BP, the British oil major, needed a good "story" to tell. It tried selling a $7.8-billion share swap last month with Rosneft in Russia, as "historic". The deal is in troubled waters. The pact with Mukesh Ambani, where BP will pay $7.2 billion for 30 percent of Ambani’s 23 oil and gas blocks, and another $1.8 billion linked to future exploration successes, has helped bridge some gaps in BP’s narrative.

But this column is about how BP CEO Bob Dudley scripted, albeit unwittingly, the story of Mukesh Ambani agreeing to bury the hatchet on one of the worst family feuds in the history of India Inc.

First, a little more on Dudley and his ascent to the job. The BP CEO chased the RIL deal, instead of other options that others territories were sending on his table, out of need to deflect attention from the company’s devastated image in the US Gulf. Rolled as a combo with the Russian deal, and doubtful bucks in Algeria, the deal in India is a cherished moment for a man who was evicted from Russia less than two years ago, where he was the CEO of BP’s joint venture with oligarch Mikhail Fridman/TNK. Dudley had to leave after an unusually public spat and Kremlin’s refusal to renew his work permit.

It is in this background that Dudley became the unwitting ghost writer of the Ambani truce. First, when the Supreme Court, on May 7,  gave a verdict favouring the government, making it the ultimate authority for allocating gas and fixing its prices, Dudley quickly saw the point that Mukesh’s fields won’t be forced to supply gas to Anil at preferential prices. Plus, with good corporate affairs, in later years even a minor increase in price by government would prove to be a windfall.  The BSE reflected some of this. RIL shares rose 5 per cent, while estranged brother Anil’s Reliance Natural Resources Ltd (RNRL) plummeted 20 per cent. The SC order clearly helped Dudley to seize the moment.

With his eyes locked on a deal, Dudley now demanded clarity on whether Anil can invoke the controversial "non-compete agreement" of January 2006 between the brothers. He feared that Anil could torpedo Mukesh just the way he himself had been undone on the home run with South African telco MTN. With his questions, albeit unwittingly, Dudley scripted one of the more mysterious rapprochements in corporate India. He made it clear that if the "non-compete agreement" remained operational, BP wouldn’t be interested, and at any rate, the valuations will be much lower. The prospect of losing BP proved to be the secret nudge. Mukesh accepted his estranged younger brother’s truce overtures. The brothers buried the non-compete agreement on May 24 last year. RNRL spurted 27 per cent. RIL was up 2.4 percent. But as is evident now, Mukesh had choreographed a bigger celebration. After May 24, the term sheet became a matter of mere detail.

Surely, BP externalities alone didn’t lead Mukesh Ambani to smoke the peace pipe. He certainly was much too shrewd to allow a role reversal of the MTN deal when Anil failed to sell a chunk of Reliance Comm after Mukesh issued a public statement reminding the South Africans of his right to first refusal, a legal enshrinement emanating out of the 2006 non-compete agreement. But once the non-compete clause had been given a decent burial (the only point on which it is still alive is that Mukesh will not enter the gas-based power generation business until March 31, 2022, though he can operate its captive gas-based power plants) valuation arbitrage kicked in for both sides.

Mukesh had long concluded that reinventing the wheel in the deep seas will be long drawn and costlier than going along an experienced partners. The first  potential partners were approached way back in 2007. No one was willing to pay the price that Mukesh wanted. He then realized that he must wait till oil and gas began to flow out of his fields. He locked in on BP, because of its knowledge to handle the rough seas. Gas had to be brought at varying pressures onshore. BP is the master of the entire game, a fact that has prompted Mukesh to sketch a specific joint venture in this deal focused on marketing of natural gas.

To ensure that the deal didn’t get into regulatory hurdles, Dudley agreed to take a minority stake. This is a vital difference with the deal between Vedanta and Cairn, where the ownership itself is being transferred. It leaves the rivals with one less weapon to convince Jaipal Reddy to spoil the RIL-BP party. The last among the hitches was Dudley’s distaste for committing more cash. He has huge liabilities by way of fines payable in the US. So, the deal with Mukesh was constructed around payments spread over the entire fiscal 2011-12. The earliest that cash will be needed is in April 2011. The next story Dudley now needs to sell is on arbitrage: that BP has bought this stake for $7 a barrel of proven reserves (plus additional acreages lying to be discovered) when it has been selling some minor acreages in the market for $12-$15 a barrel.