RELIANCE IN HOT WATERS!! Government Demands Rs 24,500 Crore Over Gas Dispute

The Indian government has issued an approximately Rs 24,500 crore demand notice to Reliance Industries Ltd and its partners, BP Plc and Niko (NECO) Ltd, for profits earned from natural gas allegedly migrated from a neighboring block owned by the state-run Oil and Natural Gas Corporation (ONGC). This follows a Delhi High Court ruling on February 14, 2025, overturning an international arbitration decision that had previously absolved the consortium of liability.

The dispute centers on the Krishna Godavari basin’s KG-DWN-98/3 (KG-D6) block, where Reliance holds a 66.66% stake and BP owns 33.33%, after acquiring Niko’s 10% share. In 2016, the government had sought USD 1.55 billion, claiming gas migrated from ONGC’s adjacent fields into KG-D6. Reliance contested this before an arbitration tribunal, which ruled in its favor in July 2018. However, the Delhi High Court’s division bench reversed this last month, prompting the Ministry of Petroleum and Natural Gas to raise the escalated demand on March 3, 2025.

Reliance, in a stock exchange filing, called the demand “provisional” and “unsustainable,” vowing to challenge the judgment, potentially in the Supreme Court. The company insists it expects no financial liability.

The saga began in 2013 when ONGC suspected reservoir connectivity between its KG-D5 block and Reliance’s KG-D6. A 2015 report by DeGolyer and MacNaughton confirmed gas migration, estimating volumes extracted by Reliance until March 2015. A government-appointed committee later ruled that the Government of India, not ONGC, was entitled to compensation for Reliance’s “unfair enrichment,” as mineral resources belong to the state.

The initial USD 1.55 billion claim included royalties and interest, alongside disallowed costs due to underperformance in KG-D6. After the arbitration rejection, the government persisted, arguing Reliance profited from an “insidious fraud.” While a single-judge bench upheld the tribunal’s view in May 2023, the division bench’s recent ruling has reignited the high-stakes legal battle, spotlighting India’s energy sector governance.