Reliance, BP Lose Decade-Old Gas Migration Dispute — Implications for India’s Energy Sector
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In a major turnaround for the Indian government, the Delhi High Court has ruled against Reliance Industries and BP, setting aside an earlier international arbitration award over a decade-old gas migration dispute. The case, centered on the KG-D6 gas block in the Krishna–Godavari Basin, has significant implications for the companies involved, India’s energy policy, regulatory risk, and corporate accountability.
Background: The Origins of the Dispute
The dispute dates to 2013, when ONGC raised concerns over geological connectivity between its KG-D5 blocks and Reliance’s KG-D6 field. ONGC alleged that natural gas was migrating from its licensed blocks into the KG-D6 block, operated by a consortium led by Reliance (with BP as a major partner).
Technical and Expert Analysis
To examine the claims, the government commissioned DeGolyer and MacNaughton (D&M), a third-party consultancy. Their 2015 report concluded there was connectivity and continuity of the reservoirs beneath ONGC’s and Reliance’s blocks, meaning gas could have migrated. D&M estimated that between 2009 and 2015, a total of 7.009 bcm of gas migrated from ONGC’s blocks into KG-D6, of which Reliance produced about 5.968 bcm.
Previous Legal Proceedings & Arbitration
In 2016, the Ministry of Petroleum demanded approximately US$1.55 billion from Reliance, BP, and partner Niko, citing “unjust enrichment” from the migrated gas. Reliance and BP referred the matter to international arbitration. In 2018, a tribunal ruled in favor of Reliance, rejecting the government’s claim.
High Court Reversal
In February 2025, a division bench of the Delhi High Court overturned the 2018 arbitral award, stating that it conflicted with India’s public policy. This decision marks a major legal defeat for Reliance and BP, which are now facing a fresh demand of US$2.81 billion from the Ministry of Petroleum.
Broader Implications for India’s Energy Sector
- Precedent for Resource Accountability: Encourages closer monitoring of migratory gas cases.
- Regulatory Risk for International Investors: Highlights potential exposure even with arbitration protections.
- Impact on PSC Contracts: May lead to clearer clauses for reservoir connectivity in future agreements.
- ONGC’s Position Strengthened: Enhances the state-run company’s leverage and confidence in disputes.
- Energy Market Dynamics: Could influence gas production plans, investments, and supply.
What Comes Next
- Reliance / BP Challenge: Companies may approach the Supreme Court to contest the ruling.
- Negotiations: Potential for structured settlements or payment plans.
- Regulatory Reforms: Ministry of Petroleum may review gas migration regulations.
- Investor Caution: Foreign investors may consider legal risks more carefully in future projects.
Conclusion
The Delhi High Court’s decision marks a turning point in a case that has spanned more than a decade. Reliance and BP’s loss carries a hefty financial demand and signals increased scrutiny for subsurface resource management. This ruling could reshape how India regulates gas reservoirs, enforces accountability, and attracts international investment, potentially shaping the future of its oil and gas industry.
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