RIL moves Supreme Court against Delhi HC ruling in $1.73 billion gas dispute with ONGC

Reliance Industries Ltd (RIL) on Tuesday approached the Supreme Court challenging a recent decision by the division bench of the Delhi High Court that overturned a 2018 international arbitral award in its favour. The dispute centers around a $1.729 billion claim over gas migration from ONGC-operated blocks into RIL’s Krishna Godavari D6 (KG-D6) block in the Bay of Bengal.

The division bench, comprising Justices Rekha Palli and Saurabh Banerjee, in February this year set aside the earlier ruling of a single judge who had upheld the arbitral tribunal’s award. That May 2023 decision had rejected the central government’s allegations of “insidious fraud” and “unjust enrichment” by RIL and its foreign partners—UK’s BP Plc and Canada’s Niko Resources.

RIL, in its appeal to the apex court, has contended that the division bench had no jurisdiction to re-examine the merits of the case since the matter had been adjudicated through international arbitration. The Mukesh Ambani-led conglomerate argues that the 2018 tribunal ruling—delivered by a three-member panel led by Singapore-based arbitrator Lawrence Boo—was binding under the terms of the production sharing contract (PSC).

The tribunal, in a 2-1 majority decision, ruled that the PSC did not restrict contractors from producing gas that had migrated into their licensed areas, effectively dismissing the government’s $1.729 billion claim.

The roots of the dispute trace back to 2013 when ONGC alerted the Directorate General of Hydrocarbons (DGH) about suspected reservoir connectivity between its Godavari PML and KG-DWN-98/2 blocks and RIL’s KG-D6 block. In response, the Delhi HC ordered an independent technical review in 2014, appointing US-based DeGolyer and MacNaughton (D&M).

D&M’s 2015 report confirmed reservoir connectivity and concluded that RIL’s production activities could deplete ONGC’s reserves. This led the government to formally raise a demand of $1.55 billion in 2016, along with an additional $175 million in profit petroleum, citing unjust enrichment.

RIL refuted the claims and invoked international arbitration under the PSC framework.

The legal battle has now reached India’s highest court, with RIL seeking to reinstate the arbitration award and challenge the HC’s interference in a matter it believes was conclusively settled by the arbitral tribunal.

The Supreme Court is yet to list the matter for hearing.