India is pursuing more than $30 billion in compensation from Reliance Industries and BP in an arbitration case over gas the government says was not produced from offshore fields, according to sources familiar with the matter.
The dispute concerns two deepwater fields, D1 and D3, located in the D6 block of the Krishna Godavari basin in the Bay of Bengal, off the coast of Andhra Pradesh. The case has been under arbitration since 2016, and final arguments were presented on November 7. A three-member tribunal is expected to deliver its verdict in mid-2026. Sources note that the decision can be challenged in Indian courts.
The D1 and D3 fields were India’s first major deepwater gas project and were initially expected to boost the country’s energy independence. However, production fell short of expectations due to technical difficulties, including water ingress and reservoir pressure issues, as well as disputes over cost recovery with the government.
When the project began, Reliance had initially estimated recoverable reserves at 10.3 trillion cubic feet (tcf), which was later revised down to 3.1 tcf, according to a 2012 statement from the oil ministry. Reliance sold a 30% stake in its 21 production sharing contracts (PSCs), including the KG-D6 block, to BP in 2011 for $7.2 billion.
The arbitration focuses on the allegation that mismanagement by Reliance and BP resulted in the loss of most of the gas reserves in the D1 and D3 fields. The government claims that the companies produced only about 20% of the estimated recoverable reserves and is seeking the value of the shortfall. Reliance and BP have argued in the tribunal that they do not owe any compensation.
In a 2020 statement, Reliance said production from the D6 block, which includes the D1 and D3 fields, had reached 3 tcf of gas equivalent, without specifying how much came from the two fields. Under the production sharing contract, the companies were allowed to recover costs from gas and oil sales before sharing profits with the government, which received 10% in the first year and a higher share once costs were recovered.
During the arbitration hearings, India argued that the fields were mismanaged by using “unduly aggressive” production methods, extracting gas from only 18 wells instead of the 31 originally planned, without sufficient infrastructure. The government said these actions damaged the reservoir and led to the loss of most of the gas reserves.
Spokespeople for Reliance and BP declined to comment on the arbitration. Officials from India’s federal oil, law, and information ministries, as well as the Prime Minister’s Office, did not respond to requests for comment.
The $30 billion claim is the largest ever pursued by the Indian government against a corporation and highlights the high stakes of India’s energy sector and its efforts to hold companies accountable for resource management.
