Reliance-led consortium moves Supreme Court over $1.7 billion KG Basin arbitration setback

New Delhi: A consortium led by Reliance Industries Ltd (RIL) has approached the Supreme Court challenging a Delhi high court order that overturned a $1.7 billion arbitral award in its favour in the long-running Krishna-Godavari (KG) Basin gas migration dispute with state-run Oil and Natural Gas Corp. (ONGC).
The consortium, which includes British Petroleum Exploration (Alpha) Ltd and Niko (NECO), filed petitions on 14 May. Both BP and Niko have also filed separate appeals contesting the Delhi high court's ruling.
'Yes, we filed the plea against the high court ruling last week. It remains to be seen when the matter will be listed for hearing,' a person familiar with the matter told Mint, requesting anonymity.
An email sent to Reliance on Tuesday afternoon remained unanswered.
The Delhi high court's order, issued on 14 February by Justices Rekha Palli and Saurabh Banerjee, set aside a May 2023 single-judge order that had upheld the arbitral award. The division bench declared the award unenforceable, citing multiple legal infirmities.
Specifically, the court pointed to four reasons: RIL's failure to disclose a crucial 2003 report (constituting patent illegality); the arbitration not qualifying as international; violation of the public trust doctrine in the context of natural resources; and unjust enrichment, as the consortium profited from gas belonging to ONGC or the government.
The verdict was seen as a major win for the central government in one of India's most high-profile energy sector disputes. It also cleared the path for the Centre to recover over ₹ 12,800 crore (approximately $1.7 billion) from the consortium.
In a stock exchange filing in March, RIL disclosed that the Ministry of Petroleum and Natural Gas had raised a separate demand of $2.81 billion from RIL, BP, and Niko, based on the gas migration findings.
The case dates back to April 2000, when RIL and its partners signed a production-sharing contract (PSC) with the government for the KG-D6 block, off the Andhra Pradesh coast. RIL holds a 60% stake in the block, BP owns 30%, and Niko the remaining 10%.
In 2013, ONGC raised concerns that gas reservoirs in its blocks might be connected to those in the KG-D6 field. A joint study commissioned by both parties, and conducted by US-based consultant DeGolyer and MacNaughton, confirmed in 2015 that significant quantities of gas had migrated from ONGC's blocks into RIL's.
The report estimated the migrated gas to be worth over ₹ 11,000 crore. In response, a panel led by former Delhi high court chief justice A.P. Shah recommended compensation for what it termed 'unjust enrichment.' The government subsequently sought $1.5 billion in compensation, plus $174 million in interest.
The consortium contested the claim and initiated arbitration in 2016. In 2018, a three-member tribunal chaired by Singapore-based arbitrator Lawrence Boo ruled 2:1 in favour of RIL and its partners, concluding that the PSC permitted the extraction of naturally migrated gas as long as it occurred within the contract area.
The tribunal also directed the government to pay $8.3 million in arbitration costs.
The government then challenged the award in the Delhi high court, alleging that RIL had extracted gas without proper authorization and had withheld critical information about reservoir connectivity since 2003.

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