Reliance Industries Suggests KG Basin Returns Exceed Potential ONGC Contributions

Reliance Industries Ltd Claims Higher Returns for Government in KG-D6 Basin Development

New Delhi: Reliance Industries Ltd (RIL) has told the Supreme Court that its development of the KG-D6 basin has yielded significantly higher returns for the government than a potential operation by state-owned ONGC would have achieved.

On the third day of arguments in the long-standing gas migration dispute, the RIL-led consortium claimed it had proposed joint development with ONGC as early as 2002—an initiative it alleges the government failed to facilitate. RIL further argued that its timely extraction prevented a massive loss to the exchequer, asserting that the government gained more from RIL's production than it would have even if ONGC had commenced operations a decade earlier.

A three-judge bench led by Chief Justice of India Surya Kant heard the matter for nearly four hours on Thursday. Senior counsel Abhishek Manu Singhvi, representing RIL, concluded his arguments by characterizing natural gas as a "fugitive mineral”. He argued that unlike static minerals like coal, gas naturally migrates from high-pressure to low-pressure areas, regardless of contract lines.

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Singhvi further claimed that RIL had proposed joint development with ONGC as early as 2002. He argued that the directorate general of hydrocarbons (DGH) failed to act on this proposal despite having the authority to mandate a joint venture after the initial oil field discoveries. Singhvi asserted in court that ONGC could not have matched the financial returns RIL provided to the state, even with a ten-year head start.

Senior counsel Kapil Sibal, appearing for Niko Resources—a Canadian company in the consortium that held a 10% stake in the project—said India is in desperate need of energy as it sets up AI centers across the country. He argued that because the oil and gas industry requires heavy investment, it relies on FDI. He further contended that had the consortium halted operations following ONGC’s allegations of gas theft, the Indian government would have suffered by being forced to purchase gas from international markets at higher rates, as ONGC had not yet started its own operations.

Niko exited its 10% stake in the project in 2019, after settling with its partners for $36 million. The company defaulted on cash call payments for its share of investments in the gas field's development, leading to arbitration between the partners. Following Niko's exit, Reliance owns 66.67% and BP 33.33% in the asset. The gas migration dispute predates Niko's exit.

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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%. In 2013, ONGC raised concerns that gas reservoirs in its blocks might be connected to those in the KG-D6 field. RIL and ONGC jointly appointed the US consulting firm DeGolyer and MacNaughton (D&M) to examine the issue. In 2015, D&M concluded that gas worth over ₹11,000 crore had migrated from ONGC’s fields to KG-D6.

Following the report, the Centre formed a committee headed by former Delhi High Court Chief Justice A.P. Shah, which concluded that RIL had been “unjustly enriched” and should compensate the government. In November 2015, the oil ministry issued a demand notice seeking around $1.5 billion plus interest. RIL, BP and Niko initiated arbitration in 2016. In 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 as long as production occurred within the contract area.

The Centre challenged the award. While a single judge of the Delhi High Court ruled in favour of the RIL-led consortium in 2023, a division bench set it aside in February 2025, paving the way for recovery proceedings against the consortium. RIL and its partners have now challenged the division bench’s decision in the Supreme Court.

The next hearing will take place on 22 May, when Niko Resources is expected to put forth more arguments.