USD 30 Billion Dispute: Government vs. Reliance and BP in High-Stakes Natural Gas Arbitration

The Indian government seeks over USD 30 billion from Reliance Industries Ltd and BP as compensation for alleged non-compliance in gas production and facility construction at the KG-D6 fields. A 14-year arbitration case is ongoing, with both sides preparing for potential further legal challenges.

The Indian government is pursuing over USD 30 billion from Reliance Industries Ltd and BP, accusing them of building excessive facilities and underproducing natural gas at the KG-D6 fields. The government lodged this claim during a hearing with an arbitration tribunal that concluded on November 7. The verdict is expected next year, and further legal challenges are anticipated.

Reliance and BP have yet to comment officially on the allegations. The government's case demands compensation for unproduced natural gas and additional expenditures on infrastructures, market margin, and interest, all valued over USD 30 billion. The controversy originates from the alleged non-adherence to an approved investment plan, leading to lower operational capacity at the Dhirubhai-1 and 3 fields.

Reliance's production estimates have consistently fallen short since 2010, with actual output poorly aligning with projections. Cost disallowance of USD 3.02 billion was imposed by the government on Reliance, although the company insists it operated within its legal rights as per signed production-sharing contracts. The dispute is ongoing, with arbitration proceedings in progress.

(With inputs from agencies.)