New Delhi, Dec 29: The Indian government is seeking more than $30 billion in compensation from Reliance Industries and BP in an ongoing arbitration case, alleging that the companies failed to produce gas from offshore fields in the Krishna Godavari basin, people familiar with the matter said. This is reportedly one of the largest claims made by New Delhi against a private corporation.
The dispute centres on two deepwater natural gas fields known as D1 and D3, part of the D6 block off the coast of Andhra Pradesh. When work began, recoverable reserves in the KG-D6 block were estimated highly, but production from D1 and D3 fell short of expectations before output declined significantly. India says the shortfall resulted from alleged mismanagement and underproduction by the partners.
Longrunning Tribunal Case
An arbitration hearing on the matter has been underway in India since 2016, with final arguments heard by a three-member tribunal on Nov. 7, according to sources familiar with the process. The panel is now expected to deliver its verdict in mid-2026, and that decision could be further appealed in Indian courts.
India contends that under the production-sharing contract governing the KG-D6 block, the government owns the gas discovered and that the companies should compensate the state for the volume not extracted. In arguments to the tribunal, officials pointed to what they described as “unduly aggressive” production methods and the drilling of fewer wells than initially planned, which they say damaged the reservoir and led to significant losses.
Reliance and BP have disputed the government’s claims, insisting they met their contractual obligations. Both companies have declined to comment on ongoing arbitration proceedings, citing confidentiality.
Strategic and Economic Implications
The D1 and D3 fields were among India’s earliest major deep-water gas projects and were seen as key to strengthening the country’s energy independence when first developed. Production from the D1 and D3 fields fell far below initial expectations, leading to significant underproduction.
A successful claim for such a large sum could have broad ramifications for India’s energy sector and for future investor confidence, especially among international partners in offshore and upstream hydrocarbon projects.
What Happens Next
The tribunal’s expected mid-2026 ruling will be closely watched by industry and legal analysts. Should India prevail, the judgment could redefine how contractual shortfalls are valued and compensated under production-sharing agreements, particularly in deep-water and other technically challenging environments.
Also Read | Reliance Stops Russian Crude Imports Ahead of Western Sanctions Deadline
