For Reliance Industries Limited (RIL), the oil-to-telecom conglomerate that has spent the better part of a decade repositioning itself around retail and digital services, its upstream gas business is slipping into a production decline.

The company’s KG-D6 block in the Krishna-Godavari basin was once projected as a transformative discovery for India’s energy sector. That promise faded quickly after its ‘flash in the pan’ success.

Cut to 2026, KG-D6 is seeing production decline for the second time.

Unlike the first cycle, RIL and its partner BP are operating in a more supportive pricing and policy environment, even as India’s rising gas demand makes clear that no single domestic block can anchor the country’s energy security ambitions anymore.

The Recap

In 2009, RIL said production from the Dhirubhai 1 and 3 discoveries had ramped up to around 30 million metric standard cubic metres per day (MMSCMD) within months of commencement. At the time, the company expected the field to double India’s indigenous gas production.

This success was, however, short-lived.

By 2012, production had begun to fall sharply. Reliance attributed the decline to “unforeseen reservoir complexities and water ingress.”

"The first time a bunch of purely commercial and regulatory issues deterred RIL from making the needed investments to develop these assets and arrest immediate declines,” Sandeep Jain, Managing Director Oil & Gas Practice, Valpro Consulting and a former oil marketing company executive, told The Core.

By February 2020, production from the D1 and D3 fields had ceased entirely.

A Second Attempt

Now, more than a decade after the first disappointment, RIL is investing to make the second revival of KG-D6 tick in a more meaningful way. The field once again touched 30 MMSCMD of production in the quarter ended March 2024, after a fresh wave of investments alongside partner BP.

Yet once again, the asset has begun declining soon after reaching peak output. RIL executives have noted this to be a natural decline, a term used in oil and gas to reflect the decline in production from gas assets post its peak, owing to pressure drops. These declines are then managed through regular, incremental investments.

The second phase of KG-D6 has been years in the making. RIL and BP floated a $5 billion investment plan for the block as early as 2013, but execution only gathered pace from 2017 onward.

Production restarted in phases beginning in December 2020 with the R-Cluster development, followed by the satellite and MJ fields.

By March 2026, output had slipped to 25.2 MMSCMD. Analysts at Macquarie Group recently described RIL’s upstream gas earnings before interest, taxes, depreciation and amortisation as being in “structural decline” as KG-D6 moves past peak production.

The company has reported a natural decline in the asset for multiple consecutive quarters now.

A Plausible Different Turn

RIL believes it can offset the fall through incremental drilling and fresh investments.

In April 2024, RIL informed investors that this additional investment plan for KG-D6 should help add 3-4 MMSCMD capacities. An email query sent to RIL remained unanswered.

“We can see consistently the production decline in KG-D6 but again, we are making the efforts to stabilise that decline,” said an RIL oil & gas executive in a recent media call in April this year. “With further activities that are planned for augmentation of production, we should be able to offset the decline to some extent,” the executive noted.

Analysts tracking the company remain hopeful that RIL’s attempts to arrest decline would show eventual results.

Those at Emkay noted, in the last quarter, RIL was able to arrest the natural decline in KG-D6 to 8% vs the usual 12%, “and has plans for drilling at the MJ and R-Cluster going ahead; this should further lower the decline rate,” they said. KG-D6 output for the full year FY26 dipped 8% compared to FY25’s output.

Industry watchers believe the asset has a fighting chance, provided incremental investments continue.

"The partnership with BP helps with the expertise needed for deepwater. Market freedom, of course, still comes with a ceiling and pre-defined offtake sectors, but it is still better than a decade or so back,” Jain said.

A More Supportive Policy Era

The optimism also comes because of how dramatically India’s upstream policy landscape has changed since KG-D6 first emerged as a national energy story.

While discussing KG-D6, industry executives and experts insist that one needs to look at India’s overall exploration and production.

“The policy amendments in recent years have helped the crude and gas prices to reflect the risks the investors take. That has benefited the industry assets like KG-D6 and that of ONGC, including smaller operators,” Deepak Mahurkar, partner at PwC, told The Core and added, “With the new PSC and revenue sharing contracts, the time to gas is lesser, the risks are lower and with more and more data becoming available, the targets are more defined.”

In 2016, the government notified the Hydrocarbon Exploration and Licensing Policy (HELP), wherein the contractual regime changed to a Revenue Sharing Contract (RSC) from a Production Sharing Contract (PSC).

This changed a profit-sharing system to a revenue-sharing one, believed to help with better cost efficiencies. Prior to that, in 2014, India announced a new gas pricing, effectively doubling the domestic prices, a move that RIL welcomed.

Ril’s gas price realisation in FY12 was $ 4.20/MMBTU from KG-D6; this for FY26 was at $ 9.81/ MMBTU. RIL’s gas business profitability remains sensitive to the gas price ceiling set biannually by the government, which stands at $8.9/MMBtu for H1FY27. Despite the volatility, analysts do not factor any major drop in KG D6 price realisation for the next few fiscal years.

However, these policy changes came not before RIL landed in arbitrations with the government over the block.

In a claim that has been pending for over a decade, the Indian government is seeking $247 million from the company, over cost recovery and lower than projected gas production.

RIL also received a separate demand notice in 2016, on account of the production of gas allegedly migrated from ONGC’s blocks.

In March 2025, RIL also received a demand pertaining to this for a payment of $ 2.81 billion (RIL share $1.87 billion). In the latest development, RIL is seeking mediation over the same, news reports said.

India’s Gas Ambitions

The bigger question now is whether KG-D6 still matters to India’s larger energy ambitions in the way it once did.

When Reliance first announced the block’s ramp-up in 2009, India’s domestic gas output stood at levels that raised hopes of reducing dependence on imported fuel. By FY12, India produced 46,453 million metric standard cubic metres (MMSCM) of gas domestically while importing another 17,849 MMSCM.

Domestic production then weakened for nearly a decade.

By FY26, India’s domestic net gas output had fallen to 34,326 MMSCM, even as imports climbed to more than 34,216 MMSCM to meet rising demand.

The gap between domestic supply and consumption is expected to widen further.

The International Energy Agency estimates India’s gas consumption could rise nearly 60% between 2023 and 2030, while domestic production may increase by only about 8% over the same period.

The agency expects offshore gas supply growth to be constrained by plateauing production from KG-D6 and declining output from legacy offshore assets operated by Oil and Natural Gas Corporation.

In other words, KG-D6 is no longer viewed as the singular answer to India’s energy security ambitions.

Beyond One Block

Jain believes that India needs to look at energy security from multiple lenses.

“One would be wrong to bet on any single factor, geography or domestic asset. If there is anything we learn from the ongoing war, is that energy security has to be a function of diversification across geographies, benchmarks, domestic assets and also sources of energy,” Jain said.

RIL, for now, seems hopeful to keep pace with India’s growing gas consumption.

“Ongoing development efforts in deepwater and CBM assets, leveraging existing infrastructure, are expected to further enhance supply and help meet growing domestic demand,” the company said in its FY25 annual report.