India said to claim $30 billion from RIL, BP on gas output

By Admin

30 Dec, 2025

Background of the Arbitration Case
India is seeking over $30 billion in compensation from Reliance Industries Limited (RIL) and its partner BP in a long-running arbitration case related to offshore gas production. The claim, described as the largest ever pursued by the Indian government against a corporation, centres on alleged mismanagement of gas fields that resulted in significant loss of reserves.

The dispute relates to gas production from the D1 and D3 deepwater fields located in the KG-D6 block of the Krishna Godavari basin. A three-member arbitration tribunal has been hearing the case in India since 2016, with final arguments concluded on November 7. The tribunal is expected to deliver its verdict in mid-2026.

Importance of the D1 and D3 Gas Fields
The D1 and D3 fields were India’s first major deepwater gas project and were seen as crucial for strengthening the country’s energy independence. 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 with the Indian government.

However, the project faced several challenges, including water ingress, declining reservoir pressure, and disputes over cost recovery. As a result, the fields failed to achieve their initial production targets.

Government’s Allegations
According to people familiar with the arbitration proceedings, the Indian government has argued that Reliance initially estimated recoverable reserves of around 10 trillion cubic feet (tcf) from the D1 and D3 fields but ultimately produced only about 20% of that amount.

In 2012, the Oil Ministry informed Parliament that Reliance had first estimated recoverable reserves at 10.3 tcf before revising the figure down to 3.1 tcf. The government claims that mismanagement by Reliance and BP led to the loss of most of the reserves and that the companies should compensate the government for the value of the shortfall.

The government also alleges that Reliance followed unduly aggressive production methods. It claims the company used only 18 wells instead of the originally planned 31, and did so without adequate infrastructure, resulting in damage to the reservoir.

Reliance and BP’s Position
Reliance and BP have disputed the government’s claims during the arbitration proceedings, stating that they do not owe any compensation. In February 2020, Reliance announced that it had ceased production at the D1 and D3 fields, noting that overall production from the broader block had reached about 3 tcf of gas equivalent. However, the company did not specify how much of that production came specifically from the D1 and D3 fields.

In 2011, BP acquired a 30% stake in 21 oil and gas production sharing contracts operated by Reliance in India, including the KG-D6 block, for $7.2 billion. A BP spokesperson declined to comment on the arbitration, while spokespeople for India’s federal oil, law, and information ministries, as well as the Prime Minister’s Office, did not respond to requests for comment.

Contract Terms and Profit Sharing
Under the production sharing contract, Reliance and its partners were allowed to recover exploration and production costs from gas and oil sales before sharing profits with the government. The government’s profit share was set at 10% in the first year and could rise after cost recovery.

During the hearings, the government justified its compensation demand by stating that it owns any gas discovered under the contract and that alleged mismanagement resulted in irreversible loss of national resources.

Reliance Refutes $30 Billion Claim
Following media reports, Reliance strongly refuted the claim of a $30 billion demand, calling such reports factually incorrect and irresponsible. The company stated that there is no $30 billion claim against Reliance and BP, and clarified that the actual claim made by the Government of India in relation to the KG-D6 block is approximately $247 million. Reliance said this figure has been consistently disclosed in its audited financial statements in line with regulatory requirements.

What Lies Ahead
While reports describe the case as the largest-ever claim pursued by the Centre against a company, the arbitration tribunal’s final ruling will determine the actual liability, if any. With the verdict expected in mid-2026, the outcome will be closely watched by the energy sector, policymakers, and investors, given its implications for India’s offshore energy projects and future production sharing agreements.