Reliance Gets ₹24,500 Cr Demand Notice in Gas Extraction Dispute

Delhi High Court Overturns Arbitration Ruling, Revives Longstanding Battle with ONGC

New Delhi, March 4, 2025

In a major setback for Reliance Industries Ltd (RIL) and its partners, the Indian government has issued a demand notice of $2.81 billion (₹24,500 crore) for allegedly producing and selling natural gas that migrated from a neighboring block owned by Oil and Natural Gas Corporation (ONGC). This action follows a recent Delhi High Court ruling that overturned an earlier arbitration tribunal decision, which had absolved RIL and its partners of any liability.

Background of the Dispute

The dispute dates back to 2014, when ONGC accused Reliance of siphoning off gas from its Krishna-Godavari (KG) basin blocks adjacent to RIL’s KG-D6 field. A committee formed by the Directorate General of Hydrocarbons (DGH) later confirmed that gas migration had indeed occurred, prompting the government to issue an initial demand of $1.55 billion in 2016. However, an international arbitration tribunal ruled in favor of Reliance in 2018, stating that no compensation was required.

In a surprising turn of events, a division bench of the Delhi High Court overturned the arbitration ruling on February 14, 2025, leading to the current demand notice.

Reliance’s Response and Legal Position

Reliance has rejected the demand, calling it “unsustainable and without merit.” The company has indicated its intent to challenge the Delhi High Court’s decision in the Supreme Court, arguing that:
• The original arbitration ruling was legally binding.
• It has operated within the regulatory framework and had no direct control over the migration of gas.
• The claim lacks precedence, as resource migration is a natural geological phenomenon that should not be penalized.

Industry and Financial Impact

This case raises broader concerns for India’s energy sector and investment climate. The KG basin is one of India’s most crucial natural gas reserves, and disputes like this could impact investor confidence in large-scale energy projects.

What’s Next?

With Reliance likely to appeal in the Supreme Court, the legal battle could continue for years. Meanwhile, the case could prompt regulatory changes in India’s natural resource management policies, possibly leading to the introduction of clearer gas migration laws.

For now, the industry waits to see whether this ₹24,500 crore demand will hold up in court or if Reliance will once again escape liability.

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