Niko Tells Supreme Court ONGC Failed to Exploit KG-D6 Fields, Rejects Allegations of Gas Theft
Mumbai: Niko Resources Tells Supreme Court ONGC Failed to Develop Adjacent Gas Fields
Mumbai: Canada's Niko Resources has made a key argument in the ongoing KG-Basin gas migration dispute before the Supreme Court. The company claims that state-run Oil and Natural Gas Corp. Ltd (ONGC) did not adequately develop its adjacent gas fields, leading to allegations of "theft" of gas from the block operated by the Reliance-led consortium.
The case is part of a long-running legal battle over alleged gas migration in the KG-D6 basin, which was operated by a consortium led by Reliance Industries Ltd (RIL). On the fourth straight day of hearing before a three-judge bench led by Chief Justice of India Surya Kant, Niko Resources argued that the directorate general of hydrocarbons (DGH) had all the reservoir data, but did not act in time. According to the company, the DGH had all the necessary data to identify the reservoir, but failed to take necessary action.
Niko's counsel, Kapil Sibal, argued that under the production sharing contract (PSC) with the government, a joint development between RIL and ONGC could not have been considered since ONGC had not fully developed its block on time. This lack of development may have led to an imbalance in output. Sibal further stated that gas flow is a natural and largely uncontrollable phenomenon, driven by geological conditions and not human intervention.
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Timeline of the Case
| Date | Event |
|---|---|
| April 2000 | RIL and its partners signed a production sharing contract (PSC) with the government for the KG-D6 block off the coast of Andhra Pradesh. |
| 2013 | ONGC raised concerns that gas reservoirs in its blocks might be connected to those in the KG-D6 field. |
| 2015 | DeGolyer and MacNaughton (D&M) concluded that gas worth over ₹11,000 crore had migrated from ONGC’s fields to KG-D6. |
| November 2015 | The Centre issued a demand notice seeking around $1.5 billion plus interest. |
| 2016 | RIL, BP and Niko initiated arbitration. |
| 2018 | A three-member tribunal ruled 2:1 in favour of the consortium, holding that the PSC did not prohibit the extraction of naturally migrated gas. |
| 2019 | Niko exited its 10% stake after settling with its partners RIL and BP for $36 million. |
| 2023 | A single-judge bench of the Delhi High Court ruled in favour of the RIL-led consortium. |
| February 2025 | A division bench set aside the single-judge bench's decision, paving the way for recovery proceedings against the consortium. |
The matter will next be heard on 25 May. The case dates back to April 2000, when RIL and its partners signed a production sharing contract (PSC) with the government for the KG-D6 block off the coast of Andhra Pradesh. RIL holds a 60% stake in the block, BP 30%, and Niko the remaining 10%.
Investor Takeaway
ONGC's alleged gas theft claims may face scrutiny due to Niko's counterarguments.
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