Govt slaps RIL, partners with $2.8-billion demand notice in decade-old natural gas migration dispute

In 2016, the government had raised a demand of $1.55 billion on RIL and its partners for sale of gas that allegedly migrated from ONGC’s block. RIL took the case to an international arbitral tribunal, which ruled in its favour in 2018. Five years later, in 2023, the government appealed the arbitral award before the Delhi HC. While at first a single judge ruling of the court upheld the arbitral award, upon appeal, the Division Bench set aside that order and ruled in favour of the government.

“Consequent upon the abovementioned Division Bench judgment, the Ministry of Petroleum and Natural Gas has raised a demand of US $2.81 billion on the PSC (production sharing contract) Contractors namely Reliance Industries Ltd, BP Exploration (Alpha) Ltd and NIKO (NECO) Ltd. The letter of demand was received by the Company at 11:30 a.m. on March 3, 2025,” RIL said Tuesday in a stock exchange filing.

“The Company is legally advised that the Division Bench judgment and this provisional demand are unsustainable. The Company is taking steps to challenge the judgment of Division Bench of Hon’ble Delhi High Court. The Company does not expect any liability on this account,” RIL added.

Earlier, RIL had 60 per cent stake in the deep-water block KG-D6, while UK-based BP and Canada’s Niko held 30 per cent and 10 per cent interest, respectively. Later, however, Niko exited the block, which led to RIL’s interest rising to 66.6 per cent and that of BP rising to 33.3 per cent.

The dispute first came to light over a decade ago in 2013 when ONGC moved the Delhi HC seeking compensation for losses arising from RIL’s alleged sale of gas that the state-owned energy major believed was actually from its KG-DWN-98/2 block. ONGC had argued that at least four wells that RIL drilled in its KG-D6 block drew natural gas from the neighbouring block. In 2014, the Delhi High Court directed the government to take a call on a matter on the basis of an independent study.

Global consultant DeGolyer and MacNaughton (D&M) carried out the study. In its report, which was finalised in November 2015, D&M said that its analysis “indicated connectivity and continuity of the reservoirs across the blocks” operated by ONGC and RIL. A month later, the government constituted a single-member panel under former Delhi High Court Chief Justice AP Shah on the issue.

The panel in its report said that the government, not ONGC, was entitled to compensation from RIL since the CPSE did not own the block, and all mineral resources of the country are owned by the Government of India. Basis the Shah panel report, the government in November 2016 slapped RIL and its partners with a total demand of $1.55 billion. After that, RIL and its partners decided to go for arbitration, which eventually went in their favour.