4.2 per mmBtu, equivalent to the rate at which Reliance sells fuel from eastern offshore KG-D6 fields.
While Cairn India boosted output from Rajasthan fields to 125,000 barrels per day or one-fifth of domestic production, Reliance could not keep the promise with KG-D6 output dropping 15 per cent to 53-54 million standard cubic meters per day in the absence of drilling in more wells.
The year also saw the nation move smoothly to Euro-IV and Euro-III grade auto fuel. ONGC Videsh lost out on opportunities in Vietnam but managed to get the giant Carabobo field of Venezuela. Perhaps not all is lost and it depends on how Deora utilises 2011 to make up for some of the follies of the year gone by.