India’s Ministry of Petroleum Demands $2.81 Billion from Contractors in Gas Dispute

The Indian government is pursuing a significant financial claim against a consortium of oil and gas companies, including Reliance Industries Limited, BP Exploration (Alpha) Limited, and NIKO (NECO) Limited. This follows a reversal by the Delhi High Court concerning an earlier arbitral award favoring these contractors.

Background of the Case

On July 24, 2018, an international arbitration panel granted the consortium an award of approximately US $1.55 billion related to allegations of gas migration from blocks operated by ONGC. The case centered on claims made by the Government of India against the KG-D6 Consortium, which operates a crucial gas field.

Legal Developments

Initially, a single judge from the Delhi High Court dismissed the government’s appeal on May 9, 2023, which contested the arbitral award. However, in a significant turn of events, the division bench has reinstated the government’s claim, demanding the consortium to pay US $2.81 billion.

In response to the latest court ruling, Reliance Industries Limited has announced plans to challenge the division bench’s judgment. “The Company is taking steps to challenge the judgment of Division Bench of Hon’ble Delhi High Court,” as stated in their regulatory filing.

Implications for the Industry

This legal battle highlights ongoing tensions in the Indian oil and gas sector, particularly regarding the interpretation of contracts and arbitration outcomes. The resolution of this dispute is expected to have far-reaching implications for future collaborations and contractual agreements in the energy sector.

The Ministry of Petroleum and Natural Gas continues to press its claims aggressively, which might set a precedent for handling similar disputes in the industry.

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