Resolution of USD 247 million KG-D6 oil block dispute between RIL and Government likely by 2026

New Delhi [India], December 27 (ANI): A long-standing financial disagreement between the Indian government and Reliance Industries Limited (RIL) regarding the KG-D6 oil block may reach a conclusion in early 2026. The dispute involves a USD 247 million claim by the government for a higher share of profits from the gas field. This legal process is currently in its final stages within an international arbitration setting.

The issue began when the government decided to block Reliance from recovering some of the money it spent on building infrastructure for the KG-D6 oil block. Under the original New Exploration Licensing Policy (NELP) agreement, companies are allowed to get back all the money they invest in drilling and pipes before they start sharing profits with the government. Reliance, along with its partners bp and Niko, spent this money to set up the deepwater facility.

According to information, the production sharing contracts under NELP explicitly allow an operator to first recover all its development costs fully, before the government’s profit share begins. Finding oil and gas is a high-risk business, and companies take on all the financial danger themselves. In this case, the government did not invest any money and faced no financial risk, yet it still received a significant share of profits and taxes.

The project was managed by a committee that included two government officials who had the power to stop any decision. Reliance says it did not spend any money or make any moves without the approval of this committee. 

The company says it followed every rule, and the government has never accused it of doing anything wrong. However, when the gas field produced less than expected due to natural geological factors, the government retroactively disallowed some of the costs Reliance had already paid for.

Further, no provision of the Production Sharing Contract allows such unilateral disallowance of costs after they have been incurred. While Reliance had to sell its gas at low prices to help the country, it was also hit with these extra charges. According to information, all other blocks in KG basin around D6, developed by other operators, have performed even worse than the D6 block. 

Reliance developed the KG-D6 block in record time, making it the most successful deepwater site in India.

The argument is that the government should not only want to share in the profits but must also respect the risks taken by private businesses. A final decision on whether Reliance must pay the USD 247 million or if it can recover its costs is expected by the start of 2026. (ANI)