India Taps US for LPG Imports to Counter Middle East Supply Disruptions

India is undergoing a significant shift in its energy sourcing strategy as liquefied petroleum gas (LPG) imports from the United States are projected to surpass 1 million metric tonnes in 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 expensive alternative suppliers to ensure household energy security.

A Historic Shift in Sourcing Patterns

For years, India’s energy security was heavily tethered to the Middle East, with Middle Eastern producers accounting for approximately 90% of the country's LPG imports, which average about 2 million tonnes per month. However, the US-Israel conflict and subsequent tensions involving Iran have disrupted traditional shipping routes through the Strait of Hormuz.

As a result, India is expected to import between 1.1 million and 1.2 million tonnes of US LPG this month alone. This marks a record high and represents a massive pivot from previous sourcing patterns. While India had already planned to increase its US LPG intake to roughly 10% of total imports to rebalance trade ties with Washington, the Middle Eastern supply uncertainty has drastically accelerated these spot purchases.

Managing High Costs and Domestic Supply

The pivot to the US has not been without economic consequences. Indian refiners have been purchasing unprecedented volumes of US LPG despite facing higher spot market premiums. The primary driver behind this decision is the Indian government's mandate to ensure uninterrupted cooking gas supplies to millions of households.

To mitigate the impact of high-cost imports and manage volatility, the government has implemented several strategic measures:

  • Maximizing Production: Refiners have been instructed to ramp up domestic LPG production.
  • Prioritizing Households: Domestic sales of LPG to households have been prioritized over industrial use.
  • Infrastructure Expansion: The government is accelerating the expansion of piped natural gas (PNG) connections, a move expected to reduce overall LPG consumption by 15% to 20%.

Data from energy intelligence firm Kpler highlights the scale of this transition. In May, India imported 648,300 tonnes of LPG from the US, significantly dwarfing the 134,700 tonnes imported from the UAE. Preliminary data for June shows that US imports are scheduled to reach approximately 1.07 million tonnes.

While the US has become a primary provider, traditional suppliers are beginning to show signs of recovery. India is expected to receive between 300,000 and 400,000 tonnes of LPG from the UAE in June, with additional shipments arriving from Kuwait, Oman, Saudi Arabia, and Qatar. For instance, the UAE has reportedly offered cargoes via Oman's Sohar port at premiums of roughly $100 per tonne above Saudi Contract Prices.

As the Strait of Hormuz partially reopens, the influx of Middle Eastern supplies is expected to improve, potentially easing price pressures and reducing India's reliance on high-cost American imports.

Key Takeaways

  • Record US Imports: India's LPG imports from the US are set to exceed 1 million tonnes in June for the first time due to Middle East supply volatility.
  • Strategic Pivot: Geopolitical disruptions in the Strait of Hormuz have forced a shift from 90% Middle Eastern reliance toward more expensive US spot purchases.
  • Demand Management: To counter high costs, India is pushing for increased domestic production and expanding piped natural gas (PNG) to cut LPG demand by up to 20%.