New Delhi, May 19 The Supreme Court on Tuesday commenced final hearing on appeals of Reliance Industries Limited (RIL) and two other foreign firms challenging a Delhi High Court verdict that set aside an arbitral award in their favour in the Krishna-Godavari Basin gas migration dispute with the Centre.
RIL, BP Exploration (Alpha) Limited and Niko (NECO) Limited have assailed the February 14, 2025 order of the high court setting aside an order of the single judge bench which had upheld the arbitral award in favour of Reliance Industries and its two partners for allegedly siphoning off gas from deposits they had no right to exploit.
In July 2018, an international arbitration tribunal rejected the Indian government's claim of USD 1.55 billion against RIL and its partners for allegedly siphoning gas from deposits they had no right to exploit.
The three-member arbitral panel by a majority of 2-1 had also awarded USD 8.3 million compensation to the three partners, Reliance had said in a regulatory filing.
A bench comprising Chief Justice Surya Kant and justices Joymalya Bagchi and Vipul M Pancholi heard senior advocate Abhishek Singhvi on behalf of RIL.
Singhvi, representing RIL, refuted the Centre's claim that RIL "siphoned" gas that had migrated from the neighbouring blocks of state-owned ONGC into RIL's KG-D6 block. He said that the gas flow was a purely physical phenomenon driven by pressure differentials, comparing it to "osmosis".
The senior lawyer emphasized that the "theft" allegation was technically and legally flawed.
He said while the government contributed zero capital and bore no exploration risk, it remained the ultimate beneficiary of all extracted gas.
"The gas belongs to the government. It is the same receiver," Singhvi said, adding that the government receives royalties and profit shares regardless of which block the gas originated from.
He said that RIL spent USD 7.4 billion on an ultra-deepwater project, a "frontier of subsea engineering" where other operators, including ONGC had struggled to produce for years.
He said by supplying gas to priority sectors like fertilizer and power at government-fixed prices (USD 2.8 to the project saved India USD 13.7 billion in subsidies).
"It is the single largest success story in domestic gas production, contributing 30 percent of India's output. Yet, I stand accused of theft," Singhvi said.
The hearing on the pleas would commence on Wednesday.
Earlier, a division bench of the high court had allowed the appeal of the central government challenging the May 9, 2023 judgment of a single-judge which was passed in favour of Mukesh Ambani-owned RIL.
The single judge, while upholding the arbitral award, had said it was not persuaded to hold that the conclusions drawn by the arbitral tribunal were such that no reasonable person would reach.
The oil ministry on November 4, 2016, slapped a demand of USD 1.47 billion on Reliance-BP-Niko combine for producing in seven years ending March 31, 2016 about 338.332 million British thermal units of gas that had seeped or migrated from ONGC's blocks into their adjoining KG-D6 in the Bay of Bengal.
After deducting USD 71.71 million royalty paid on the gas produced and adding an interest at the rate of LIBOR plus 2 per cent, totalling USD 149.86 million, a total demand of USD 1.55 billion was made on Reliance, BP and Niko.
Reliance had disputed the government's demand as being based on a "misreading and misinterpretation of key elements of the PSC", and it said that such a demand was without precedent in the oil and gas industry.
It on November 11, 2016, slapped an arbitration notice. Reliance is the operator of the KG-D6 block with 60 per cent interest while BP holds 30 per cent.
The remaining 10 per cent is with Niko Resources.
The government's compensation claim flowed from the report of the Justice (retd) A P Shah Committee.
The Shah panel, in its August 28, 2016, report, concluded that there has been "unjust enrichment" to the contractor of the block KG-DWN-98/3 (KG-D6) due to the production of the migrated gas from ONGC's blocks KG-DWN-98/2 and Godavari PML.
Originally, ONGC had sued Reliance for producing gas that had migrated from its blocks KG-DWN-98/2 (KG-D5) and Godavari PML in the KG basin to adjoining KG-D6 block of Reliance.
Under the direction of the Delhi High Court, the government had appointed a one-man committee under retired Justice A P Shah to go into the issue. Shah, however, said the compensation should go to the government as it is the owner of all unproduced natural resources.
