Delhi High Court Delivers Major Blow in RIL Gas Dispute with ONGC
RIL Gas Dispute: In a significant legal setback for Reliance Industries Ltd (RIL) and its foreign partners, BP Plc and Niko Resources, the Delhi High Court overturned a 2018 international arbitration award that favoured the consortium.
The court delivered a landmark judgment, accusing the companies of engaging in “insidious fraud” and “unjust enrichment,” which amounted to over $1.729 billion.
Background of the RIL Gas Dispute
The case stems from a dispute between RIL and state-owned ONGC, which claimed that RIL illegally extract natural gas from adjacent deposits in the Krishna-Godavari (KG) basin.
ONGC allege that RIL’s drilling operations, conducted between 2009 and 2013, drain gas from ONGC’s fields by drilling wells near the boundaries of its block, allowing gas to migrate into RIL’s KG-D6 block.
RIL, which holds a 60% stake in the KG-D6 block, consistently deny any wrongdoing, maintaining that its operations comply with the terms of the production sharing contract (PSC).
However, the Delhi High Court, in a ruling by Justices Rekha Palli and Saurabh Banerjee, set aside a 2022 ruling by a single judge and declared the international arbitration award of July 24, 2018, to be “contrary to public policy” in India.
Government’s Argument Against Reliance
The arbitration panel, led by Singapore-based Lawrence Boo, had ruled in favor of RIL, stating that the PSC not prohibit contractors from extracting gas that migrated from external sources.
The Indian government, however, argue that the ruling violates public policy and accuse RIL of fraudulent enrichment through its actions.
The dispute began in 2014, when the Indian government, citing an investigation by US-based DeGolyer and MacNaughton (D&M), demanded $1.47 billion from RIL for unauthorized extraction of ONGC’s gas.
The report suggested that RIL’s drilling activities have depleted reserves from ONGC’s Godavari and KG-DWN-98/2 blocks.
Future Implications and Potential Appeal
Following the court’s ruling, RIL and its partners may face substantial financial liabilities, though the consortium may challenge the verdict in the Supreme Court.
The outcome of this case is expected to have significant implications for India’s oil and gas industry, particularly in how disputes over resource ownership and migration are resolved.
This ruling can reshape future legal interpretations of resource extraction and ownership in India also carrying high stakes for the country’s energy sector.
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