Krishna-Godavari Basin Gas Theft Case: The RIL–ONGC Gas Migration Controversy

Krishna-Godavari Basin Gas Theft Case: The RIL–ONGC Gas Migration Controversy

The allegations of unauthorised extraction of ONGC’s natural gas, the Government’s $1.55 billion restitution claim, international arbitration, and the legal battle over ownership of India’s natural resources

The Krishna-Godavari Basin gas migration controversy is one of India’s most significant corporate and natural-resource disputes. It involves allegations that Reliance Industries Limited (RIL), led by Mukesh Ambani, extracted and commercially benefited from natural gas that had migrated from neighbouring oil and gas blocks belonging to the state-owned Oil and Natural Gas Corporation (ONGC).

The controversy raises a fundamental question: If natural gas originally located beneath one company’s licensed block moves underground into an adjoining block operated by another company, who has the legal right to extract it and retain the financial benefits?

This question became the centre of a major confrontation involving Reliance Industries, ONGC, the Ministry of Petroleum and Natural Gas, international energy experts, an arbitration tribunal and the Delhi High Court.

The Government of India eventually demanded approximately $1.55 billion from the Reliance-led consortium, alleging that it had received an unjust financial benefit by producing gas that had migrated from ONGC’s neighbouring blocks.

Reliance rejected the allegations and argued that it had extracted gas through lawful petroleum operations within the boundaries of its licensed contract area.

In July 2018, an international arbitration tribunal ruled in favour of Reliance and its partners. In May 2023, a single-judge bench of the Delhi High Court declined to interfere with that award. However, on 14 February 2025, a Division Bench of the Delhi High Court overturned the earlier decision and set aside the arbitration award.

The dispute subsequently reached the Supreme Court of India.

This case is particularly important because it examines the relationship between underground geological formations, petroleum extraction rights, contractual boundaries, public ownership of natural resources and the Government’s power to recover financial benefits allegedly obtained through unauthorised extraction.

It is also important to distinguish this controversy from the 2010 RIL–RNRL dispute involving Mukesh and Anil Ambani. The two cases concern different legal questions. The 2010 dispute primarily involved gas pricing and allocation, whereas the ONGC controversy concerns alleged migration of gas between neighbouring licensed blocks and the right to extract and retain its economic value.

1. Background: Understanding the Krishna-Godavari Basin

The Krishna-Godavari Basin is one of India’s major sedimentary basins, located along the eastern coast of the country, primarily in Andhra Pradesh and its offshore region.

The basin contains substantial hydrocarbon resources, including natural gas and crude oil.

Because of its geological potential, the region became an important centre of India’s exploration and production activities.

The Government of India awarded different offshore exploration blocks to companies under the New Exploration Licensing Policy (NELP).

These blocks were assigned geographical boundaries and operated under Production Sharing Contracts (PSCs).

A Production Sharing Contract establishes the legal and commercial relationship between the Government and companies undertaking exploration and production.

It generally covers:

• The geographical area in which petroleum operations may be conducted.

• Exploration and development obligations.

• Capital investment and cost recovery.

• Sharing of petroleum profits.

• Government supervision and regulatory obligations.

• Rights and responsibilities concerning production and marketing.

Two neighbouring blocks became central to the gas migration controversy.

The Reliance block: KG-DWN-98/3 (KG-D6)

This block was operated by Reliance Industries, initially in partnership with Niko Resources.

Reliance subsequently brought BP into the project through a transfer of participating interest in 2011.

The ONGC blocks: KG-DWN-98/2 and Godavari PML

These were operated by the state-owned Oil and Natural Gas Corporation.

The important geological question was whether the natural gas reservoirs extended across the contractual boundaries of these neighbouring blocks.

In other words, could natural gas located beneath ONGC’s licensed areas move underground into the Reliance-operated KG-D6 area?

The controversy emerged when ONGC claimed that geological connections between the reservoirs had allowed gas to migrate from its blocks into the Reliance block.

2. What Is Gas Migration? Understanding the Technical Issue

To understand the dispute, it is necessary to understand how natural gas exists and moves underground.

Natural gas is generally found in porous geological formations deep beneath the Earth’s surface.

These formations may contain gas trapped within microscopic pores and fractures in rocks.

The gas is held under pressure and may exist across interconnected geological structures.

In some circumstances, natural gas can move from one part of a reservoir to another because of differences in pressure.

This phenomenon is known as gas migration.

Imagine two neighbouring agricultural properties separated by a boundary line.

Beneath the surface, however, both properties sit above one continuous underground water-bearing formation.

If one property owner pumps water, the underground water may move from beneath the neighbouring property towards the pumping location.

A broadly similar geological phenomenon can occur with natural gas, although actual reservoir behaviour is considerably more complicated.

How gas migration may occur

A simplified sequence is:

1. Natural gas accumulates in an underground reservoir.

2. Geological formations connect different portions of the reservoir.

3. Production from one location changes underground pressure.

4. Gas may move through connected formations towards areas of lower pressure.

5. Gas originally present beneath one licensed block may migrate into an adjoining block.

6. Production wells in the adjoining block may subsequently extract that gas.

This creates a difficult legal problem.

Petroleum production rights are generally defined by contractual areas, but geological formations do not necessarily follow administrative or contractual boundaries.

A company may operate entirely within its licensed geographical area while extracting gas that originally accumulated beneath another company’s licensed area.

That is the central factual and legal issue in the RIL–ONGC controversy.

Why this distinction matters

There are two different questions:

• Where was the natural gas originally located?

• From which licensed area was the gas ultimately extracted?

The answer to the second question does not necessarily establish the answer to the first.

This distinction became critical in determining whether Reliance had merely produced gas available within its contract area or had obtained an economic benefit from gas originating in ONGC’s blocks.

3. The Parties Involved: RIL, ONGC, BP and Niko Resources

The dispute involved several major participants in India’s energy industry.

Reliance Industries Limited

Reliance Industries Limited, led by Mukesh Ambani, operated the KG-D6 block and was the principal company accused of benefiting from gas migration.

Reliance maintained that it had conducted petroleum operations within its contractual boundaries and in accordance with the applicable Production Sharing Contract.

It disputed the Government’s allegations and challenged the financial demand through international arbitration.

Oil and Natural Gas Corporation

ONGC is India’s state-owned oil and gas exploration and production company.

ONGC operated the neighbouring blocks and raised concerns about the continuity of underground gas reservoirs.

Its position was that gas from its licensed areas had migrated into the Reliance block and was being extracted through Reliance’s production operations.

BP Exploration (Alpha) Limited

BP became a 30% participating-interest partner in the Reliance-operated KG-D6 project through a 2011 transaction.

It was subsequently included in the Government’s financial claim because it was a participating contractor in the relevant project.

Niko Resources

The Canadian energy company was an original partner in the KG-D6 project and retained a 10% participating interest.

The ownership structure relevant to the later dispute was:

This structure became relevant when the Government sought recovery from the contractor consortium.

4. The Beginning of the Controversy: ONGC’s Discovery of Possible Gas Migration

The controversy became public in 2013, when ONGC informed the Directorate General of Hydrocarbons (DGH) that geological evidence suggested continuity between gas reservoirs in its blocks and the adjoining Reliance-operated KG-D6 block.

On 22 July 2013, ONGC formally wrote to the DGH, raising concerns about the possible migration of natural gas between the neighbouring areas.

ONGC’s concern was that the reservoirs were not entirely independent geological structures.

If gas could move between the two blocks, Reliance might have extracted gas that had originally accumulated beneath ONGC’s licensed areas.

The allegation was particularly significant because the KG-D6 block had already entered commercial production in April 2009.

ONGC questioned whether the production operations conducted by Reliance had resulted in the extraction of natural gas that should have been attributable to its own blocks.

ONGC’s principal allegations

ONGC’s concerns can be understood through four major allegations.

First: Geological connectivity existed between the reservoirs.

ONGC argued that the underground gas-bearing formations extended across the contractual boundaries separating its blocks from the Reliance block.

Second: Gas had migrated from ONGC’s blocks into KG-D6.

The alleged migration was attributed to geological connectivity and pressure conditions within the reservoirs.

Third: Reliance had extracted and sold some of this migrated gas.

ONGC argued that the production from Reliance’s wells included gas originating in its neighbouring blocks.

Fourth: The economic benefit should not remain with Reliance.

ONGC maintained that the Government and the relevant resource-owning interests should be compensated for the value of the gas allegedly extracted from outside Reliance’s original resource entitlement.

It is important to understand that these were allegations requiring technical and legal examination. The existence of connected reservoirs does not, by itself, establish the exact quantity of gas migrated, the period of migration, or the legal consequences of its extraction.

5. The Independent Technical Investigation: DeGolyer and MacNaughton

Because the dispute involved complex geological questions, technical evidence became extremely important.

The Delhi High Court proceedings initiated by ONGC resulted in the involvement of an independent petroleum consultancy, DeGolyer and MacNaughton (D&M).

The company was asked to examine whether the reservoirs in the ONGC blocks and Reliance’s KG-D6 block were connected and whether gas migration had occurred.

Its work involved analysing geological information, reservoir characteristics, pressure conditions and production-related data.

The purpose was to determine whether the gas-bearing formations extended across the boundaries of the different contractual areas.

The 2015 technical report

D&M submitted its final report on 19 November 2015.

The report concluded that integrated geological and reservoir analyses indicated connectivity and continuity of the reservoirs across the blocks operated by ONGC and Reliance.

This finding was important because it provided technical support for the possibility that natural gas had moved between the neighbouring areas.

However, the technical conclusion had to be distinguished from the subsequent legal question.

Establishing reservoir connectivity does not automatically establish that a contractor committed an unlawful act by producing gas from its own contract area.

The legal consequences depend on the Production Sharing Contract, the rights granted to the contractor, the applicable petroleum laws and the circumstances surrounding the production.

Why technical evidence became central

The dispute required answers to several difficult questions:

• Were the reservoirs genuinely connected?

• What was the direction of gas migration?

• When did migration begin?

• How much gas moved between the blocks?

• How much of the migrated gas was subsequently extracted?

• Could the gas have been identified and separately measured?

• What obligations did the Production Sharing Contract impose on the contractor?

These questions could not be resolved merely by examining the geographical boundaries on an offshore exploration map.

The underlying geological evidence was essential.

6. The Justice A.P. Shah Committee: Investigation of Unjust Enrichment

Following the D&M report, the Ministry of Petroleum and Natural Gas appointed a committee headed by Justice (Retd.) A.P. Shah, former Chief Justice of the Delhi High Court.

The committee was constituted on 15 December 2015.

Its task was to examine the dispute between ONGC and Reliance and recommend an appropriate course of action.

The committee examined the technical findings, contractual provisions and submissions made by the concerned parties.

It submitted its report on 29 August 2016.

The committee’s principal conclusion

The Shah Committee concluded that the contractor operating KG-D6 had received an unjust economic benefit through the production of natural gas that had migrated from ONGC’s neighbouring blocks.

Its reasoning centred on the principle of unjust enrichment.

Unjust enrichment generally refers to a situation in which one party obtains or retains an economic benefit at the expense of another without a sufficient legal basis for doing so.

In the context of the KG Basin dispute, the committee considered that Reliance had benefited from gas originating in ONGC’s licensed areas.

The committee also concluded that the Government, rather than ONGC acting alone, was the appropriate party to pursue restitution under the relevant contractual framework.

This distinction was important.

The dispute was not treated simply as a private disagreement between two petroleum companies.

The Government argued that natural resources belonged to the public and that it had the authority to recover the value of resources allegedly exploited beyond the contractor’s legitimate entitlement.

An important procedural detail

The Delhi High Court’s later account of the proceedings recorded that Reliance withdrew halfway through the Shah Committee process.

The report was based on written and oral submissions, and the committee did not receive expert assistance from witnesses appearing before it.

This procedural background later became relevant to the arguments concerning the evidentiary basis of the Government’s financial claim.

7. The Government’s $1.55 Billion Demand: How Much Money Was at Stake?

On 3 November 2016, the Ministry of Petroleum and Natural Gas issued a notice demanding restitution from Reliance Industries and its partners.

The demand was based on the Shah Committee’s findings.

The Government sought approximately $1.55 billion in restitution, calculated provisionally with interest up to 31 March 2016.

It also claimed an additional amount of approximately $174.91 million towards revised additional cumulative Profit Petroleum.

The official figures were:

The financial demand was enormous even by international energy-industry standards.

It represented the Government’s attempt to recover the economic benefit it alleged had been obtained from the production of migrated natural gas.

Why did the Government demand restitution rather than simply asking ONGC to claim damages?

The Government’s position was based on its role under the Production Sharing Contract and its responsibility concerning India’s natural resources.

The Shah Committee considered that the Government was the appropriate party to pursue restitution for the alleged unjust enrichment.

This meant that the claim was framed around recovery of the benefit allegedly obtained by the contractor, rather than merely compensation for a private commercial loss suffered by ONGC.

The Government also sought additional Profit Petroleum because the valuation and treatment of the disputed production could affect the Government’s contractual share of petroleum profits.

The demand was contested by Reliance, which disputed both the legal basis and the calculation.

8. Reliance Industries’ Defence: Why RIL Rejected the Allegations

Reliance Industries strongly contested the Government’s claim.

Its central argument was that it had conducted petroleum operations within the geographical boundaries of the KG-D6 contract area.

It maintained that it had extracted natural gas through wells located within its licensed area and in accordance with the applicable Production Sharing Contract.

Reliance challenged the idea that gas migration from a neighbouring block automatically made its production unlawful.

Its defence involved several important legal and technical arguments.

A. Production occurred within the contract area

Reliance argued that its wells were located within the boundaries of the block awarded to its consortium.

The Production Sharing Contract authorised the contractor to undertake petroleum operations within that contract area.

According to RIL, the Government could not automatically treat gas extracted through authorised wells as unauthorised production merely because some of the gas may have originated in adjoining geological formations.

B. The Production Sharing Contract did not expressly prohibit production of migrated gas

Reliance argued that the PSC did not contain an express provision prohibiting the extraction of gas that had migrated naturally into the contractor’s contract area.

It maintained that the relevant contractual rights were defined by the location of petroleum operations and the contract area, not solely by the original geological location of individual gas molecules.

This became one of the central legal questions considered by the arbitration tribunal.

C. The Government had approved petroleum operations

Reliance argued that the Government and its regulatory agencies had reviewed and approved its development plans and petroleum operations.

It maintained that the Government had been aware of the production activities and had received its contractual share of royalty and Profit Petroleum.

According to the company, the Government could not subsequently treat the production as unauthorised without establishing a contractual or legal basis for doing so.

D. The Government’s calculations were disputed

Reliance also questioned the technical and financial methodology used to calculate the alleged migration and the resulting economic benefit.

It argued that the Government’s demand was based on disputed assumptions concerning reservoir connectivity, production attribution and the quantity of gas that had allegedly migrated.

E. The Government’s failure to arrange coordinated reservoir development

Another important argument concerned the Government’s regulatory responsibilities.

Reliance pointed to opportunities when the Directorate General of Hydrocarbons could have considered coordinated development or technical measures to examine the connected reservoirs.

The company argued that the Government could not ignore these opportunities and later hold the contractor entirely responsible for the consequences.

These arguments formed a significant part of the subsequent arbitration proceedings.

It is important to note that Reliance’s defence represented its legal position, not an uncontested determination that all gas production was necessarily attributable to its original reserves.

9. International Arbitration: Reliance Takes the Dispute to a Tribunal

On 11 November 2016, Reliance Industries issued a notice invoking the arbitration clause under Article 33 of the Production Sharing Contract.

The arbitration involved the Union of India, represented by the Ministry of Petroleum and Natural Gas, and the contractor consortium comprising:

• Reliance Industries Limited.

• Niko Resources.

• BP Exploration (Alpha) Limited.

The dispute was referred to an international arbitral tribunal.

The tribunal consisted of three arbitrators:

• Sir Bernard Eder, nominated by Reliance.

• Justice G.S. Singhvi, nominated by the Government.

• Professor Lawrence Boo, appointed as the presiding arbitrator.

The tribunal examined the Production Sharing Contract, technical evidence, the parties’ submissions and the circumstances surrounding the development of KG-D6.

The central arbitration question

The central question was whether the Production Sharing Contract prohibited the contractor from producing and selling natural gas that had migrated from an adjoining block into the geological formations located within its own contract area.

This question involved two competing interpretations.

The Government’s interpretation

The contractor’s rights were restricted by the resource entitlements and obligations under the PSC. Gas originating outside the contract area could not simply become the contractor’s property because it had moved underground.

Reliance’s interpretation

The contractor was authorised to extract hydrocarbons through petroleum operations within its contract area. The PSC did not expressly prohibit the production of gas that had migrated naturally into that area.

The tribunal had to interpret the contractual provisions and determine the consequences of the alleged migration.

10. The 2018 Arbitration Award: Reliance Wins by a 2–1 Majority

On 24 July 2018, the international arbitration tribunal delivered its award.

The decision was divided.

Two arbitrators supported Reliance’s position, while the third arbitrator favoured the Government’s position.

The majority concluded that Reliance was entitled to produce hydrocarbons resulting from petroleum operations conducted within its contract area, even where those hydrocarbons might include gas that had migrated from an adjoining block.

This was a significant outcome for Reliance and its partners.

The majority’s reasoning

The majority considered several important issues.

1. The geographical boundaries of the contract area

The tribunal focused on the fact that the production wells were located within the Reliance contract area.

2. No express contractual prohibition

The majority found that the PSC did not expressly prohibit the production of gas that had migrated into the contract area from an external geological source.

3. The Government’s regulatory knowledge

The tribunal considered the Government’s knowledge of the petroleum operations and its opportunities to investigate or address the issue of reservoir connectivity.

4. Government participation in petroleum revenues

The tribunal also considered that Reliance had accounted for the gas it produced under the applicable contractual arrangements, including royalty and Profit Petroleum payments.

5. The absence of a material breach

The tribunal considered the non-disclosure of an earlier technical report to be a breach of a PSC obligation but did not regard it as a material breach sufficient to justify the Government’s restitution claim.

The minority opinion

The third arbitrator disagreed with the majority.

The minority opinion supported the Government’s position on the dispute.

This disagreement is important because it shows that the arbitration did not produce a unanimous determination.

The legal and contractual interpretation was contested even within the tribunal.

Financial consequence of the arbitration

The tribunal rejected the Government’s restitution claim and awarded approximately $8.3 million in costs to the Reliance-led consortium.

The result represented a major setback for the Government’s attempt to recover the alleged value of migrated gas.

However, the Government did not accept the award as the final resolution of the dispute.

It challenged the award before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996.

11. The Government Challenges the Arbitration Award Before the Delhi High Court

The Government was dissatisfied with the arbitration outcome.

It argued that the majority award had failed to properly consider the public-interest implications of extracting natural gas that originated in ONGC’s neighbouring blocks.

In 2018, the Union of India approached the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996.

Section 34 provides a mechanism through which an arbitral award can be challenged on specified legal grounds.

However, courts do not ordinarily rehear an arbitration dispute as though they were conducting a completely new trial.

The Government therefore had to establish grounds for judicial interference with the award.

The Government’s principal arguments

The Union of India raised several important objections.

First: The award violated the public policy of India.

The Government argued that the contractor could not obtain the economic benefit of natural gas originating in neighbouring ONGC blocks merely because it had migrated into the Reliance contract area.

Second: The tribunal had misinterpreted the Production Sharing Contract.

The Government maintained that the PSC had to be interpreted in a manner that protected the Government’s rights and the public interest.

Third: The public trust doctrine had been overlooked.

The Government argued that natural resources were held for the benefit of the public and that the contractor could not retain benefits arising from resources it was not legally entitled to exploit.

Fourth: Reliance had failed to disclose important technical information.

The Government relied on an earlier DeGolyer and MacNaughton report from 2003, arguing that the contractor’s failure to disclose it was relevant to the allegations concerning reservoir connectivity.

Fifth: The award failed to adequately address unjust enrichment.

The Government argued that the consortium had retained substantial economic benefits from the production of migrated gas.

Reliance disputed these arguments and defended the arbitration award.

12. The Delhi High Court’s 2023 Judgment: Arbitration Award Initially Upheld

On 9 May 2023, Justice Anup Jairam Bhambhani of the Delhi High Court delivered a judgment in favour of the Reliance-led consortium.

The Court dismissed the Government’s petition challenging the 2018 arbitration award.

This was a major development because it meant that the arbitration award survived the Government’s initial judicial challenge.

Why did the single judge uphold the award?

The Court examined the grounds available under Section 34 of the Arbitration and Conciliation Act.

It considered whether the tribunal’s conclusions were legally unreasonable or whether the award violated the public policy of India.

The Court placed importance on the limited scope of judicial interference with arbitral awards.

It observed that an award should not be overturned merely because a court might prefer a different interpretation of the evidence or contract.

The Court’s consideration of the PSC

The judgment examined whether the Production Sharing Contract expressly restricted Reliance from producing gas that had migrated into its contract area.

It considered the tribunal’s conclusion that the PSC did not prohibit such production.

The Court also examined the Government’s argument that the production constituted unjust enrichment.

It concluded that the tribunal’s interpretation represented a possible view of the contractual provisions and did not justify interference under Section 34.

The 2003 technical report issue

An important aspect of the proceedings concerned the earlier D&M report.

The arbitral tribunal had found that the contractor had failed to disclose the 2003 report to the Government.

However, the tribunal did not consider this omission sufficient to establish a material breach warranting the restitution claim.

The 2023 judgment examined this finding and the tribunal’s reasoning.

It also considered the argument that the Government had opportunities to investigate the possible geological connectivity through appropriate pressure-testing techniques and coordinated reservoir-development measures.

The single judge ultimately found no sufficient basis to overturn the tribunal’s conclusions.

For Reliance, the 2023 judgment was an important legal success.

For the Government, however, the dispute was not over.

The Union of India appealed against the single-judge decision before a Division Bench of the Delhi High Court.

13. The 14 February 2025 Turning Point: Delhi High Court Rules Against Reliance

The legal position changed significantly on 14 February 2025.

A Division Bench of the Delhi High Court, comprising Justice Rekha Palli and Justice Saurabh Banerjee, set aside the earlier single-judge decision and overturned the arbitration award.

The Division Bench accepted the Government’s challenge and concluded that the award could not stand under the applicable legal principles.

This decision reversed the position that Reliance had secured through the 2018 arbitration award and the 2023 single-judge judgment.

What did the Division Bench decide?

The Court accepted the Government’s case concerning the extraction of gas that had migrated from ONGC’s neighbouring blocks.

It considered the legal consequences of the consortium producing and commercially benefiting from gas that did not originally belong to its licensed resource entitlement.

The Division Bench found the arbitration award contrary to public policy and rejected the reasoning that had protected the consortium from the Government’s restitution claim.

The decision was particularly significant because it treated the dispute as involving more than a technical disagreement about the interpretation of a commercial contract.

It involved the legal protection of natural resources and the Government’s authority to recover benefits allegedly obtained through unauthorised extraction.

Why was this judgment important?

The 2025 ruling changed the legal position in several respects.

1. The 2018 arbitration award in favour of Reliance was set aside.

2. The 2023 single-judge decision was overturned.

3. The Government’s case concerning unjust enrichment received judicial support.

4. The consortium faced renewed financial exposure.

5. The dispute moved towards the Supreme Court for further consideration.

It is important to distinguish between the Division Bench’s findings and a final determination by the Supreme Court. The 2025 judgment was a major judicial development, but the consortium subsequently challenged it.

14. The Government’s Revised $2.81 Billion Demand in March 2025

Following the February 2025 Delhi High Court decision, the Government pursued a substantially higher financial demand.

On 4 March 2025, Reliance Industries disclosed that the Ministry of Petroleum and Natural Gas had raised a provisional demand of approximately $2.81 billion against Reliance, BP and Niko.

The revised amount reflected the financial consequences of the Government’s continuing claim, including the accumulated amounts and additional liabilities associated with the dispute.

This was substantially higher than the original 2016 demand.

The difference reflected the passage of time, interest and the subsequent financial calculations.

What did Reliance say?

Reliance maintained that the Delhi High Court’s Division Bench judgment and the revised financial demand were legally unsustainable.

The company indicated that it intended to challenge the decision before the Supreme Court.

It also stated that it did not expect to incur liability in the matter.

This distinction is important: the $2.81 billion figure represented a Government demand, not an amount finally paid or conclusively determined to be payable.

Comparing the two financial demands

The financial exposure became one of the most important dimensions of the litigation.

For Reliance and its partners, the dispute involved potentially significant financial liability.

For the Government, it concerned recovery of the economic value of natural resources that it alleged had been extracted beyond the contractor’s lawful entitlement.

15. The Supreme Court of India: The Final Legal Battle

Following the February 2025 judgment, Reliance Industries and its partners approached the Supreme Court of India.

The consortium challenged the Delhi High Court Division Bench’s decision.

The Supreme Court proceedings became the next major stage in the dispute.

The case involved three broad questions:

1. Interpretation of the Production Sharing Contract

Could a contractor lawfully produce natural gas that had migrated from neighbouring geological formations into its licensed contract area?

2. Limits of arbitral autonomy

Could the arbitration tribunal’s interpretation of the PSC be protected from judicial interference, or did the award violate the public policy of India?

3. Public ownership and unjust enrichment

Could the Government recover the value of natural gas allegedly originating from neighbouring ONGC blocks, even if the gas had physically migrated into the Reliance production area?

The Supreme Court had to consider the balance between commercial contractual rights and the public interest in natural-resource management.

The competing legal positions

Neither side’s submissions should be confused with a final Supreme Court determination.

16. Latest Development: Supreme Court Refers the Dispute to Mediation on 30 October 2026

One of the most important recent developments occurred on 30 October 2026.

The Supreme Court referred the long-running KG Basin gas migration dispute between the Government of India and the Reliance-led consortium to mediation.

A three-judge bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice Vipul M. Pancholi appointed former Supreme Court judge Justice Ranjana Prakash Desai as the sole mediator.

The decision followed discussions between the Government and the consortium about the possibility of reaching an amicable settlement.

Why did the Supreme Court appoint a mediator?

The parties had been exploring the possibility of resolving the dispute through negotiations.

However, their discussions had not produced a viable settlement.

Both sides requested the Supreme Court to refer the matter to mediation.

The Court accepted the request and appointed Justice Desai to facilitate the process.

It also permitted the mediator to obtain assistance from two domain experts, either suggested by the parties or selected by the mediator.

This was particularly relevant because the dispute involved complicated technical questions about geological formations, reservoir connectivity, production attribution and the valuation of natural gas.

What happens next?

The Supreme Court directed the parties to cooperate with the mediator.

The matter was scheduled to be listed again on 1 December 2026 for further consideration of the proceedings.

As of 5 November 2026, the position is therefore:

• The 2018 arbitration award in favour of Reliance has been set aside by the Delhi High Court Division Bench.

• The 2025 Division Bench judgment has been challenged before the Supreme Court.

• The Supreme Court has referred the dispute to mediation.

• Justice Ranjana Prakash Desai has been appointed as mediator.

• No final Supreme Court judgment resolving the substantive dispute has been delivered.

• The Government’s financial claim remains disputed.

The mediation does not itself establish liability or amount to a final settlement. Any negotiated resolution would have to be reached by the parties and dealt with in accordance with the Supreme Court proceedings.

This latest development is important because a dispute that has continued for more than a decade is now also being considered through a negotiated resolution process.

17. The Central Legal Question: Who Owns Natural Gas That Migrates Across Contractual Boundaries?

The most important legal issue in the entire dispute concerns the relationship between geological ownership and contractual extraction rights.

The Government’s position was that natural gas originating in ONGC’s licensed areas could not become Reliance’s economic entitlement simply because geological forces moved it underground.

Reliance, on the other hand, argued that it was authorised to produce hydrocarbons through wells situated inside its contract area and that the PSC did not expressly prohibit the extraction of naturally migrated gas.

This creates an unusual legal problem.

Contractual boundaries versus geological boundaries

A petroleum block is defined through geographical coordinates.

However, an underground reservoir may extend beyond those coordinates.

The result is that two companies may hold separate contractual rights over areas containing connected geological formations.

If one company extracts gas, the pressure changes may influence the movement of gas across the boundary.

This can create economic consequences for both companies.

The dispute therefore raises a question that extends beyond India:

Should petroleum extraction rights be determined exclusively by the location of the production well, or should they also account for the geological origin of the extracted resource?

There is no simple answer that can be applied without examining the relevant contracts, petroleum laws and reservoir-development circumstances.

The concept of unitisation

One potential industry mechanism for addressing connected reservoirs is known as unitisation.

Unitisation involves treating a connected reservoir as a coordinated production unit, even where it extends across multiple licensed areas.

Instead of each company developing its portion independently, the parties may coordinate production, investment, reservoir management and allocation of revenues.

The objective is to manage the reservoir efficiently and avoid unnecessary losses or disputes.

A unitisation arrangement may address:

• The estimated total quantity of recoverable gas.

• The participating interests of different contractors.

• Production responsibilities.

• Investment and operating costs.

• Revenue allocation.

• Technical monitoring.

• Dispute-resolution mechanisms.

The RIL–ONGC controversy illustrates why such mechanisms are important.

However, the arbitral proceedings also examined whether coordinated development was technically feasible at the relevant time, given the different stages of development of the neighbouring blocks.

The case therefore demonstrates that unitisation is not simply a matter of signing an agreement. It requires reliable geological data, compatible development plans and effective regulatory supervision.

18. The Public Trust Doctrine and Government Ownership of Natural Resources

The gas migration controversy also raises important questions concerning the constitutional principles governing India’s natural resources.

The Government’s case relied on the idea that natural resources are held for the benefit of the public.

Two constitutional provisions are particularly relevant.

Article 297 of the Constitution

Article 297 deals with resources within India’s territorial waters, continental shelf and exclusive economic zone.

It establishes the constitutional framework for the vesting of certain maritime resources in the Union of India.

This is important because the KG-D6 block is located offshore.

Article 39(b)

Article 39(b), a Directive Principle of State Policy, directs the State to ensure that the ownership and control of material resources of the community are distributed in a manner that best serves the common good.

This provision is relevant to the broader principle that natural resources must be managed for public benefit.

The public trust doctrine

The public trust doctrine is based on the idea that the State exercises authority over certain natural resources as a trustee for the public.

The doctrine does not mean that private companies cannot participate in exploration or production.

Rather, it recognises that private commercial rights exist within a broader framework of public responsibilities.

In the KG Basin dispute, the Government argued that a private contractor could not retain benefits from gas that it was not legally entitled to extract.

The controversy therefore raised a broader question: How should the State protect public interests when private contractors operate under long-term petroleum agreements?

The eventual legal outcome will have significance for how this principle is applied to offshore oil and gas operations.

19. Why This Case Matters for India’s Economy

The RIL–ONGC controversy has implications beyond the two companies and the disputed natural gas.

It highlights several important issues concerning India’s economic and energy policies.

A. Protection of Government revenue

India’s Production Sharing Contracts provide for the Government to receive economic benefits from petroleum production through contractual mechanisms, including royalty and Profit Petroleum.

If a contractor produces resources beyond its legal entitlement, the Government may argue that the public has been deprived of economic value.

The dispute therefore concerns the protection of public revenue and the correct valuation of extracted hydrocarbons.

B. Protection of public-sector enterprises

ONGC is a major public-sector energy company.

Its exploration and production activities involve substantial public investment and long-term national energy objectives.

If geological connectivity results in one contractor extracting gas originating from another contractor’s licensed area, the consequences can affect the commercial interests of both operators.

This raises questions about the protection of public-sector resource entitlements.

C. Confidence among private investors

India needs private and foreign investment to develop technically challenging offshore energy resources.

Investors require certainty regarding:

• Contractual rights.

• Petroleum ownership.

• Government approvals.

• Production entitlements.

• Dispute-resolution procedures.

• Financial liabilities.

Long-running disputes involving billion-dollar claims can create uncertainty about the interpretation and enforcement of petroleum contracts.

At the same time, clear enforcement of resource rights can strengthen confidence that contractors must comply with the rules governing their operations.

The challenge is to create a regulatory framework that protects public resources without creating arbitrary or unpredictable liabilities.

D. Energy security

Natural gas is important for electricity generation, fertilizer production, petrochemicals and industrial manufacturing.

India’s domestic gas production can reduce dependence on imported energy.

Disputes over the ownership and allocation of gas may affect investment decisions, production planning and the development of offshore fields.

E. Better geological monitoring

The controversy also demonstrates the importance of modern reservoir monitoring.

Regulators and petroleum contractors need access to accurate geological models, pressure data, production records and reservoir studies.

When adjoining blocks are developed independently without adequate coordination, potential resource conflicts may emerge.

Better technical cooperation can help prevent disputes before they become major legal battles.

20. The Case’s Wider Implications for International Petroleum Law

The RIL–ONGC dispute is not merely an Indian corporate controversy.

It raises questions that are relevant to petroleum-producing countries around the world.

Underground hydrocarbon reservoirs do not necessarily conform to national boundaries, licensing boundaries or administrative divisions.

This creates problems when different contractors have rights over neighbouring areas.

International petroleum practice has developed various methods to address these challenges.

These include:

1. Joint geological studies.

2. Cross-boundary reservoir monitoring.

3. Unitisation agreements.

4. Coordinated development plans.

5. Independent reservoir audits.

6. Production-sharing arrangements.

7. Contractual mechanisms for allocating migrated hydrocarbons.

The KG Basin controversy illustrates the consequences of failing to resolve these issues clearly at an early stage.

It also demonstrates why petroleum contracts must address not only the rights of contractors within their respective blocks but also the possibility of interconnected reservoirs.

For India, the dispute provides an important opportunity to strengthen the legal and technical framework governing offshore hydrocarbon production.

21. Complete Timeline of the RIL–ONGC Gas Migration Controversy

22. The Most Important Questions Raised by the Dispute

The case leaves several important questions for India’s legal, corporate and energy sectors.

Who should receive the financial benefit from naturally migrated gas?

Should the benefit belong to the contractor operating the production well, or should the original location of the resource determine its entitlement?

Can a company be held financially responsible for naturally occurring geological processes?

If gas migrates without deliberate intervention, should the legal consequences depend on the contractor’s knowledge, the contractual language or the actual production activities?

What happens when Government agencies know about potential reservoir connectivity but fail to take timely action?

Can a contractor rely on the Government’s approvals and regulatory conduct when a dispute emerges years later?

How should the Government calculate the value of migrated natural gas?

The quantity of migrated gas, its production period, market valuation, interest and the applicable contractual revenue-sharing arrangements can significantly influence the final financial claim.

Can international arbitration resolve disputes involving public natural resources?

The case demonstrates that contractual disputes involving natural resources may be arbitrable, but the resulting awards remain subject to the statutory grounds for judicial review.

Can mediation resolve a technical and constitutional dispute involving billions of dollars?

The Supreme Court’s October 2026 decision introduces another dimension to the controversy. A negotiated settlement could potentially resolve the commercial dispute without requiring a final judicial determination of every contested issue.

23. A Billion-Dollar Battle Over Who Owns India’s Underground Natural Resources

The Krishna-Godavari Basin gas migration controversy is an important chapter in India’s corporate, legal and energy history.

What began as an allegation by ONGC concerning geological connectivity between neighbouring offshore reservoirs eventually developed into a multibillion-dollar dispute involving Reliance Industries, BP, Niko Resources and the Government of India.

The controversy exposed an unusual problem in the petroleum industry: natural resources exist beneath the surface without necessarily respecting the contractual boundaries created by governments.

ONGC alleged that natural gas originating in its licensed blocks migrated into Reliance’s KG-D6 block and was subsequently extracted and commercially sold by the Reliance-led consortium.

The Government accepted the findings of the Justice A.P. Shah Committee and demanded restitution of approximately $1.55 billion, together with an additional Profit Petroleum claim.

Reliance rejected the allegations, arguing that its production operations were conducted within its authorised contract area and that the Production Sharing Contract did not prohibit the extraction of naturally migrated gas.

The international arbitration tribunal initially accepted Reliance’s interpretation by a 2–1 majority in July 2018.

The Government challenged that decision, but its initial challenge was dismissed by a single judge of the Delhi High Court in May 2023.

The legal position changed in February 2025 when a Division Bench overturned that decision and set aside the arbitration award.

The Government subsequently raised a revised provisional demand of approximately $2.81 billion.

The matter then reached the Supreme Court, which, on 30 October 2026, referred the dispute to mediation under former Supreme Court judge Justice Ranjana Prakash Desai.

As of 5 November 2026, the substantive dispute remains unresolved.

The significance of this controversy extends far beyond Reliance and ONGC.

It raises fundamental questions about the ownership of natural resources, the limits of private extraction rights, the responsibilities of Government regulators, the interpretation of petroleum contracts and the protection of public wealth.

The case also demonstrates that geological realities can create legal complications that cannot always be resolved through conventional contractual boundaries.

The RIL–ONGC gas migration controversy is not simply a dispute over natural gas. It is a dispute over the legal meaning of ownership, the economic value of public resources and the responsibility of private corporations when their commercial operations intersect with resources that may belong to someone else.

Its eventual resolution will be important for India’s petroleum industry, future offshore exploration contracts and the country’s approach to protecting natural resources.