Indian Government Seeks ₹24,500 Crore from Reliance & BP Over ONGC Gas Field Dispute
The Indian government has issued a ₹24,500 crore demand notice to Reliance Industries and BP over alleged gains from gas migration from ONGC's block, following a Delhi High Court ruling.
New Delhi, March 4, 2025: The Indian government has issued a demand notice of $2.81 billion (approximately Rs 24,500 crore) to Reliance Industries Ltd (RIL) and its partners, including BP Plc, for the production and sale of natural gas allegedly migrating from a neighboring block owned by Oil and Natural Gas Corporation (ONGC).
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Legal Battle Over Gas Migration
This move comes after the Delhi High Court’s Division Bench ruling on February 14, 2025, which overturned a previous international arbitration tribunal verdict that had initially dismissed the government’s claims against Reliance and BP. The tribunal had ruled in July 2018 that RIL and BP were not responsible for compensating ONGC for the extracted gas.
However, following the government’s legal appeal, the single-judge bench of the Delhi High Court in May 2023 upheld the tribunal’s decision, dismissing the appeal. In a significant turn of events, the Division Bench last month ruled in favor of the Indian government, paving the way for the massive financial claim.
Breakdown of the Dispute
The dispute centers around the Krishna-Godavari (KG) Basin deep-sea block KG-DWN-98/3 (KG-D6), where Reliance Industries initially held a 60% stake, BP owned 30%, and Canadian firm Niko Resources Ltd. controlled the remaining 10%. Over time, Reliance and BP acquired Niko’s stake, and the ownership now stands at:
- Reliance Industries Ltd: 66.66%
- BP Exploration (Alpha) Ltd: 33.33%
The Indian government first raised concerns in 2016, claiming that natural gas from ONGC’s adjoining fields had migrated into Reliance’s KG-D6 block and was extracted unlawfully. It initially issued a $1.55 billion compensation claim against Reliance and its partners.
Following the latest court ruling, the Ministry of Petroleum and Natural Gas has significantly increased the demand to $2.81 billion, considering production gains over an extended period.
Reliance’s Response and Future Legal Actions
In a regulatory filing with the stock exchange, Reliance stated that it received the official demand letter on March 3, 2025. The company has strongly opposed the decision, asserting that the judgment and the subsequent financial claim are legally unsustainable.
“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 the Division Bench of the Hon’ble Delhi High Court,” Reliance said in a statement.
This indicates that Reliance and BP are likely to appeal the latest ruling, possibly taking the case to the Supreme Court of India or seeking international arbitration again.
Impact on Reliance and BP
The $2.81 billion demand poses a significant financial liability for Reliance Industries and BP, two of the largest players in India’s energy sector. The outcome of the legal battle could have far-reaching implications on:
- India’s energy policy and regulations related to hydrocarbon migration disputes.
- Foreign investments in India’s oil and gas sector, particularly by multinational corporations.
- Reliance’s financial outlook, as the company may need to allocate substantial funds for legal battles and potential settlements.
What’s Next?
- Appeal by Reliance and BP: The companies are expected to challenge the Delhi High Court Division Bench ruling in higher courts.
- Possible government negotiations: The Indian government might negotiate a settlement instead of enforcing the full penalty immediately.
- Impact on India’s energy exploration policies: This case could lead to new regulations governing gas migration disputes between private and public sector players.
With billions of dollars at stake, all eyes will be on India’s top judicial authorities and their final verdict on this high-profile corporate dispute. Stay tuned for further updates on this evolving legal and financial battle.
