RIL And Partners Reject Centre Claim On KG Basin Gas Extraction

27 May 2026 CW Team

The appeals relate to a demand by the oil ministry of USD one point four seven billion for production in the seven years ending March 31, 2016 of about 338.332 million British thermal units, which the Centre alleges had seeped from ONGC blocks into the KG-D6 area. Counsel for the companies argued before the bench that migration can occur naturally because of pressure differences and cannot be attributed to deliberate extraction. It was submitted that ONGC had not operationalised extraction in its blocks for 10 years and that quantification of any alleged siphoning would be inherently problematic.

Senior counsel countered the high court division bench judgment on the ground that it impermissibly imported constitutional doctrines such as Article 297 and the public trust doctrine into what is essentially a contractual arbitration dispute under the production sharing contract. They urged that the contractual framework envisages maximising resource exploitation by contractors bearing capital risk and operational cost, and that the arbitral tribunal had correctly held that extraction of naturally migrated gas was permitted. The companies warned that undue interference with arbitral awards could undermine investor confidence, particularly where foreign partners are involved.

Reference was also made to the 2018 international arbitration in which a majority rejected the Centre's claim of USD one point five five billion and awarded USD eight point three million to the three partners. The bench declined a plea to keep the hearing on hold while mediation or conciliation was pursued and listed the matter to resume on Friday. The proceedings will continue before the same bench.

Reliance Industries Ltd and its two offshore partners challenged the Centre's allegation in the Supreme Court that they unjustly extracted gas which migrated from a state-owned ONGC field into the Krishna-Godavari basin contract area. A bench of the Chief Justice and two other judges heard appeals by the three firms against a Delhi High Court order that set aside an arbitral award in their favour. The firms maintain that they operated within their licensed geographical limits. The appeals relate to a demand by the oil ministry of USD one point four seven billion for production in the seven years ending March 31, 2016 of about 338.332 million British thermal units, which the Centre alleges had seeped from ONGC blocks into the KG-D6 area. Counsel for the companies argued before the bench that migration can occur naturally because of pressure differences and cannot be attributed to deliberate extraction. It was submitted that ONGC had not operationalised extraction in its blocks for 10 years and that quantification of any alleged siphoning would be inherently problematic. Senior counsel countered the high court division bench judgment on the ground that it impermissibly imported constitutional doctrines such as Article 297 and the public trust doctrine into what is essentially a contractual arbitration dispute under the production sharing contract. They urged that the contractual framework envisages maximising resource exploitation by contractors bearing capital risk and operational cost, and that the arbitral tribunal had correctly held that extraction of naturally migrated gas was permitted. The companies warned that undue interference with arbitral awards could undermine investor confidence, particularly where foreign partners are involved. Reference was also made to the 2018 international arbitration in which a majority rejected the Centre's claim of USD one point five five billion and awarded USD eight point three million to the three partners. The bench declined a plea to keep the hearing on hold while mediation or conciliation was pursued and listed the matter to resume on Friday. The proceedings will continue before the same bench.

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