KG Basin row: RIL claims returns to govt surpass what ONGC could have delivered

New Delhi: Reliance Industries Ltd (RIL) told the Supreme Court on Thursday that developing the KG-D6 basin provides much higher returns to the government than a potential operation by state-owned ONGC.

On the third day of discussions in the long-running gas transit dispute, the RIL-led consortium claimed to have proposed joint development with ONGC as early as 2002; this is an initiative that the government claims it has failed to facilitate. RIL also defended itself by arguing that its timely issuance prevented a huge loss to the exchequer and that the government got more from RIL’s production than ONGC would have gotten even if it had started operations a decade ago.

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 calling natural gas a “fugitive mineral”. He argued that, unlike static minerals such as coal, gas naturally migrates from areas of high pressure to areas of low pressure, regardless of contract lines.

“This is an artificial boundary against nature in the convention. Please do not blame the people who simply removed what came there. And their extraction may never have happened. The cost of ONGC would have been at least 1.4 billion (when ONGC would happen),” Singhvi said.

Development proposal

Singhvi also claimed that RIL had proposed joint development with ONGC as early as 2002. He argued that the directorate general of hydrocarbons (DGH) did not act on this proposal even though it had the authority to establish a joint venture after the first oil field discoveries.

Singhvi argued in court that ONGC could not match the financial returns RIL was providing to the state even with a ten-year head start. “Not today, but eventually, I would do the math that there is a huge gain for the government that they would never have made even with the development of ONGC 10 years ago. First, this would have come after 10 years, second, they would have lost multiple investments, and third, their share would have been zero or close to zero,” he said.

Kapil Sibal, senior advisor at Niko Resources, a Canadian company that is part of the consortium and has a 10% stake in the project, said India urgently needs energy as it establishes artificial intelligence centers across the country. He argued that the oil and gas industry depends on foreign direct investment because it requires heavy investment. He also argued that if ONGC stops the consortium’s operations following allegations of gas theft, the Indian government will have to purchase gas from international markets at higher rates as ONGC is yet to start its own operations.

Niko gave up its 10% stake in the project in 2019 after reaching an agreement with its partners for $ 36 million. The company defaulted on cash exploration payments for its investment share in the development of the gas field, which led to arbitration between the partners. After Niko’s departure, 66.67% of the asset belonged to Reliance and 33.33% to BP. The gas transit dispute begins before Niko’s departure.

The next hearing will take place on May 22, when Niko Resources is expected to present further arguments.

Origin of the dispute

The case dates back to April 2000, when RIL and its partners signed a production sharing agreement (PSC) with the government for the KG-D6 block off the Andhra Pradesh coast. RIL holds 60% stake in the block, BP 30% and Niko the remaining 10%.

In 2013, ONGC expressed concerns that gas reservoirs in its blocks could be linked to those in the region. KG-D6 area. RIL and ONGC have jointly appointed US consultancy firm DeGolyer and MacNaughton (D&M) to study the matter. In 2015, D&M concluded that the value of the gas was above 2015. ₹11,000 crore had migrated from ONGC’s fields to KG-D6.

Following the report, the Center constituted a committee headed by former Delhi High Court Chief Justice AP Shah, which concluded that RIL was “unjustly enriched” and should pay compensation to the government. In November 2015, the oil ministry issued a demand notice seeking approximately $1.5 billion plus interest.

RIL, BP and Niko filed for arbitration in 2016. In 2018, a three-member tribunal ruled 2:1 in favor of the consortium and ruled that the PSC does not prohibit the extraction of naturally transported gas as long as production occurs within the contract area.

The Center objected to the award. While a single judge of the Delhi High Court ruled in favor of the RIL-led consortium in 2023, a division bench set aside the order 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.