India Shifts LPG Sourcing to US Amid Middle East Supply Disruptions

India is undergoing a significant shift in its energy procurement strategy as liquefied petroleum gas (LPG) imports from the United States are projected to surpass 1 million metric tonnes this June. This historic surge comes as geopolitical tensions in the Middle East and disruptions in the Strait of Hormuz force New Delhi to seek more reliable, albeit more expensive, alternatives to ensure domestic cooking gas security.

Record-Breaking US Imports Amid Geopolitical Volatility

For the first time, India is expected to import between 1.1 million and 1.2 million tonnes of US LPG in a single month. This massive uptick reflects a strategic pivot away from traditional sourcing patterns. Prior to the recent US-Israel-Iran conflicts, India relied on Middle Eastern producers for approximately 90% of its monthly LPG requirements, which average around 2 million tonnes.

The disruption in the Strait of Hormuz caused a sharp contraction in supply, with imports falling to just 696,000 tonnes in April. While supplies began to recover in May to 1.15 million tonnes, the volatility has accelerated India's move toward the US market. While India had previously planned to increase US imports to roughly 10% of its total volume to rebalance trade ties with Washington, the current crisis has turned this long-term goal into an immediate necessity.

Prioritizing Energy Security Over Spot Market Premiums

To prevent a shortage of essential cooking fuel for households, Indian refiners have been purchasing unprecedented volumes of US LPG, even when facing higher spot market premiums. The government has taken a multi-pronged approach to manage this supply crunch, which includes:

  • Maximizing Domestic Production: Refiners have been instructed to ramp up local LPG production.
  • Prioritizing Household Sales: Ensuring the domestic consumer remains insulated from global volatility.
  • Infrastructure Acceleration: Speeding up the expansion of piped natural gas (PNG) connections to reduce the total reliance on LPG, with a target reduction in consumption of 15% to 20%.

The Landscape of Global LPG Sourcing

While the US has emerged as a dominant supplier, the Middle Eastern landscape is showing signs of a gradual recovery. Data from energy intelligence firm Kpler highlights the massive scale of the shift; in May, India imported 648,300 tonnes from the US compared to just 134,700 tonnes from the UAE.

For June, preliminary data indicates a diversified but US-heavy import schedule:

  • United States: ~1.07 million tonnes
  • United Arab Emirates: 223,800 tonnes
  • Iran: 116,200 tonnes
  • Kuwait: 108,600 tonnes

Additional shipments are expected from Oman, Saudi Arabia, Algeria, Qatar, and Nigeria. As the Strait of Hormuz partially reopens, the market anticipates a return of traditional Middle Eastern supplies, which could eventually ease price pressures and reduce the reliance on high-cost Western imports.

Key Takeaways

  • Historic Shift: India's US LPG imports are set to cross the 1 million tonne mark in June for the first time due to Middle East supply disruptions.
  • Strategic Pivot: Geopolitical instability in the Strait of Hormuz has forced India to prioritize energy security by tapping US markets despite higher spot market premiums.
  • Demand Management: To mitigate supply risks, the government is pushing for increased domestic production and faster expansion of piped natural gas to reduce LPG consumption by up to 20%.