India Seeks Billions From Key Upstream Players Like Reliance And Bharat Petroleum.

New Delhi; December 2025: The Indian government is demanding over $30 billion in compensation from Reliance Industries and BP for their failure to produce contracted gas volumes from two offshore fields, as per official government sources.

The case has been running since 2016 at an arbitration tribunal, with the final ruling expected in mid-2026. The dispute concerns gas production from the D1 and D3 deepwater gas fields in the D6 block in the Krishna Godavari basin, India’s first major offshore gas projects.

The 03 member tribunal is expected to deliver its verdict in mid-2026, two people aware of the hearing schedule said. The verdict can be challenged in Indian courts, several people said. “The matters which are referred to in the report are entirely sub judice and would be determined in accordance with the laws of the country“, Reliance said in the statement.

A spokesperson for London-based BP, a Reliance partner in the fields, declined to comment. The D1 and D3 fields, India’s first major deepwater gas project, were seen as key to bolstering the country’s energy independence when first developed.

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 contract.

The $30 billion claim is the largest ever pursued by the Indian government against a corporation and centres on its allegation that mismanagement by the companies resulted in the loss of most of the reserves in D1 and D3, as per official sources.

In 2011, Reliance sold a 30% stake in 21 oil-and-gas production sharing contracts (PSCs) that Reliance operates in India, including the KG-D6 block, to BP for $7.2 billion. Under the production sharing contract between Reliance and the Indian government, disputes must be settled by a mutually agreed arbitration tribunal.

Official sources informed that the government argued in the arbitration that Reliance had estimated recoverable gas reserves from D1 and D3 fields at about 10 trillion cubic feet but had produced only about 20% of that.

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

In a public statement in February 2020 to announce it had ceased production at the D1 and D3 fields, Reliance said that overall production from the block that includes those fields had reached 3 tcf of gas equivalent. It was not clear from the statement how much of the gas came from the D1 and D3 fields.

Under the contract with the government, Reliance and its partners were allowed to recover costs from gas and oil sales before sharing profits with the government, both Reliance and the government have said in previous public statements. The government’s profit share was 10% in the first year and under the contract could rise subsequently once costs were recovered, the government has said in previous public comments.

During the arbitration hearings, the government justified its demand of $30 billion in compensation by saying that it owned any gas discovered under the contract and that mismanagement had led to most of the reserves being lost, two people said. It alleged that Reliance mismanaged the fields by pursuing what the government argued was “unduly aggressive” production methods, which involved extracting gas from fewer wells than the number initially planned, two people said.

The government says Reliance used only 18 wells, instead of 31 planned, without adequate infrastructure, which resulted in damage to the reservoir, they said. However, the high-profile project was plagued by production difficulties related to water ingress and reservoir pressure, as well as cost-recovery disputes with the government, and failed to live up to initial production hopes, previous public statements by Reliance and the government show.

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

Development of the gas reserves at the D1 and D3 fields had proven to be challenging both in technical terms and in financial terms both Reliance and BP had a production cost recovery dispute with the government and reported water ingress and reservoir pressure problems. In addition to all that, production failed to live up to expectations.

According to Reliance Industries, gas production from the D6 block contributes as much as 30% of India’s total natural gas output, or 30 million cubic metres of gas. The company also said on its website that, together with BP, it will be starting production from three more deepwater fields in the same basin.

The Krishna Godavari basin is India’s largest offshore oil and gas region. It has also become the focus of more than one dispute between operators and the government. A recent report in Fortune India said that Reliance and its partners had invested some $10 billion in exploration and production in the basin since its discovery in the early 2000s. Since then, gas production has quickly moved to a peak, and the pricing mechanism agreed with the government in New Delhi has led to slower than desired cost recovery, the report said.

The International Energy Agency forecast earlier this year that India could see a 60% surge in natural gas demand by 2030, not least in response to the expected growth in supply of liquefied natural gas.

The report, India Gas Market Report: Outlook to 2030, shows the country’s gas consumption is set to reach 103 billion cubic metres (bcm) annually by the end of the decade. Following over a decade of slow growth and periodic declines, India’s natural gas demand increased by more than 10% in both 2023 and 2024, indicating an inflection point. While total gas consumption in 2023 was only marginally higher than 2011 levels, three key factors are now converging to drive substantial growth: rapid infrastructure expansion, recovering domestic production, and an expected easing of global gas market conditions.

“India’s gas market is entering a new phase of growth, supported by significant infrastructure development and clear policy direction“, said IEA Director of Energy Markets and Security Keisuke Sadamori. “The prospect of higher gas demand in India coincides with an expected wave of new global LNG supply. However, it will require careful planning and market coordination to ensure supply security and to help gas to compete in a price-sensitive market“.

Infrastructure development is playing a crucial role in enabling market growth. Since 2019, India has almost quadrupled its number of compressed natural gas (CNG) stations and more than doubled the number of residential gas connections, while extending its transmission pipeline network by 40%. By 2030, the number of CNG stations and residential connections is expected to nearly double again, with the gas transmission grid expanding by an additional 50%.

The city gas distribution sector is expected to lead consumption growth in India between now and 2030, supported by rapid CNG infrastructure expansion and competitive pricing against liquid fuels. The heavy industry and manufacturing sectors are expected to add around 15 bcm of demand during this period, while gas use in oil refining is forecast to increase by more than 04 bcm as more refineries connect to the network.

India’s domestic gas production, which met 50% of demand in 2023, is projected to grow gradually, reaching just under 38 bcm by 2030. This would put it around 8% above 2023 levels. The limited growth in domestic supply means India’s LNG imports will need to more than double to around 65 bcm a year by 2030 to meet rising demand.

India is looking to increase the share of gas in its energy mix and the report identifies potential for even higher growth under an accelerated scenario, where targeted policy measures could push total demand to approximately 120 bcm by 2030, which is overseen as a comparable figure to the current gas consumption of South America. This scenario would require additional policy support to drive higher utilisation of gas-fired power plants, faster adoption of LNG in heavy-duty transport, and more rapid expansion of city gas infrastructure.

Looking ahead, the report emphasises the need for strategic planning in LNG procurement and import infrastructure. As legacy contracts expire, India faces a widening gap between contracted supply and projected demand after 2028, potentially increasing exposure to spot market volatility unless new long-term contracts are secured in the coming years.

Team Maverick.