The Indian government has launched an epic legal lawsuit against Reliance Industries and its partner BP, claiming over $30 billion in compensation. The historic claim that is in an arbitration case today revolves around the accusations that the companies had not delivered the promised quantities of natural gas using the important offshore fields. This is the largest ever compensation claim pursued by the Indian government against a corporation, as reported by the sources, who are well-informed on the issue. The controversy shows that the relationship between the state and the Indian energy giants is strained at the moment, as the two sides are fighting over the control of the scarce natural resources in India, and the fact that the deepwater explorations are a high-stakes game.

Core of the legal battle

The core of the court fight is the operation of the D1 and D3 deepwater fields, which are situated in the D6 block of the Krishna Godavari (KG) basin in the Bay of Bengal. These sectors had earlier been regarded as the main pillar of the Indian approach to enhance energy self-sufficiency with large deepwater projects. The government’s claim of $30 billion is based on the argument that the companies had mismanaged the fields and that a substantial amount of recoverable reserves had been lost permanently. As sources close to the process say, the government claims that when Reliance had first estimated recoverable gas reserves to around 10 trillion cubic feet (tcf), the actual production was only around 20% of that.

The government insists that Reliance and BP should pay the state the amount of the shortfall. This requirement can be explained by the fact that the principle, according to which the state is the ultimate owner of any discovered gas under the production-sharing contract, justifies this demand. The government accuses the companies of using unduly aggressive methods of extracting gas, which ended up destroying the reservoir. The state asserts that Reliance only used 18 wells to extract as opposed to the 31 wells initially intended, but without the requisite infrastructure, and thus caused a major loss in the long-term production.

Financial structure and technical challenges

There is a track record of both technical and operational challenges in the D1 and D3 projects. The project has faced a number of problems since it was initiated, including water intrusion and declining pressure in the reservoir, which have hampered early production estimates. The government and Reliance have already addressed these problems in their rhetoric. Although the fields were sold by Reliance in 2000 to the London-based energy major BP in a production-sharing contract, the relationship took a new dimension in 2011 when Reliance sold 30 percent of its interests in 21 oil-and-gas contracts, including the KG-D6 block, to the London-based energy giant BP for $7.2 billion.

The establishment of the production-sharing contract dispute settlement mechanism is the arbitration that has been in effect since 2016 in India. The last submissions to this ancient case were heard on November 7, and a tribunal of three attended it. Although the case surrounding the claim of $30 billion is serious, it has been a low-profile case.

Reliance Industries and BP spokespersons have refused to comment on the details of the case, and the government ministries have not made any comment on the legal issue underway. It is intent to be expected that the final verdict of the tribunal will be provided in mid-2026, yet the verdict is also subject to being contested in Indian courts, according to legal experts.

The contract financial structure is the critical part of the dispute. According to the agreement, Reliance and its partners could recover their capital and operating expenses on the sale of oil and gas and then divide the profits with the government.

The profit to be paid to the government was 10% and this amount could go up after the recovery of the costs was complete. The government’s argument currently being presented is solid in the sense that the so-called mismanagement robbed the government of its rightful profit and the overall economic advantages of the extracted gas.

At the beginning of 2020, Reliance declared that it had stopped the production of D1 and D3 fields. The company then indicated that a total production in the larger block had reached 3 tcf of gas equivalent, but it was unknown how much of that total was specifically in the D1 and D3 fields. This underestimation of the pre-estimates and the actual output is the main witness in the assertion of mismanagement and loss by the government.

Conclusion

The lawsuit of $30 billion against Reliance and BP is a turning point in the history of corporate and legal litigation in India. It highlights how challenging and dangerous deepwater exploration is, and how the government is now more assertive in resource ownership and corporate responsibility.

With the energy sector paying attention to the developments, the final ruling by the arbitration tribunal in 2026 will probably become a major precedent in the way future production-sharing agreements are handled and the way technical malfunctions of massive infrastructural projects are addressed. At present, the court struggle can be considered as one of the most high-stakes clashes between the Indian state and the corporate world, tens of billions of dollars being at stake.