Reliance Denies Report of Govt Demanding $30 Bn over Production Losses at KG Basin

Reliance Industries on December 29 rejected an earlier report which claimed that the Centre has demanded $30 billion from the company and its partner British Petroleum (BP) over production losses at the Krishna-Godavari (KG) D6 gas field.

"The contents of the report titled 'India claims $30 billion from Reliance Industries, BP for underproduction from gas field, sources say' are factually incorrect." Reliance stated. It added that the publication of the report, based on unnamed and unidentified sources, is inappropriate and irresponsible.

The company further said that there is no claim of $30 billion. "The claim made by Government of India in relation to KG D6 Block is of the order of $247 million which has been appropriately and consistently disclosed in the company’s annual audited financial statements, in accordance with its disclosure requirements," Reliance said.

The clarification comes in response to the earlier report by Reuters which claimed that the government had made the demand as the companies failed to produce the amount of natural gas they had promised from offshore gas fields.

It had further claimed that the KG D6 gas field dispute began in 2016 and the case is being allegedly heard by an arbitration panel. The dispute was about two deep-sea gas fields called D1 and D3, located in the Krishna-Godavari basin off the coast of Andhra Pradesh. Reuters had reported that final arguments in the case were heard on November 7, with a decision expected by mid-2026, while the final ruling would remain open to challenge in the courts.

What Report Claimed

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 reportedly 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 and hence got involved in the dispute.

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