Why govt wants $2.81 billion from Reliance, its partners: ONGC gas migration case explained

The Union government has issued a $2.81 billion demand notice to Reliance Industries Ltd (RIL) and its partners, including BP Plc, over alleged gains from producing and selling natural gas that may have migrated from a state-owned Oil and Natural Gas Corporation (ONGC) block.

The demand follows a recent court ruling overturning an arbitration award in the companies’ favour.

"Consequent upon the Division Bench judgment, the Ministry of Petroleum and Natural Gas has raised a demand of USD 2.81 billion on the PSC contractors namely Reliance Industries Ltd, BP Exploration (Alpha) Ltd and NIKO (NECO) Ltd," Reliance said in a stock exchange filing.

What triggered the demand?

The dispute dates back to July 2013, when ONGC suspected that gas from its Krishna Godavari basin blocks KG-DWN-98/2 (KG-D5) and G-4 was migrating into Reliance’s adjoining KG-D6 block. It felt that at least four wells that Reliance drilled on the borderline with KG-D5 may have drained out its resources as well.

In May 2013, ONGC filed a writ in the Delhi High Court seeking compensation for the loss.

On September 10, 2014, the court disposed of the petition and directed the government to take a decision, after it received a report from an independent panel set up by ONGC and RIL.

An independent third-party study by global consultant DeGolyer and MacNaughton (D&M) in 2015 confirmed reservoir connectivity between the two blocks.

Acting on the study’s findings, the government set up a committee led by former Delhi High Court Chief Justice Ajit Prakash Shah, which concluded that Reliance had unfairly benefited from the migration of gas and that the Indian government, rather than ONGC, was entitled to claim compensation. All mineral resources are the property of the government of India.

How has the dispute unfolded?

The government originally sought $1.55 billion from Reliance, BP, and former partner Niko Resources for producing gas that allegedly migrated from ONGC’s fields between April 2009 and March 2016.

In July 2018, the international arbitration tribunal ruled in favour of Reliance and its partners, rejecting the government's demand.

The Delhi High Court initially upheld the arbitration ruling in May 2023. However, a division bench overturned that decision in February 2024, paving the way for the government’s latest demand. Reliance said the letter of demand was received by the company on March 3, 2025.

What has Reliance said?

Reliance maintains that the latest demand is unsustainable and plans to challenge the ruling in the Supreme Court.

"The company is legally advised that the Division Bench judgment and this provisional demand are unsustainable. The company is taking steps to challenge the judgment of the Division Bench of Hon'ble Delhi High Court," it said.

"The company does not expect any liability on this account," it added.

What next?

Reliance and BP are expected to appeal the Delhi High Court's latest decision, and the case will likely move to the Supreme Court.