India claims $30 billion from Reliance Industries, BP for underproduction from gas field, sources say

NEW DELHI, Dec 29 (Reuters) – India is seeking more than $30 billion in damages from Reliance Industries and BP in an arbitration case over gas the companies failed to produce from offshore fields, three people with knowledge of the matter said.

A court has been hearing the dispute since 2016 over gas produced from two deepwater fields (D1 and D3) in block D6 of the Krishna Godavari basin in India, seven people with knowledge of the hearing said. They said the last discussions took place on November 7.

The three-member court is expected to issue its decision in mid-2026, two people with knowledge of the hearing schedule said. The decision could be challenged in Indian courts, several people said.

Reuters is the first to report on the case and India’s $30 billion claim.

India’s first major deepwater gas project, the D1 and D3 fields, were seen as key to strengthening the country’s energy independence when they were first developed. But the high-profile project was plagued by production challenges related to water inflow and reservoir pressure, as well as cost recovery disputes with the government, and failed to meet initial production hopes, according to previous press releases by Reliance and the government.

In 2012, the oil ministry told parliament in a written statement that Reliance had estimated recoverable reserves in D1 and D3 at 10.3 trillion cubic feet (tcf) before starting work on the D6 gas fields and subsequently reduced it to 3.1 tcf.

A Reliance spokesman said the arbitration was confidential and did not comment on the case. A spokesman for London-based BP, Reliance’s partner in the field, declined to comment.

India’s federal ministries of oil, law and information, as well as a spokesman for the prime minister’s office, did not respond to multiple requests seeking comment.

The gas block, located in the Bay of Bengal off the southern state of Andhra Pradesh, was awarded by the Indian government in 2000 to Reliance, a company controlled by billionaire Mukesh Ambani, under a production sharing agreement.

The $30 billion claim is the largest lawsuit filed by the Indian government against a company and centers on allegations that the companies’ mismanagement led to the loss of most of the reserves in D1 and D3, three people said.

In 2011, Reliance sold a 30% stake in 21 oil and gas production sharing contracts (PSCs) it operates in India, including the KG-D6 block, to BP for $7.2 billion.

Under the production sharing agreement between Reliance and the government of India, disputes must be resolved by a mutually agreed upon arbitration tribunal.

The government argued in the arbitration that Reliance estimated recoverable gas reserves from the D1 and D3 fields at about 10 trillion cubic feet but produced only 20% of that, the two people said.

The government said Reliance and BP should pay the government for the shortfall, two people said. In their arguments to the court, Reliance and BP disputed that they owed anything to the government, the two people said.

In its press release to announce the halt of production at the D1 and D3 fields in February 2020, Reliance said that the total production in the block containing these fields reached 3 tcf of gas equivalent. In the statement, it was not clear how much of the gas came from the D1 and D3 areas.

Both Reliance and the government have said in previous public statements that under the contract with the government, Reliance and its partners were allowed to absorb costs from gas and oil sales before sharing profits with the government. The government had previously stated in its public statements that the government’s profit share was 10% in the first year and could increase later by covering the costs within the scope of the contract.

During the arbitration hearings, the government justified its $30 billion compensation claim by saying it owned the gas discovered under the contract and that mismanagement led to the loss of most of the reserves, two sources said.

The two people alleged that Reliance mismanaged the fields by following what the government said were “overly aggressive” production methods that involved extracting gas from fewer wells than the originally planned number.

The government said Reliance used only 18 wells instead of the planned 31 wells, lacking adequate infrastructure, which damaged the reservoir.