India seeks $30 billion from Reliance, BP in long-running KG-D6 gas dispute: Report

India is seeking more than $30 billion in compensation from Reliance Industries and its partner BP in an arbitration case over gas the government says the companies failed to produce from offshore fields, Reuters reported quoting three people with knowledge of the matter.

The dispute relates to gas production from the D1 and D3 deepwater fields in the D6 block of the Krishna Godavari basin, and has been under arbitration in India since 2016, seven individuals familiar with the proceedings said. Final arguments were heard on November 7, they added.

A three-member tribunal is expected to deliver its verdict in mid-2026, according to two people aware of the hearing schedule. The ruling can be challenged in Indian courts, several people said.

The D1 and D3 fields, India’s first major deepwater gas project, were initially viewed as critical to boosting the country’s energy independence. However, the project faced production difficulties linked to water ingress and reservoir pressure, as well as disputes with the government over cost recovery, and failed to meet initial production expectations, according to previous public statements by Reliance and the government.

In 2012, the oil ministry told parliament in a written reply that before starting work on the KG-D6 gas fields, Reliance had estimated recoverable reserves of 10.3 trillion cubic feet (tcf) from D1 and D3, later revising the estimate to 3.1 tcf.

A spokesperson for Reliance said the arbitration proceedings are confidential and declined to comment.

The gas block, located in the Bay of Bengal off the coast of Andhra Pradesh, was awarded to Reliance in 2000 under a production sharing contract, the government said. Reliance is controlled by billionaire Mukesh Ambani.

The $30 billion claim is the largest ever pursued by the Indian government against a corporation, and centres on its allegation that mismanagement by Reliance and BP resulted in the loss of most of the gas reserves in the D1 and D3 fields, three people said.

In 2011, Reliance sold a 30% stake in 21 oil and gas production sharing contracts, including the KG-D6 block, to BP for $7.2 billion.

Under the production sharing contract, disputes between Reliance and the government are required to be settled through a mutually agreed arbitration tribunal.

Two individuals told Reuters the government argued during the hearings that Reliance had estimated recoverable reserves of around 10 tcf from the D1 and D3 fields but had produced only about 20% of that amount.

The government said Reliance and BP should compensate it for the value of the shortfall, the two people said. Reliance and BP disputed that they owed any compensation, according to the same Reuters sources.

In a public statement in February 2020, when Reliance announced it had stopped production from the D1 and D3 fields, the company said overall production from the block that includes those fields had reached 3 tcf of gas equivalent. The statement did not specify how much of that production came from D1 and D3.

Under the contract, Reliance and its partners were allowed to recover costs from oil and gas sales before sharing profits with the government, according to previous public statements by both parties. The government’s profit share was 10% in the first year, and could rise later once costs were recovered, the government has said.

During the arbitration hearings, the government justified its $30 billion compensation demand by arguing that it owned any gas discovered under the contract and that mismanagement had led to the loss of most of the reserves, two people said.

The government alleged that Reliance mismanaged the fields by adopting what it described as “unduly aggressive” production methods, extracting gas from fewer wells than originally planned.

It said Reliance drilled 18 wells instead of the planned 31, without sufficient infrastructure, resulting in damage to the reservoir, according to the people familiar with the matter.

(With inputs from Reuters)