India is seeking over $30 billion in compensation from Reliance Industries and BP in an arbitration case for gas. It says the companies failed to produce from offshore fields, as per three people with knowledge of the matter.

A tribunal has been hearing the dispute in India since 2016 over gas produced from two deepwater fields, D1 and D3, in the D6 block of the Krishna Godavari basin, seven individuals with knowledge of the proceedings said. Final arguments took place on November 7, they said.

The three-member tribunal is expected to deliver its verdict in mid-2026, two people aware of the hearing schedule said.

The D1 and D3 fields, India’s first major deepwater gas project, were seen as key to bolstering the country’s energy independence when first developed. However, the high-profile project was plagued by production difficulties related to water ingress and reservoir pressure, as well as cost-recovery disputes with the government, and failed to live up to its initial production hopes.

In 2012, the Oil Ministry told Parliament that prior to commencing the work on the D6 gasfields, Reliance had estimated the recoverable reserves from D1 and D3 at 10.3 trillion cubic feet (tcf) before revising that down to 3.1 tcf.

A spokesperson for London-based BP, a Reliance partner in the fields, declined to comment. Spokespeople for India’s federal oil, law and information ministries and the PM’s office did not reply to requests seeking comment.

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

The $30 billion claim is the ‍largest ever pursued by the Indian Government against a corporation and centres on its allegation that mismanagement by the companies resulted in the loss of most of the reserves in D1 and D3, the three-member tribunal said.

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

Under the production sharing contract between Reliance and the Indian Government, disputes must be settled by a mutually agreed arbitration tribunal.

Two individuals said that the government argued in the arbitration that Reliance had estimated recoverable gas reserves from D1 and D3 fields at about 10 trillion cubic feet but had produced only about 20% of that.

The government said that Reliance and BP should pay the government the value of the shortfall, two people said. In their arguments to the tribunal, Reliance and BP disputed that they owed anything to the government, the two people said.

In a public statement in February 2020 to announce it had ceased production at the D1 and D3 fields, Reliance said that overall production from the block that includes those fields had reached 3 tcf of gas equivalent. It was ⁠not clear from the statement how much of the gas came from the D1 and D3 fields.

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

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

It alleged that Reliance mismanaged the fields by pursuing what the government argued was “unduly aggressive” production methods, which involved extracting gas from fewer wells than the number initially planned, two people ⁠said.

The government says Reliance used only 18 wells, instead of 31 planned, without adequate infrastructure, which resulted in damage to the reservoir, they said.

Reliance refutes Reuters report

Meanwhile, RIL refuted the Reuters report as “factually incorrect, inappropriate and irresponsible.” The firm said, “There is no claim of $30 billion against Reliance and BP. The claim made by the Government of India in relation to the KG D6 block is of the order of $247 million, which has been appropriately and consistently disclosed in the company’s annual audited financial statements, in accordance with its disclosure requirements.”

The $30 billion claim is the largest-ever pursued by the Centre against a firm.

(With Hindu Bureau inputs)

Published – December 29, 2025 10:37 pm IST