Reliance's broken promise is India's energy crisis

ELI5/TLDR

Seventeen years ago, Reliance promised that a big offshore gas field called KG-D6 would end India’s dependence on imported fuel. It did — for about two years. Then production collapsed, imports ballooned, and today India gets half its gas from abroad, with nearly half of that coming from a single country: Qatar. Now that war in the Middle East has put Qatari supply at risk, the old broken promise has turned into a full-blown energy security crisis.

The Full Story

The promise, and how quickly it worked

In 2008 Reliance Industries drilled its way into the Krishna Godavari Dhirubhai 6 block — KG-D6 — one of India’s first deepwater gas fields. Deepwater is just what it sounds like: drilling for gas in very deep parts of the ocean, which is expensive and hard. Reliance pulled it off in six and a half years instead of the usual nine or ten. By 2009, the field was pumping 60 million standard cubic meters a day. That covered roughly 40% of India’s gas use. Import dependency dropped below 20%. The country, for a moment, looked like it was solving its own problem.

Then it stopped working

By 2011, output was falling. The government assumed it was temporary. The economic survey that year still expected KG-D6 to hit 80 million cubic meters soon. Instead, production kept sliding. Reliance brought in BP as a 30% partner to help, and the slide continued anyway.

By 2020, output was near zero. Import dependency had crossed 50%. Three new fields came online during the pandemic and briefly pulled production back up to 30 million cubic meters — half of the earlier peak — and it has been declining since.

Reliance blames geology: water and sand flooding wells, pressure drops, faster-than-expected reserve depletion. Analysts accept that deepwater is genuinely risky, but say the original projections were simply too optimistic.

Qatar, and the vulnerability that came next

With domestic production falling, India leaned harder on imports. Today Qatar alone supplies almost half of India’s imported gas. That single-source reliance was fine until it wasn’t. An Iranian strike on regional energy infrastructure knocked out about a fifth of Qatar’s export capacity, and Qatar has now told its long-time buyers, India included, that it can no longer guarantee deliveries.

The IEA’s Fatih Birol has called this the worst energy crisis in history, worse than the 1973 and 1979 oil shocks combined. The US Energy Information Administration expects oil prices to stay about $23 a barrel above baseline well into 2027 — even if the Strait of Hormuz fully reopens.

“This is India’s 1991 moment for energy security.”

That comparison — made by a senior oil and gas executive quoted in the episode — is doing a lot of work. In 1991 India nearly ran out of foreign exchange and airlifted gold out of the country to stay solvent. The crisis forced the economic reforms that made modern India. The argument here is that import dependence on gas has become a structural weakness of the same order.

The tightrope walk

While all this was happening, Trump announced a $300 billion oil refinery in Texas, backed by America First Refining and Reliance Industries. Reliance said nothing — no confirmation, no denial. The silence is the story. India has deep ties with both the US and Iran, needs the Strait of Hormuz to stay open, and cannot afford to publicly take either side. Reliance is in the same bind. Being loudly associated with an American mega-project while Indian diplomats are quietly talking to Tehran is not a comfortable position.

Not just Reliance

The public-sector producers haven’t covered for the gap. ONGC and Oil India together produce more than two-thirds of India’s natural gas, but as one executive put it, “At least Reliance got going, even if output crashed later. Meanwhile, ONGC barely got started in its own adjacent block.”

Reliance’s overseas record is also weak. Shale gas assets — gas trapped in deep rock formations — bought in the US between 2010 and 2013 were later sold, often at a loss. Conventional oil and gas operations in Myanmar, Peru, Yemen, Oman, Kurdistan, Colombia, East Timor, and Australia have all been exited. The company is a world-class refiner. Exploration and production, as the executive put it, may simply not be in its DNA.

The fights and the reforms

KG-D6’s decline triggered years of litigation that are still ongoing. The government claimed Reliance drilled only 18 of 31 promised wells and therefore should not get full cost recovery. ONGC claimed compensation for gas it says Reliance pulled from its adjacent block. Reliance disputed all of it, and disputed a $30 billion headline number — saying the actual figure was closer to $250 million.

The policy response has been real but modest. In 2016 the old “recover costs first, share profit later” model — basically designed to produce disputes — was replaced with a simpler revenue-sharing regime. In 2023 deepwater gas pricing was revised upward to attract exploration capital. These helped: Reliance’s oil and gas segment posted an operating profit of around ₹16,000 crore in FY25, roughly 12% of total profit.

But industry voices say the reforms India treats as big are standard elsewhere. What they want is faster pipeline build-out in gas-producing states like Assam, Gujarat, and Rajasthan — because some of the gas India has already found still can’t get to market — and aggressive terms to bring global majors into deepwater blocks where capital requirements are too large for local players.

The takeaway the episode lands on: renewables are growing, but hydrocarbons are still indispensable to India. And a good crisis, as the saying goes, should never be wasted.

Key Takeaways

KG-D6 was the great hope. One of the world’s five largest deepwater gas projects, built in record time. Peak output in 2009 was 60 million standard cubic meters a day, covering about 40% of India’s gas needs.
The collapse was steep. Output started falling by 2011 and was near zero by 2020. A BP partnership with a 30% stake didn’t stop the decline.
Half of India’s gas is imported. Half of those imports come from Qatar. Single-source concentration is the vulnerability.
Refining and exploration are different businesses. Reliance excels at refining (taking crude and turning it into usable fuel). Exploration — finding and extracting hydrocarbons — has been a consistent miss, both at home and across Myanmar, Peru, Yemen, Oman, Kurdistan, Colombia, East Timor, Australia, and US shale.
Production Sharing Contract vs Revenue Sharing. Before 2016, India’s fiscal regime paid the government only after contractors recovered their own costs — a structure that invited disputes over what counted as a cost. The 2016 switch to revenue-sharing simplified the fight.
Infrastructure is a separate bottleneck. Gas that has been found in Assam, Gujarat, and Rajasthan doesn’t always reach buyers because pipelines don’t exist. Discovery is only half the battle.
The “1991 moment” framing. Analysts are comparing India’s gas import dependency to the 1991 forex crisis — both structural vulnerabilities that eventually force reform rather than shallow patches.
Oil price floor. Even if the Strait of Hormuz fully reopens, the US EIA expects a ~$23/barrel premium to persist into 2027.
Litigation scars investor appetite. When a group as big as Reliance gets stuck in a decade-long dispute with the government, smaller players read it as a warning.

Claude’s Take

This is solid business journalism doing what business podcasts should do: take a specific corporate failure and show how it metastasized into a national vulnerability. The KG-D6 arc is well told — the promise, the peak, the collapse, the lawsuits — and The Ken sensibly doesn’t let ONGC off the hook either. Pointing out that the state-owned producers are two-thirds of output and have barely moved the needle is the kind of detail that keeps the piece from being a simple “Reliance bad” story.

The weaker move is the “1991 moment” framing. It’s a quote from one executive, and the parallel is rhetorically punchy but a little loose. 1991 was an immediate solvency crisis — days away from defaulting. Gas import dependency is a chronic structural problem, not a cliff edge, and the policy response will look more like slow incentive redesign than dramatic liberalization. The comparison works as a wake-up call but not as analysis.

One thing the episode doesn’t fully interrogate: Reliance walking away from eight country-level exploration ventures in a decade is a real pattern. If exploration genuinely isn’t in the company’s DNA, then the deeper question is why India structured its gas security around a private conglomerate’s appetite for deepwater risk in the first place — and whether the right fix is policy reform, or getting genuinely specialist international players into Indian blocks. The episode gestures at the second answer without quite committing to it.

Score 7: tight, well-sourced, useful for anyone trying to understand why Indian gas prices and electricity tariffs may get uglier in 2026-27. Loses a point for leaning on the 1991 comparison and another for being lighter on the renewables side of the energy mix picture.