India is demanding over $30 billion in compensation from Reliance Industries and BP in an arbitration case over gas the companies allegedly failed to produce from offshore fields, Reuters has reported for the first time. The dispute centers on the D1 and D3 deepwater fields in the Krishna Godavari basin, with hearings before a three-member tribunal ongoing since 2016 and final arguments concluded on November 7. The tribunal is expected to issue a verdict by mid-2026, which could be challenged in Indian courts.
The D1 and D3 fields, part of India’s first major deepwater gas project, were initially seen as critical to the country’s energy independence. However, production faced persistent problems, including water ingress, reservoir pressure issues, and cost-recovery disputes, causing output to fall far short of initial estimates. In 2012, Reliance revised its recoverable reserve estimates from 10.3 trillion cubic feet to 3.1 tcf. The government argues that mismanagement by Reliance and BP caused the loss of most of the reserves, seeking compensation for the shortfall.
Under a production sharing contract awarded to Reliance in 2000, the government owns any gas discovered, while companies are allowed to recover costs before sharing profits. The government alleges that Reliance and BP used only 18 wells instead of the planned 31, employing “unduly aggressive” extraction methods that damaged the reservoir. Reliance, which sold a 30% stake in the block to BP in 2011, has disputed owing any compensation, and both companies declined to comment due to the confidential nature of the arbitration.
If upheld, the $30 billion claim would be the largest ever sought by the Indian government against a corporation. The outcome of the case could have major implications for India’s offshore energy sector and its legal framework for production sharing contracts.
