KG-D6 Dispute Between RIL and Centre Likely to End by 2026

A long-running financial dispute between the Government of India and Reliance Industries Limited (RIL) over the KG-D6 deepwater gas block is nearing resolution, with an international arbitration award expected in early 2026. The case centres on a $247 million claim by the government, which contends that RIL owes additional profit petroleum from the block.

Reliance, the operator of KG-D6 since 2002 along with partners BP and Niko Resources, has challenged the claim, arguing that it contradicts the cost-recovery provisions of the New Exploration Licensing Policy (NELP). Arbitration proceedings are currently in their final stages, marking a potential end to a dispute that has stretched over 13 years.

The disagreement arose after the government retrospectively disallowed a portion of expenditure incurred by the RIL-led consortium on drilling activities and evacuation infrastructure. Under NELP production sharing contracts (PSCs), operators are entitled to recover all approved development costs before sharing profits with the government, which also earns royalties and taxes.

Reliance maintains that oil and gas exploration is inherently risky and that private operators bear the full financial burden of this risk. In the case of KG-D6, the government did not invest capital or assume exploration risk, yet continued to receive profit petroleum and tax revenues. The company argues that PSCs clearly prohibit post-facto disallowance of costs once they have been approved and incurred.

According to RIL, all expenditures were cleared by the project’s management committee, where government nominees hold veto powers. The company says no contractual or procedural lapses have ever been alleged. However, when gas output declined due to unforeseen geological challenges, the government moved to reduce cost recovery, a step Reliance has described as unfair and punitive.

Reliance has also pointed out that other KG Basin blocks have underperformed without facing similar action. The company argues that the case has wider implications for investor confidence, contract sanctity and risk-sharing in India’s upstream energy sector. The arbitration ruling will determine whether RIL must pay the claimed amount or retain its full cost recovery.