India's LNG Supply Disrupted by West Asia Conflict, Govt Devises Optimization Strategy
NEW DELHI: The ongoing conflict in West Asia has severely impacted India's liquefied natural gas (LNG) imports, with nearly 40% of the flow currently disrupted. In response, the government is actively formulating an "optimization plan" aimed at managing supplies across various industrial sectors, with a particular focus on priority areas such as fertiliser production.
Priority for Fertiliser Sector Amid Supply Constraints
Sources familiar with the high-level discussions indicate that the petroleum ministry could finalize this arrangement as early as Tuesday. While a reduction in supply to the fertiliser sector has not been ruled out, officials emphasize that it will not be drastic. "Fertiliser units will be given enough supply for them to operate at optimum level," confirmed a person involved in the planning.
This prioritization is bolstered by several factors:
- India is entering the agricultural lean season, with kharif sowing scheduled to begin in June, leading to moderate fertiliser consumption.
- Many fertiliser units are advancing their maintenance shutdowns during this period.
- Sufficient urea stocks are available, reducing immediate concerns over shortages.
Robust Fertiliser Inventories Provide Cushion
Official data reveals a significant increase in fertiliser reserves. As of Friday, stocks have surged by 36.5% to 17.7 million tonnes, compared to nearly 13 million tonnes a year ago. The Fertiliser Association of India (FAI) reports that inventories of DAP and NPK fertilizers are 70-80% higher than last year.
"Fertiliser reserves, which are significantly higher than last year, provide a vital operational cushion, ensuring that international logistics bottlenecks do not translate into domestic farm-gate shortages," stated the fertilisers department in a recent announcement.
Challenges for Non-Priority Sectors and Supply Diversification
While the fertiliser industry remains relatively secure, non-priority sectors will likely face reduced LNG supplies and must explore alternative arrangements to meet their fuel needs. Company executives note that India continues to receive 60% of its LNG from sources outside West Asia, with ongoing efforts to secure additional supplies from countries like Australia and Canada.
However, diversifying supply chains presents logistical hurdles:
- Arranging specialized tankers capable of shipping LNG.
- Ensuring new gas sources have surplus liquefaction capacity before loading onto vessels.
Import Strategies and Regional Risks
To mitigate risks, agencies have imported substantial quantities of soil nutrients, totaling 9.8 million tonnes by the end of February. Contracts for an additional 1.7 million tonnes have been secured for the next three months, though some shipments may face disruptions due to the West Asia conflict.
The FAI highlights that India's diversified supplies for phosphatic fertilizers help offset regional risks. Notably, 60% of the LNG used in urea manufacturing is imported from Qatar, where production has been halted after an attack on the QatarEnergy facility by Iran.
This strategic approach underscores the government's commitment to balancing industrial needs with national agricultural security during a period of global energy instability.
