The Supreme Court has refused to pause proceedings in the Krishna-Godavari (KG) Basin gas migration dispute between the Union government and the Reliance Industries Limited (RIL)-led consortium.
The three-judge Bench of Chief Justice of India (CJI) Surya Kant, Justice Joymalya Bagchi and Justice Vipul M Pancholi passed the orders on appeals filed by RIL, BP Exploration (Alpha) Limited and Niko (NECO) Limited challenging the February 14, 2025 judgment of the Delhi High Court, which had set aside an arbitral award passed in favour of the consortium.
During oral mentioning on Wednesday, the counsel appearing for the consortium informed the Bench that the petitioners would formally approach the Union government seeking conciliation or mediation. It was submitted that the parties continued to remain in an ongoing contractual relationship under the production sharing arrangement governing the KG Basin operations.
The consortium also requested the Bench to defer further hearing of the appeals to facilitate possible settlement discussions. However, Attorney General R Venkataramani, appearing for the Union government, opposed suspension of the proceedings and urged the Court to continue hearing the matter on merits. The Attorney General submitted that if any settlement discussions progressed, the same could subsequently be brought to the notice of the Court.
Accepting the Centre’s submission, the Bench observed that proceedings could not be halted unless both sides jointly informed the Court that the dispute had been resolved. The CJI stated that mediation efforts could continue simultaneously while the Court proceeded with hearing the appeals.
The dispute arose from allegations that natural gas from offshore blocks operated by state-owned Oil and Natural Gas Corporation (ONGC) migrated into the adjoining KG-D6 block operated by the RIL-led consortium in the Krishna-Godavari Basin off the Andhra Pradesh coast and was subsequently extracted between 2009 and 2013.
During the hearing, the Union government alleged that the consortium had unlawfully benefited from the extraction of migrated gas originating from ONGC’s fields. The Centre argued that the consortium was accountable for commercially exploiting natural resources belonging to adjoining government-controlled blocks.
Senior Advocate Abhishek Manu Singhvi, appearing for the consortium, opposed the allegations and argued that migration of hydrocarbons across underground reservoirs was a natural geological phenomenon driven by pressure differentials beneath the seabed. He submitted that such movement of gas could not be characterised as deliberate siphoning, theft or unauthorised extraction.
The dispute involves interpretation of the production sharing contract (PSC), principles governing ownership of natural resources, and the legal consequences of cross-boundary migration of hydrocarbons in offshore reservoirs.
The litigation stemmed from a production sharing contract executed in 2000 between the Union government and the consortium for exploration and production of natural gas in the KG Basin. Commercial production from the KG-D6 block commenced in April 2009. RIL held a 60 per cent participating interest in the block, while BP Plc and Niko Resources held 30 per cent and 10 per cent stakes, respectively.
The controversy surfaced in 2013 after ONGC alleged that the consortium had drilled wells near the boundary areas and extracted gas migrating from ONGC-operated blocks, resulting in alleged unjust enrichment. The Union government subsequently sought recovery of nearly USD 1.5 billion along with interest claims of approximately USD 174 million.
The consortium invoked arbitration under the production sharing contract. In July 2018, an international arbitral tribunal ruled in favour of the consortium and rejected the government’s monetary claims, holding that the contract did not prohibit the extraction and sale of naturally migrated gas from adjoining reservoirs.
The arbitral award was later upheld by a single-judge Bench of the Delhi High Court in May 2024. However, a Division Bench of the High Court subsequently reversed that decision and set aside the arbitral award on February 14, 2025, leading to the present appeals before the Supreme Court.
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