Mukesh Ambani-led Reliance Industries Ltd and its partner BP Plc faced a setback when the Delhi High Court overturned an international arbitration tribunal’s ruling, which had previously exonerated the duo from paying compensation for gas allegedly migrated from adjoining fields. The court’s ruling comes after the government’s challenge to the arbitration award, which had dismissed claims for $ 1.55 billion in compensation related to the gas migration issue.
The dispute dates back to 2013, when ONGC suspected the migration of gas from its adjacent blocks to Reliance’s KG-D6 block. The issue escalated when ONGC requested the Directorate General of Hydrocarbons (DGH) for data regarding the connectivity of the gas reservoirs between the blocks. ONGC’s claims were based on evidence suggesting that gas from the ONGC-controlled areas had migrated into Reliance’s KG-D6 fields, potentially depriving ONGC of its resources.
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Following extensive studies, including an independent report from DeGolyer and Mac Naughton (D&M), which confirmed the gas migration, ONGC filed a petition against the government and Reliance. A subsequent report by a committee led by former Delhi High Court Chief Justice Ajit Prakash Shah concluded that while gas had migrated from ONGC’s blocks, no criminal wrongdoing was found on Reliance’s part. However, the committee ruled that the Indian government, not ONGC, was entitled to restitution.
Despite these findings, the Ministry of Petroleum and Natural Gas sought $ 1.55 billion in restitution from Reliance, citing unjust enrichment from the migrated gas. Reliance contested the claims and turned to arbitration, which eventually resulted in a 2018 ruling in favor of Reliance and its partners. The arbitration tribunal rejected the government’s demand and awarded compensation to Reliance.
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The government, dissatisfied with the arbitration outcome, approached the Delhi High Court, which in May 2023 upheld the arbitration award. However, in a new twist, a division bench of the Delhi High Court set aside the May 2023 decision on February 15, 2025. The bench ruled that the arbitration award contradicted established law and was not consistent with public policy.
The ruling marks a critical juncture in the long-running dispute between Reliance, ONGC, and the government over the KG-D6 gas block. While Reliance has yet to comment on the latest court decision,
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