Govt Demands $30 Bn from Reliance and BP over Production Losses at KG Basin

The Centre is asking for more than $30 billion from Reliance Industries and its partner British Petroleum (BP), saying they failed to produce the amount of natural gas they had promised from offshore gas fields.

This dispute is being heard by an arbitration panel in India and has been going on since 2016.

The case is about two deep-sea gas fields called D1 and D3, located in the Krishna-Godavari (KG) basin off the coast of Andhra Pradesh. Final arguments in the case were made on November 7, and a decision is expected by mid-2026. The final ruling can still be challenged in the courts, Reuters reported citing sources.

The D1 and D3 fields were India’s first major deep-water gas project and were expected to greatly reduce India’s dependence on imported energy. However, the project ran into several problems, such as water entering the wells, pressure issues underground, and disagreements with the government over costs. As a result, gas production was much lower than originally expected.

Before starting the project, Reliance had reportedly told the government that the fields contained about 10 trillion cubic feet (tcf) of recoverable gas. Later, this estimate was reduced to 3.1 tcf. According to the government, only about 20% of the originally estimated gas was actually produced.

The KG-D6 gas block was awarded to Reliance in 2000 under a contract that allowed the company to recover its costs first and then share profits with the government. Under the contract, the government was entitled to 10% of profits in the first year, with its share increasing later once costs were recovered.

In 2011, BP bought a 30% stake in the project for $7.2 billion.

This $30 billion claim, the largest ever against a private company in India, is based on the government's belief that poor management by Reliance and BP caused most of the gas reserves to be lost. It argues that since the gas belongs to the government, the companies should pay for the gas that was not produced, Reuters added.

Specifically, the government reportedly claims that Reliance used only 18 wells instead of the 31 originally planned, and followed overly aggressive production methods without proper infrastructure. This damaged the gas reservoir and reduced output permanently.

In 2020, when Reliance announced it had stopped production from the D1 and D3 fields, it said the entire KG-D6 block had produced about 3 tcf of gas, though it did not clarify how much came specifically from those two fields.

The arbitration panel is expected to decide whether Reliance and BP must pay compensation for the gas that was never produced.