India, the world's largest consumer of cooking fuel, is actively negotiating with the United States to significantly increase its liquefied petroleum gas (LPG) imports under annual contracts for 2027. This initiative underscores India's broader strategy to diversify its energy supply chain and reduce its longstanding dependence on West Asian nations.
Boosting US LPG Imports
According to reports, the Indian government has instructed its state-owned refiners—Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—to target sourcing at least 15 percent of the nation's total LPG imports for 2027 through US term contracts. This represents a notable increase from the approximately 10 percent (or 2.2 million tonnes) secured through US term supplies earlier this year, marking India's first-ever long-term arrangements with the United States.
Strategic Diversification and Trade Relations
Executives from the three major Indian refiners are currently in the US, engaged in negotiations to finalize these crucial supply deals. This push for increased US LPG contracts is not only about energy security but also aligns with New Delhi's efforts to expand its overall supply options and potentially help reduce its trade surplus with the US, as both nations continue to pursue a comprehensive trade agreement.
US as a Key Supplier
The United States has already emerged as India's primary LPG supplier, with shipments reaching a record 3.9 million tonnes through August of the current year. The state refiners are expected to issue a joint tender for US LPG once they have thoroughly evaluated potential suppliers and their respective offers.
Addressing Supply Challenges
India's LPG supply outlook has faced pressure due to geopolitical factors, including the ongoing impasse over the Strait of Hormuz and stalled negotiations between the US and Iran. Recent data indicated a more than 16 percent year-on-year drop in LPG consumption last month, to 2.35 million tonnes, as shortages compelled households and industries to switch to alternative, often more polluting, fuels like biomass and kerosene, or piped natural gas where available.
The proposed increase in US term supplies is anticipated to provide India with a more stable and diverse source of cooking gas, thereby mitigating its exposure to potential supply disruptions originating from the volatile West Asian region.