KG-D6 row: Niko tells SC ONGC didn’t develop fields, rejects gas theft claim
Mumbai: In the ongoing KG Basin gas transit dispute, Canada’s Niko Resources has approached the Supreme Court against state-run Oil and Natural Gas Corp. Ltd (ONGC) had failed to adequately develop neighboring gas fields and falsely claimed that gas was “stolen” from the block operated by the Reliance-led consortium.
The case is part of a long-running legal battle over alleged gas migration in the KG-D6 basin operated by a consortium led by Reliance Industries Ltd (RIL).
On the fourth day of the hearing before the three-judge bench led by chief justice of India Surya Kant, Niko Resources argued that the directorate general of hydrocarbons (DGH) had all the reservoir data but failed to act on time. Niko’s lawyer Kapil Sibal said, “You had all the data provided by me, all the data provided by Reliance. You would have known from the data that there was a reservoir. You are guilty.”
Sibal argued that under the production sharing agreement (PSC) with the government, a joint development between RIL and ONGC could not have been considered as ONGC had not fully developed its block on time and this lack of development might have led to imbalance in production.
He said the gas flow was a natural and largely uncontrollable phenomenon driven by geological conditions, not human intervention.
The next hearing of the case will be held on May 25.
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 had expressed concerns that gas reservoirs in its blocks could be linked to those in the KG-D6 field. 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 operated by the RIL-led consortium.
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.
Of course, Niko exited its 10% stake after settling with partners RIL and BP for $36 million in 2019. The Canadian company defaulted on cash exploration payments for its investment share in the development of the gas field, leading to arbitration between the partners. After Niko’s departure, 66.67% of the asset belonged to Reliance and 33.33% to BP.
The Center objected to the award. While a single judge bench of the Delhi High Court ruled in favor of the RIL-led consortium in 2023, the division bench set aside this 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.
