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Mint
5 days ago
- Business
- Mint
India's quest for cooking gas shifts from east to west
India's state-run oil marketers are in joint discussions with US firms to secure cooking gas supplies beginning next year, three people aware of the development said, indicating a potential deepening of energy ties. The companies—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd—are likely to sign near-identical contracts with the selected partners, the people said on the condition of anonymity. The negotiations, happening against the backdrop of the US tariff on Indian goods, support the target set by both countries earlier this year to increase their energy trade to $20 billion. This would include India importing liquified petroleum gas (LPG) from the US through term contracts, and increasing crude oil and liquefied natural gas (LNG) imports. 'Indian OMCs are in talks, collectively, with at least a dozen LPG suppliers in the US. The negotiations are for supplies starting January next year, and the discussions are progressing well," one of the three people cited above said. The person added that although deals may be signed separately, given that talks are happening at a combined level, the nature of deals would be largely the same. Targa, OneOk Some of the major American LPG suppliers are Texas-headquartered Targa Resources and Enterprise Products and Oklahoma-headquartered ONEOK. Queries emailed to the Union ministries of petroleum and commerce, the Indian oil marketing companies, and the US LPG suppliers went unanswered. India traditionally imports most of its LPG from West Asian countries including Qatar, the UAE and Saudi Arabia through long-term contracts, while other major LPG importing countries source it from the US. The US so far has been supplying India LPG in small volumes through spot deals, and this is the first time the Indian companies may have a term deal with US suppliers. On the other hand, China has been a major buyer of LPG from the US. In India, LPG is used primarily for residential cooking, followed by commercial and industrial purposes. India imported LPG worth $12.47 billion in FY25, 19.85% higher than $10.42 billion the previous year. According to Ken Research, as of December 2024, the Indian LPG market was valued at $15 billion, with growth backed by the government's emphasis on use of LPG for cooking purposes through the Pradhan Mantri Ujjwala Yojana. Thaw? The talks with the US firms is seen as indicating a thaw in ties between the two, even as talks on the Bilateral Trade Agreement remain active but are stuck on intractable issues such as dairy and agriculture. US president Donald Trump has also wared that India could face penalties if it continues purchasing petroleum products from Russia. "India is a huge importer of LPG. US is a large producer of LPG which is produced as natural gas liquids along with shale gas. So, US can be a significant supplier of LPG to India," said Prashant Vasisht, senior vice president and co-group head, corporate ratings, ICRA Ltd. He added the price of LPG will not be very different and will be competitive compared to the West Asian LPG on a landed basis in India. In a bid to diversify import sources amid geopolitical tensions and regional instability in West Asia, Indian buyers are already forging new ties. State-run BPCL signed an annual contract with Norway's Equinor to secure 550 kilotonne per annum of propane and butane, reducing its reliance on the West Asian countries. Reuters last month reported that India plans to source about 10% of its cooking gas imports from the US as part of a broader effort to boost energy purchases to narrow its trade gap with Washington. Trade war ripples In March this year, as the tariff war flared between the US and China, a report by maritime consultancy Drewry suggested that if the US-China trade war escalated, Saudi contract prices could attract a premium, with China likely engaging Middle Eastern suppliers and forcing India to diversify its import sources, including the US. LPG used in India comprises 60% butane and 40% propane. West Asian exports are better suited for this as they are primarily butane-dominated, since their LPG production is a byproduct of oil processing. On the other hand, US supplies are primarily propane-dominated, as LPG production in the US is the byproduct of natural gas processing. According to the Drewry report, Butane accounted for 52% of India's LPG imports in 2024. "India may source the required propane from the US, which would be 40-50% of the composition and the butane may continued to be imported from the Gulf countries," an industry executive said on the condition of anonymity LPG country As on 1 April, 2025, the three state-run oil marketing companies which dominate the LPG market in India, together have 32.97 crore active LPG customers in the domestic category who are being served by 25,542 LPG distributors. Data from the Petroleum Planning & Analysis Cell (PPAC) shows these companies sold nearly 31.2 million metric tonnes of LPG in FY25, out of which about 88.3% was sold in the domestic sector. Ajay Srivastava, former Indian Trade Service officer and founder of the Global Trade Research Initiative (GTRI), said, 'Those engaging with US oil firms for the deal should ensure certainty of supply and competitive pricing, as the US has overcommitted to supplying oil and gas to various countries, but currently lacks adequate production of petroleum products and LNG. The contract must guarantee supply certainty and include penalties for failure to deliver on time." However, a former government official, requesting anonymity, said, 'It's a forward-looking move by both sides, as such deals happen with the consent of the government, and this move could help ease tensions and make it easier to resolve some of the sticking points in the larger agreement." Vessel dynamics The Drewry report cited earlier said the increase in import of American LPG would also impact the LPG vessel segments that India employs to import the product. Typically, India uses medium gas carriers (MGC) to transport LPG, as the country has low storage capacities and most terminals are unable to cater to very large gas carriers (VLGCs) However, upgrading the infrastructure as well as changing supplier countries can lead to changes in the vessel employment patterns with VLGCs increasing their share in India's import mix with higher imports from the US. India's energy imports from the US, largely crude, have already witnessed an uptick this year. To be sure, India has already assured the US that it would ramp up energy ties and increase imports. After Prime Minister Narendra Modi's meeting with Trump last month in Washington, foreign secretary Vikram Misri had said that India aims to increase its purchases of US energy in the near future. During prime minister Narendra Modi's visit to the US in February, the US president Donald Trump said that both the countries have reached an 'important" agreement on energy that would make the US one of the leading suppliers of oil and gas to India, 'hopefully number one supplier". Mint earlier reported that oil and gas imports are emerging as a key factor in the ongoing bilateral trade talks between the US and India and India plans to increase the share of Western Texas Intermediate or WTI crude in the country's import basket, which could even entail setting a tariff rate quota for US crude.
Mint
02-08-2025
- Business
- Mint
Never mind the US drub, India continues to buy oil from Russia; discount seen rising
New Delhi: India continues to buy oil from Russia notwithstanding the punishing penalty and calling out by the US earlier this week, and it is even reaping a bigger discount. State-owned refiners—Indian Oil Corp Ltd (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL)—continue to buy oil from Russian suppliers, and negotiations are underway for spot deals, said two people in the know of the developments. One of the two people mentioned above said that over the past few days, two cargoes of Russian oil had been purchased by Indian refiners with better discounts than usual. 'OMCs (oil marketing companies) are negotiating for Russian oil supplies currently. There is no decision as to go slow or stop Russian oil," said the person mentioned above. "They (Russian supplies) may have declined amid cheaper global oil prices and narrowing discounts in the past, but there is no decision on halting imports from Russia." 'Although discounts have declined from the highs, of late, there has been a spike of around $1 per barrel in discounts in the latest few deals," the person added. The last two or three cargoes have been booked at a discount of up to $3 a barrel, compared to about $1.7 in the earlier purchases, and it is likely to rise further, even if not significantly, after US President Donald Trump's censure of India for its Russian energy purchases, the person in the know said. The discounts on Russian oil have narrowed down to single-digit from the high of around $30 per barrel in 2022. 'The deals which are being negotiated now are for deliveries to be made in September. Till then, refiners are already tied up," said the second person in the know of the developments. There was no response to queries on the issue sent to the petroleum ministry, IOC, BPCL, HPCL and Rosneft till the publishing of this report. On 30 July, the US President announced a 25% tariff on Indian exports, starting 7 August, along with a penalty for India's energy and defence purchases from Russia, which has been berated for its war with Ukraine. The punishing announcement had raised concern over energy supply crunch and price increase. Russia exports about 4.5 million barrels of oil daily on an average, and if it goes out of the market global prices may shoot up as was witnessed in 2022, according to experts. Prashant Vasisht, senior vice-president and co-group head, corporate ratings at ICRA Ltd, said refiners would need to carry out techno-economic feasibility before halting refining of a particular variety of crude oil and completely replacing it with another. 'Of late, prices have seen an uptick due to optimism of completion of the US-European Union (EU) trade deal. However, the demand-supply dynamics will play out, going ahead. Further, if supplies from Russia continue as usual and demand supply dynamics play out, prices may somewhat ease going ahead from the current levels," Vasisht said. The second person cited above said the supply of Russian oil is not prohibited since it is not sanctioned, as in the case of Iranian and Venezuelan crude, which are sanctioned and are not purchased by Indian refiners. 'The only thing OMCs need to respect, and they have always complied with, is the price cap (of $60 per barrel)," the person said. The price cap announced by the US and G7 countries in December 2022. The European Union last month announced to lower the cap to about $47 per barrel, which will be implemented starting September. Russian oil comprises of about 7% of the daily global oil consumption and 36% India's total oil imports. On the back of deep discounts starting February 2022, after its invasion of Ukraine, Russia became the top supplier to India. Earlier, the country catered to only about 2.5% of India's oil import. China and India are top buyers of Russian oil. Although the US and EU have raised concern over India's oil purhases from Russia, India has maintained that its energy procurement would depend on its needs. India imports over 88% of its crude oil requirement, and has diversified its oil sources to nearly 40 countries in order to ensure energy security. Responding to the US President's warning of secondary tariffs on countries that import Russian oil, minister for petroleum and natural gas Hardeep Singh Puri had said the country was not overtly worried, and would navigate any eventuality as there was enough supply in the market.
Mint
30-07-2025
- Business
- Mint
US tariffs, penalties may impact India's oil supplies, lift global prices
New Delhi: Hiked US tariffs and threats of penalties for energy and defence purchases from Russia, may crimp oil supplies to India while increasing its import bill, said sector experts. Russian oil makes up 36% of India's total oil imports. A person in the know of the development said that although India has a diversified oil import basket, an immediate shift in import sources would be tough and supplies may be disrupted in the near-term. An increase in oil prices as a result of fresh western sanctions on Russia may also increase India's oil import bill given India imports more than 88% of its domestic oil requirement. The exact impact on India's economy will become clear once there is clarity on the additional 'penalty' beyond the 25% tariff announced by US President Donald Trump. The spokesperson for the ministry of petroleum and natural gas did not immediately respond to a mailed query. Prashant Vasisht, senior vice president and co-group head, corporate ratings, ICRA Ltd said: "Several options exist for India to diversify its crude purchases as Russian crude accounted for less than 2% of Indian crude imports prior to FY2023. However, the potential impact of cutting off Russian oil from the international market would be a significant increase in international oil prices as Russian oil exports account for 7% of the global liquids consumption." He said a significant spike in crude prices could lead to higher crude import bill and under-recoveries on sale of liquified petroleum gas, petrol and diesel for oil marketing companies. Vasisht added that a $10-per-barrel-increase in crude oil prices would take up the oil bill by about $13-14 billion. Additionally, domestic gas and LNG imports linked to dated Brent prices would also become dearer thereby impacting all gas consumers such as fertilizer, city gas distribution, he said. India's crude import bill in FY25 was $137 billion. A person in the know of the development said that India can increase purchases from West Asia, Africa, Latin America and the US itself, in case it decides to ease Russian oil imports. Although India's import from the US also has picked up this year, it is yet to assume a major share of India's total imports. At the time of writing the story, the September contract of Brent on the Intercontinental Exchange was trading at $72.76 per barrel, higher by 0.22% from its previous close. Although India has adequate stock for the near term, supplies are likely to be impacted given that Russian oil comprises the largest share of India's energy imports. India has diversified its sources of oil imports to nearly 40 countries after the crisis in the global markets in 2022 post Russia's invasion of Ukraine. 'The current situation reinforces the wisdom of our multi-alignment approach in an increasingly multipolarworldorder," said Rishi Shah, Partner and Economic Advisory Services Leader, Grant Thornton Bharat. Earlier this month, after the US President warned of secondary tariffs on countries that import Russian oil, Union minister for petroleum and natural gas Hardeep Singh Puri said India is not worried and will navigate any eventuality as there is enough supply in the market. Russia has emerged as the top supplier of crude oil to India since February 2022 after western economies sanctioned purchases of Russian energy and Russia in turn offered deep discounts. China and India emerged as its top two buyers. Prior to that, Russian oil comprised only about 2% of India's oil imports. In a report on Tuesday, Rubix Data Sciences, a risk management and monitoring company noted that the value of Russian oil imports has surged at a 96% CAGR over the past five years. This shift has helped Indian refiners secure cost-effective barrels, improve margins through discounted grades like Urals and ESPO (Russian oil supplied to the Asia Pacific markets through Eastern Siberia–Pacific Ocean (ESPO), and reduce exposure to vulnerable routes such as the Strait of Hormuz, it said.
India Today
25-06-2025
- Business
- India Today
Why Iran's threat to block Strait of Hormuz could have huge bearing on India
The 'ceasefire' announced by US president Donald Trump on June 24 had initially raised hopes of an end to the Israel-Iran conflict and had positively impacted oil prices. Crude oil prices weakened, falling to $68 a barrel for Brent crude on June 25, from the highs of $78 seen two days prices had earlier threatened to cross $80 a barrel after the US joined the conflict and dropped 'bunker-buster' bombs that it claimed had destroyed Iran's key nuclear the situation continues to be tenuous, as both Iran and Israel have reportedly breached the 'ceasefire' agreement and continued to rain missiles on each other. All eyes are on whether Iran will carry out its threat of closing the Strait of Hormuz, which lies between the Persian Gulf and the Gulf of Oman and is the only marine entryway into the Persian Strait of Hormuz is one of the world's most strategically located 'choke points', through which a fourth of the oil for global consumption and a third of the world's liquefied natural gas supplies pass. There were media reports that Iran's Parliament, the Majlis, had approved the closure of the Strait of Hormuz in response to the US attack on the country's nuclear facilities. Any disruption in the flow of vessels through the Strait will have a direct impact on oil and gas supply and prices. A shutdown of the Strait can put 20 million barrels per day of supply at risk, say analysts. India will be affected in a big way, prodding the Centre to reportedly find alternative ways to surpass the FY25, as much as 54 per cent of India's gas imports and 45 per cent of its oil imports came through the Strait of Hormuz,' says Prashant Vasisht, senior vice-president and co-group head, corporate ratings, at ICRA. Some of the major oil suppliers to India through this route are Iraq, Saudi Arabia, the UAE and Kuwait, he is the third largest consumer of oil in the world, importing 89 per cent of its crude oil requirement and consuming over 5 million barrels per day (bpd). The US is the largest consumer of oil, with 20 bpd of consumption, followed by China (15.2 bpd).According to a Bank of Baroda report, India imported 244 million tonnes of crude oil in FY25, the compounded annual growth rate (CAGR) in the last 10 years being 2.6 per cent. 'This does indicate that the oil intensity of the economy has come down with the growing focus on a greener economy,' says the suppliers to India, there has been a sea change since 2022 after the outbreak of the Ukraine war when India channelled its sourcing more to Russia. Russia accounted for 36 per cent of India's imports of crude oil in FY25, followed by Iraq (20 per cent) and Saudi Arabia (nearly 14 per cent).advertisementIn case Iran shuts the Strait of Hormuz, India will have to significantly increase its off-take from countries like Russia, US and Brazil. An increased off-take from these countries will help India bridge the gap, but it will prove to be much costlier, widening the current account deficit (difference between the value of India's imports and exports). 'All these producers on the Strait of Hormuz don't have loading facilities or pipelines to divert produce to other locations (in case of a disruption),' says Vasisht.A Crisil report on June 20 said the impact of any further significant increase in crude oil prices would vary across sectors. The impact on profitability for companies in that sector would depend on the ability to pass on the cost increase to customers, the report said.'Higher oil prices will benefit upstream oil companies (those involved in oil exploration and production) because it translates to more revenue, while their costs are fixed. For downstream oil refiners, operating margins could get squeezed due to higher input cost as they may have limited ability to fully pass on the same through increase in retail fuel prices,' the report to India Today Magazine- EndsMust Watch
Time of India
23-06-2025
- Business
- Time of India
Explainer: Why the Strait of Hormuz matters to India's energy security — and what happens if it closes
New Delhi: The Strait of Hormuz — a narrow passage between the Persian Gulf and the Gulf of Oman — has again come into focus after the Iranian Parliament approved a possible closure of the strategic waterway following US airstrikes on Iranian nuclear facilities. While the move signals growing geopolitical tensions in West Asia, its ripple effects could be felt thousands of kilometres away — including in India, which depends heavily on crude oil and natural gas imports routed through Hormuz . So, what happens if the strait is closed, even temporarily? How vulnerable is India's energy system to such a shock, and what measures can be taken in response? Here's a detailed explainer. What is the Strait of Hormuz, and why is it critical? The Strait of Hormuz connects the Persian Gulf with the Arabian Sea and is one of the busiest oil shipping routes in the world. Around 20 million barrels per day (mb/d) of oil and 290 million standard cubic metres per day (mmscmd) of LNG pass through it. According to Prashant Vasisht , Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd., 45–50% of India's crude oil imports and 54% of its LNG imports move through this strait. 'About 20% of the global oil and gas/LNG consumption passes through the Strait of Hormuz. About 45–50% of India's crude oil imports and 54% of natural gas imports pass through the Strait. In case there is a closure of the same, there would be an increase in prices of both crude oil and gas and India would have to look for alternate sources,' he said. What would be the immediate impact on India's energy security and pricing? A closure or blockade of the strait would significantly disrupt oil and LNG supply chains, especially for India's refineries and gas utilities dependent on West Asian producers. This includes imports from Qatar, Saudi Arabia, the UAE, and others. Rohit Chaturvedi , Partner at Forvis Mazars in India, estimates that more than 30% of India's crude oil imports pass through Hormuz. 'A Hormuz blockade would have very serious short-term effects. A disruption would cause massive increases in freight rates, insurance rates, and re-routing of tankers through the Cape of Good Hope, which would take 10–14 days and involve massive cost overruns,' he said. Such a disruption could trigger: 1. Immediate increase in energy prices 2. Shipping delays and extended transit times 3. Inflationary pressure across sectors due to higher fuel costs 4. Container shortages and supply chain backlogs beyond the energy sector How vulnerable is India's energy system to this kind of disruption? India imports around 89% of its crude oil needs and about 50% of its natural gas requirements. This level of dependency makes it one of the most vulnerable major economies to global oil price swings or supply route disruptions. According to Vasisht, India's strategic petroleum reserves (SPRs) and commercial inventories combined account for only about 74 days of oil consumption. 'The SPR and domestic oil companies have only about 74 days of oil inventory combined. While there are other sources of oil such as Russia, Nigeria, Brazil, US etc., a 20% reduction in global oil and gas supply would impact prices and restrict options,' he added. Chaturvedi adds that a blockade would also expose gaps in India's energy logistics: 'India's energy supply chain is highly susceptible to geopolitical threats due to its over-reliance on Gulf imports. A blockade would expose weaknesses in crude procurement and also in freight, including tanker shortages and container imbalances.' What are India's options if the crisis persists? Experts agree that immediate alternatives are limited and would largely involve sourcing from other geographies. However, long-term strategies will require broader structural changes. Short-term mitigation: 1. Import from non-Gulf regions: Countries such as Russia, the US, Nigeria, and Brazil are alternative crude suppliers that do not require passage through Hormuz. 2. Use of strategic reserves: SPRs can help temporarily meet shortfalls in case of a sudden supply cut. 3. Rerouting of shipping: Crude and LNG could be re-routed via Cape of Good Hope, although this involves longer transit times and higher freight costs. Longer-term strategies: 1. Boost domestic exploration and refining 'The options such as boosting domestic production and expanding green energy would take months to years to implement,' said Vasisht. 2. Expand green energy and substitutes Invest in solar, wind, green hydrogen, and biofuels to reduce long-term fossil fuel dependency. 3. Strengthen logistics and port infrastructure Chaturvedi suggests firms must prepare for rerouting, longer lead times, and port congestion: 'Strategic freight planning, inventory stocking, and alternative port access become critical for energy as well as non-energy trade flows.' 4. Demand-side management Encourage energy-efficient transport, adopt fuel rationing if needed, and monitor product pricing to manage inflation. What is the likelihood of the strait being fully closed? While Iran's Parliament has approved the measure, the final decision rests with the Supreme National Security Council . A complete and prolonged closure remains unlikely given the potential economic consequences for Iran itself—especially its own oil exports and trade ties with countries like China. Nonetheless, even short-term disruptions of 24–72 hours could push up Brent prices, raise freight rates, and lead to short-term shortages. Conclusion The Strait of Hormuz represents a critical vulnerability in India's energy supply chain. A prolonged disruption could test the resilience of India's import infrastructure, pricing strategy, and diplomatic relations. While buffers like SPRs and diversified sourcing offer some protection, longer-term security will depend on structural reforms in exploration, energy diversification, and logistics preparedness. India's evolving import strategy, combined with a sharper focus on domestic capacity and renewables, may offer a path forward—but for now, the global energy system remains on alert.
