Govt demands over $30 billion in compensation from Reliance Industries, BP: Report
The D1 and D3 fields, launched as India’s first major deepwater gas project, were initially expected to bolster the nation's energy self-sufficiency.
- Dec 29, 2025,
- Updated Dec 29, 2025 1:39 PM IST
The Indian government is demanding more than $30 billion in compensation from Reliance Industries and BP, alleging that the companies failed to produce agreed quantities of gas from offshore fields in the Krishna Godavari basin. This claim, which is the largest ever pursued by the Indian government against a corporation, arises from accusations that mismanagement resulted in significant reserves being lost from the D1 and D3 fields.
The dispute is being heard by a tribunal, with proceedings ongoing since 2016. A report in Reuters quoted several individuals familiar with the matter, who stated that final arguments concluded on November 7, and a verdict is anticipated in mid-2026. The outcome has the potential to be challenged in Indian courts, according to several people. The government maintains that the shortfall is owed due to underproduction and operational decisions taken during the project.
The D1 and D3 fields, launched as India’s first major deepwater gas project, were initially expected to bolster the nation's energy self-sufficiency. However, the project struggled with substantial production difficulties, including water ingress and issues with reservoir pressure, as well as ongoing disputes over cost recovery. These challenges led to results that fell far short of initial expectations, according to previous public statements by Reliance and the government.
In 2012, the oil ministry informed parliament that Reliance originally estimated recoverable reserves at 10.3 trillion cubic feet (tcf), subsequently revising this figure down to 3.1 tcf. Production from the D1 and D3 fields ultimately represented only about 20 per cent of the original estimate. According to the oil ministry that told parliament in a written statement, prior to commencing the work on the D6 gas fields, Reliance had estimated the recoverable reserves from D1 and D3 at 10.3 trillion cubic feet (tcf) before revising that down to 3.1 tcf.
The government claims that Reliance and BP should pay compensation equivalent to the value of gas that was not produced, according to two people in the know. During the arbitration, officials argued that the state owns any gas discovered under the contract, and that mismanagement led to the loss of most reserves. They allege that Reliance employed "unduly aggressive" production methods, extracting gas from only 18 wells rather than the 31 originally planned, and lacking sufficient infrastructure, which they said caused damage to the reservoir.
Reliance Industries and BP both contest the government’s claim, asserting that they do not owe any compensation. A Reliance spokesperson said that the arbitration is confidential and did not comment further.
The gas block, awarded in 2000 under a production sharing contract, granted Reliance and its partners the right to recover project costs from oil and gas sales before profits were shared with the government. The state's initial profit share was 10 per cent, with the potential to increase once costs were recovered, as both Reliance and the government have said in previous public statements.
Under the contract terms, all disputes are subject to arbitration by a mutually agreed tribunal. Reliance sold a 30 per cent stake in the D6 block and other production sharing contracts to BP in 2011 for $7.2 billion.
The Indian government is demanding more than $30 billion in compensation from Reliance Industries and BP, alleging that the companies failed to produce agreed quantities of gas from offshore fields in the Krishna Godavari basin. This claim, which is the largest ever pursued by the Indian government against a corporation, arises from accusations that mismanagement resulted in significant reserves being lost from the D1 and D3 fields.
The dispute is being heard by a tribunal, with proceedings ongoing since 2016. A report in Reuters quoted several individuals familiar with the matter, who stated that final arguments concluded on November 7, and a verdict is anticipated in mid-2026. The outcome has the potential to be challenged in Indian courts, according to several people. The government maintains that the shortfall is owed due to underproduction and operational decisions taken during the project.
The D1 and D3 fields, launched as India’s first major deepwater gas project, were initially expected to bolster the nation's energy self-sufficiency. However, the project struggled with substantial production difficulties, including water ingress and issues with reservoir pressure, as well as ongoing disputes over cost recovery. These challenges led to results that fell far short of initial expectations, according to previous public statements by Reliance and the government.
In 2012, the oil ministry informed parliament that Reliance originally estimated recoverable reserves at 10.3 trillion cubic feet (tcf), subsequently revising this figure down to 3.1 tcf. Production from the D1 and D3 fields ultimately represented only about 20 per cent of the original estimate. According to the oil ministry that told parliament in a written statement, prior to commencing the work on the D6 gas fields, Reliance had estimated the recoverable reserves from D1 and D3 at 10.3 trillion cubic feet (tcf) before revising that down to 3.1 tcf.
The government claims that Reliance and BP should pay compensation equivalent to the value of gas that was not produced, according to two people in the know. During the arbitration, officials argued that the state owns any gas discovered under the contract, and that mismanagement led to the loss of most reserves. They allege that Reliance employed "unduly aggressive" production methods, extracting gas from only 18 wells rather than the 31 originally planned, and lacking sufficient infrastructure, which they said caused damage to the reservoir.
Reliance Industries and BP both contest the government’s claim, asserting that they do not owe any compensation. A Reliance spokesperson said that the arbitration is confidential and did not comment further.
The gas block, awarded in 2000 under a production sharing contract, granted Reliance and its partners the right to recover project costs from oil and gas sales before profits were shared with the government. The state's initial profit share was 10 per cent, with the potential to increase once costs were recovered, as both Reliance and the government have said in previous public statements.
Under the contract terms, all disputes are subject to arbitration by a mutually agreed tribunal. Reliance sold a 30 per cent stake in the D6 block and other production sharing contracts to BP in 2011 for $7.2 billion.