Blitz Bureau
NEW DELHI: Reliance Industries Ltd last week rejected media reports claiming that the Government had raised a $30-billion demand against the company and its partner BP over alleged underproduction at the KG-D6 gas field, calling the reports “irresponsible” and factually incorrect.
In a statement, the company said there was no claim of $30 billion against Reliance or BP and clarified that the Government’s demand related to the KG-D6 block stood at $247 million, a figure that has already been disclosed in its audited financial statements, Moneycontrol reported.
“The publication of a report such as this based on unnamed and unidentified sources is inappropriate and irresponsible,” the statement added.
It also said that the issue is sub-judice and would be decided by the judicial process. The company said it had full faith in the legal system.
Reliance further stated that it, along with BP, had at all times complied with contractual and legal obligations, and strongly objected to what it described as a mischaracterisation of facts, according to the Moneycontrol report.
The clarification comes after reports claimed that the Government had sought over $30 billion from Reliance and BP, alleging that the partners had built excess infrastructure at the Krishna Godavari D6 block and failed to meet gas production targets.
According to sources cited in reports, the claim was made during arbitration proceedings that concluded on November 7 and pertained to compensation for unproduced gas and allegedly excessive spending on installations, fuel marketing and interest.
The arbitration award is expected next year, with the losing party likely to challenge it in the Supreme Court.
The dispute centres on the KG-D6 block, once seen as a cornerstone of India’s energy security. Production from its D1 and D3 fields, however, fell sharply after initial output began in 2010, eventually ceasing in February 2020.
The Government has argued that the shortfall resulted from Reliance’s failure to follow the approved development plan, including drilling fewer wells than originally committed.
Reliance, in its defence, has maintained that production declined due to geological challenges, including water and sand ingress, and not due to mismanagement.
It has argued that under the production sharing contract, all exploration and development risks rest with the contractor, and that cost recovery is permitted before profit-sharing with the Government.
The company has also maintained that all investments were cleared by a management committee that included representatives of the Directorate General of Hydrocarbons and the Oil Ministry.
The long-running dispute dates back over a decade. Between 2012 and 2016, the Government disallowed $3.02 billion in costs incurred by the consortium and sought $247 million in additional profit petroleum.
Reliance contested the move, arguing that the production sharing contract does not permit retrospective disallowance of costs.
The arbitration process itself faced multiple delays, including legal challenges over the appointment of arbitrators. In 2023, the Supreme Court cleared the way for proceedings to continue.
Reliance currently holds a 66.66 per cent stake in the KG-D6 block, while BP owns the remaining interest after Niko Resources exited the project.
