India has no viable substitute for liquefied petroleum gas (LPG) sourced from the Middle East, according to Pulkit Agarwal, Head of India Content at S&P Global Energy. In an exclusive interview with ANI on the sidelines of the S&P Global Energy New Delhi Energy Briefing, Agarwal stated that the Middle East remains the most reliable source capable of supplying the volume and type of LPG that India requires.
Middle East remains indispensable for India's LPG needs
Agarwal emphasized that despite efforts to diversify supply sources, the Middle East is irreplaceable for India's LPG imports. “Middle East continues to remain and today still is one of the most reliable and the only source of LPG which can supply the kind of LPG that India needs,” he told ANI. The recent disruption in flows through the Strait of Hormuz has underscored this dependence, and the energy sector is closely monitoring the restoration of normal traffic.
India's attempts to diversify LPG sources fell short
During the disruption, India sought to increase LPG purchases from alternative markets, including West Africa and the United States. However, these sources could not fully compensate for the reduced Middle Eastern supplies. “India tried to maximise where it can buy LPG from. It can be West Africa, it can be the US, which is the world's largest producer of LPG. Not exactly the kind that India needs, but to some extent India did rely quite heavily on the US to fill in LPG demand,” Agarwal explained.
Physical constraints limited alternative LPG imports
Agarwal noted that physical limitations restricted the volume of LPG India could source from the US and other markets. “There was a physical constraint on how much India can buy from the US in the world,” he said. As a result, LPG imports into India have declined noticeably in recent months. “As we know, the imports of LPG in the country have fallen off quite noticeably in the past few months,” Agarwal added. He indicated that a return to normal LPG traffic through the Strait of Hormuz could help ease supply pressures. “If LPG traffic returns to normalcy, we could see the downstream impact of that constraint, which had kicked in over the past few months, starting to ease slightly,” he said.
LNG offers more flexibility but at a higher cost
On liquefied natural gas (LNG), Agarwal pointed out that India has greater sourcing flexibility because LNG is a homogeneous commodity available from multiple regions. However, the disruption led to higher prices, which affected demand. “LNG is a homogeneous commodity. You can buy LNG from other places in the world. You need to pay up for it, but the molecule availability is there,” he said. According to Agarwal, the landed price of LNG in India remained above USD 16-17 per million British thermal units (mmBtu) for most of the crisis period, resulting in significant price-led demand destruction. “The prices of LNG went up. The landed price of LNG into India remained above 16-17 dollars per mmBtu for most of this crisis, which means there was a lot of price-led demand destruction,” he stated.
Demand recovery likely if LNG prices fall to USD 11-12
Agarwal suggested that LNG demand could recover if prices decline to around USD 11-12 per mmBtu, a level at which the fuel becomes more competitive for discretionary consumers. He added that the disruption has highlighted India's heavy reliance on Middle Eastern energy supplies and may influence future decisions on sourcing and trading energy commodities. “The market is looking forward to how people buy and sell oil and other energy commodities and how that evolves out of this crisis,” he said.
