Supreme Court refuses to pause proceedings in KG Basin gas migration dispute

THe sublime margaret court on midweek declined to break proceedings in the high-stakes Krishna-Godavari (KG) basinful gas migration dispute between the Centre and a Reliance Industries Limited (RIL)-led consortium, even as the consortium informed the court that it intends to approach the Union government seeking conciliation or mediation of the matter.After the RIL’s legal team mentioned the matter before Chief Justice of India Surya Kant, the CJI said that the hearing would continue unless both sides jointly informed the court that a resolution had been reached.The development came a day after the Centre accused the consortium of having “virtually committed a theft” of natural gas belonging to state-run the Oil and Natural Gas Corporation Ltd (ONGC) from adjoining offshore fields in the KG basin off the Andhra Pradesh coast.The hearing had on Tuesday commenced before the bench comprising the CJI and justices Joymalya Bagchi and Vipul M Pancholi.“Petitioners will today to approach the government…petitioners will write to the central government to attempt reconciliation or mediation. This is an ongoing contract and we are still in a contractual relationship with them,” counsel for the consortium, including advocates Sameer Parekh and Mahesh Agarwal, told the court.Attorney General R Venkataramani, appearing for the Centre, opposed any halt in the proceedings and urged the court to continue hearing the appeals.“Let us complete the hearing, my lords. If there is any other development in the meantime, we can always bring it to the notice of the court. Why should the hearing be discontinued?” the attorney general submitted.Also Read: Bail, liberty, and a Supreme Court split in reading UAPAThe bench agreed with the Centre’s position.“Both parties have to agree,” the CJI observed initially, before adding: “Both parties have to come to us and say that there is a resolution, then we will immediately dispose of the matter. The petitioners have already begun. We can stop the hearing once both sides tell us it has been resolved…let us hear and we can record that mediation has been attempted.”The dispute centres on allegations that natural gas from ONGC’s offshore blocks migrated into the adjoining KG-D6 block operated by the RIL-led consortium and was subsequently extracted between 2009 and 2013.On Tuesday, the Centre alleged before the court that the consortium unlawfully benefited from gas originating in ONGC’s fields. Addressing the bench, Venkataramani argued that the consortium was accountable for extracting gas that had naturally migrated across reservoir boundaries beneath the seabed.“There were two blocks. ONGC had a block, they had a block. Gas migrated. You virtually committed a theft of my gas and you are accountable for that,” the attorney general submitted.The consortium, however, strongly denied the allegation, contending that migration of hydrocarbons across underground reservoirs was a natural geological phenomenon incapable of being prevented by artificial means.Also Read: What AI can do for the judiciary, what it can’tSenior advocate Abhishek Manu Singhvi, appearing for the consortium, argued that the extraction could not be characterised as deliberate siphoning or theft.“When you extract by a natural process of pressure, from the nearby sea block, some oil will always flow and migrate. That has nothing to do with voluntariness, deliberation, intent. That becomes a bugbear with them to add it to what they call stolen gas. There is nothing, it is a pressure movement,” Singhvi argued.The litigation arises out of a production sharing contract executed in 2000 between the Centre and the RIL-led consortium for exploration and extraction of natural gas in the KG basin. Commercial production from the KG-D6 block adjoining ONGC’s fields began in April 2009.At the relevant time, RIL held a 60% participating interest in the block, while BP Plc and Niko Resources held 30% and 10% stakes respectively.The controversy surfaced in 2013 when ONGC alleged that the consortium had drilled wells close to the boundary areas and extracted gas migrating from ONGC’s adjoining blocks, leading to what it described as “unjust enrichment”.The Union government subsequently sought disgorgement of gains from the consortium, claiming nearly $1.5 billion along with approximately $174 million in interest.The consortium invoked arbitration under the production sharing contract. In July 2018, an arbitral tribunal ruled in favour of the consortium, holding that the contract did not prohibit extraction and sale of gas that had naturally migrated from adjoining reservoirs.While a single judge of the Delhi High Court upheld the arbitral award in May 2024, a division bench on February 14, 2025 reversed the ruling and set aside the award, holding it contrary to settled principles of law. The consortium challenged that judgment before the Supreme Court.