In a setback for Reliance Industries Ltd (RIL), led by Mukesh Ambani, the Delhi High Court’s division bench has overturned a previous ruling by an international arbitration tribunal that favored the company in its $1.7 billion dispute with Oil and Natural Gas Corp. Ltd (ONGC) regarding alleged gas migration from neighboring fields. The bench, consisting of Justices Rekha Palli and Saurabh Banerjee, also annulled a May 2023 ruling from a single bench that had upheld the 2018 arbitration award dismissing the government’s claims. The court stated, “In light of the above, we are setting aside the order dated 9 May 2023, issued by the learned single judge, and the arbitral award from 2018, as it contradicts established legal principles. All pending applications, if any, are resolved, with each party bearing its own costs.”
This ruling represents a significant win for the Union government in its protracted legal battle with RIL over gas migration in the Krishna-Godavari (KG) basin, a matter that has been central to India’s energy exploration and production for over a decade. The decision allows the government to pursue its claim of approximately $1.7 billion against RIL and its foreign partners, while RIL retains the option to appeal the ruling in the Supreme Court.
The origins of the dispute date back to the 2000s. In April 2000, a consortium led by RIL entered into a production-sharing contract (PSC) with the Union government, granting it rights to explore and extract natural gas from the KG basin off the coast of Andhra Pradesh. This contract outlined the responsibilities, entitlements, and revenue-sharing arrangements among the parties involved.
Between 2006 and 2007, RIL reportedly drilled four development wells and commenced commercial production on 1 April 2009. The KG-D6 block operated by RIL is adjacent to ONGC’s Godavari Petroleum and Mining Lease (PML) and the KG-DWN-98/2 block. RIL holds a 60% stake in the KG-D6 block, with BP Plc owning 30% and Niko Resources holding the remaining 10%.
In July 2013, ONGC alerted the Directorate General of Hydrocarbons (DGH) about evidence indicating lateral continuity of gas pools between its fields and RIL’s block. Although both companies initially agreed to appoint an independent consultant for investigation, ONGC filed a writ petition in the Delhi High Court on 15 May 2014, naming the government, the DGH, and RIL in the case.
To investigate the gas migration, RIL and ONGC jointly hired the US-based consulting firm DeGolyer and MacNaughton (D&M). The firm’s report, submitted in November 2015, concluded that over ₹11,000 crore worth of natural gas had migrated from ONGC’s idle fields to RIL’s KG-D6 block.
