RIL Argues KG Basin Arbitration Was International Dispute, Not Domestic in Supreme Court

Reliance Industries Seeks Relief in KG-Basin Gas Migration Dispute

Reliance Industries Ltd (RIL) has approached the Supreme Court, arguing that the Delhi high court erred in treating the $1.7 billion Krishna-Godavari (KG) Basin gas migration arbitration dispute as a domestic dispute. The conglomerate claims that the high court overlooked the participation of foreign partners BP Exploration and Niko Resources in the proceedings.

In a five-hour-long hearing before a bench led by Chief Justice Surya Kant, RIL's lawyer Abhishek Manu Singhvi argued that the conglomerate had not pursued the arbitration alone, but had acted as the operator under the production sharing contract (PSC) on behalf of the entire consortium comprising RIL, BP, and Niko. Singhvi contended that all investments under the PSC were made by all three parties, not just by RIL, and therefore, the profits should be divided among the three.

The senior counsel relied on the notice invoking arbitration, the statement of claim, hearing transcripts, and the arbitral award to contend that all three entities were treated collectively as the "contractor" under the PSC. According to Singhvi, the arbitration notice itself stated that RIL was initiating proceedings "for and on behalf of all constituents of the contractor," namely RIL, BP, and Niko, which held 60%, 30%, and 10% participating interests, respectively, in the KG-D6 block.

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The senior counsel argued that the Delhi high court selectively relied on portions of the arbitral award dealing with costs to conclude that BP and Niko were not parties to the proceedings. Singhvi also relied on an earlier Supreme Court ruling arising out of the same PSC, arguing that the apex court had already recognized the international character of disputes involving RIL, BP, and Niko.

Before the hearing, RIL and two other foreign firms had informed the top court that they would write to the Centre seeking mediation in the KG-basin gas migration dispute. Attorney General R. Venkataramani, however, urged the apex court to continue with the hearing in the case.

The hearing will continue on Thursday. The case dates back to April 2000, when RIL and its partners signed a PSC with the government for the KG-D6 block off the coast of Andhra Pradesh. Following Niko's exit in 2019, Reliance owns 66.67% and BP 33.33% in the asset. The dispute has its roots in ONGC's concerns that gas reservoirs in its blocks might be connected to those in the KG-D6 field.

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In 2015, DeGolyer and MacNaughton (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, along with interest.

RIL, BP, and Niko initiated arbitration in 2016. In 2018, the three-member arbitral 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.