The war in West Asia has turned out to be a wake-up call for India’s natural gas ambitions, according to industry watchers. That LNG (liquefied natural gas) became the country’s most reliable and relatively affordable fuel amid the war explains that thesis. Despite Qatar, the world’s second biggest LNG producer and India’s biggest supplier, imposing a force majeure in March soon after the US and Israel attacked Iran, there was no natural gas crisis.
Senior industry officials say that New Delhi is ignoring a cleaner burning fuel, which offered more supply security during the war compared to crude oil and LPG.
India’s LNG imports averaged 2.2 million tonnes monthly in the three months to June from over nine countries amid the closure of the Strait of Hormuz, higher than average monthly fuel imports in pre-war calendar 2025 of around 2 million tonnes, calculations based on Kpler data show. June receipts at 2.5 million tonnes were the second highest since August 2024.
In 2025, around 10 countries supplied 25 million tonnes of LNG, with Qatar alone contributing 46 per cent of the fuel. On including supplies from UAE and Oman, the share of West Asian LNG via the Hormuz, surged to 67 per cent, Kpler said.
“Qatar’s key LNG production hub, Ras Laffan, produces roughly 80 million tonnes of LNG annually, and disruptions affecting nearly 15-16 million tonnes of supply have had a meaningful impact on global LNG availability and, consequently, on India,” said Kaustubh Verma, managing director and partner, BCG India. “India should strengthen engagement with other major LNG-exporting regions such as Australia, the United States, and North African producers to reduce over-dependence on a single geography.”
While Hormuz remained essentially closed through May, new LNG supply offset 90 per cent of the decline in Qatari and Emirati LNG. “LNG supply from the Gulf (of Hormuz) declined by around 9 billion cubic metres in May, and while this unprecedented supply disruption is profoundly altering short-term market dynamics, new LNG supply from other producers is providing some buffer,” explained Greg Molnar, gas analyst at the International Energy Agency, in a LinkedIn post. “This also shows the strength of the unfolding LNG wave, which will take full effect once Hormuz reopens.”
The import story
Despite being the least pampered fuel, LNG’s appeal compared to crude oil and LPG stands out. After importing over 2 million tonnes a month of LPG, an equal blend of propane and butane, since September 2025-close to 90 per cent from West Asia-India’s import of the fuel crashed by more than half in April. It averaged at just 1.2 million tonnes in the April-June period. The drop resulted in some 800 units getting shut in Morbi, a global ceramic tile hub running on cheap LPG. Most units bounced back only after Gujarat Gas resumed supplies of LNG, albeit at a premium to pre-war rates.
Crude oil imports have also suffered. West Asia made up over half of India’s crude oil imports, supplying medium, sour crude grades, aligned with Indian refinery configurations. While refiners imported 5 million barrels a day of crude oil in June, exceeding pre-war levels, from alternative sources, refining officials said they could not secure similar grades and had to rely on more expensive, lighter varieties. Also, there was an over-dependence on Russia, a heavily sanctioned nation, which supplied 53 per cent of India’s crude imports in June. The US supplied over 60 per cent of India’s LPG last month.
But India received LNG from nine suppliers in June, with no single supplier exceeding 20 per cent.
“A significant per cent, 60-70 per cent or more (of crude), is coming from Russia, Venezuela, whereas in gas that’s not the case,” said Sanjay Sah, partner at Deloitte. “Gas is more diversified.” A surge in demand could lead to a 70 per cent dependence on imported LNG by 2030 from 50 per cent now, Sah said.
Kitchen demand
Besides imports, domestic output of gas makes up around 51 per cent of demand at around 35 billion cubic metres-adequate to meet India’s demand for cooking if LPG in kitchens – largely supplied via imports – is replaced by PNG (piped natural gas). After ignoring missed PNG targets for years, New Delhi is now goading city gas utilities to boost connections over tenfold to 100,000 a day to slash dependence on imported LPG.
Gautam Kedia, head of Indian Biogas Association, said that even if domestic gas output declines, India’s growing mountains of waste can be converted into compressed biogas (CBG) for use in kitchens and industries. “We have a potential for 62 million tonnes of CBG. So, theoretically, we can replace all the LNG imports and also take care of the internal demand.”
Level playing field?
Despite ease of availability, handsome domestic production, and a massive infrastructure—built at a cost of ₹2 trillion—ready to supply to most of the country’s households, critics argue that New Delhi has been unfair in its treat-ment towards natural gas, offering hardly any incentives for the fuel. By contrast, under recoveries or revenue losses on sales of petrol, diesel, and LPG totalled ₹2.2 trillion, oil minister Har-deep Singh Puri said. Subsidies on fertilizers may exceed ₹3 trillion this fiscal. But there’s no subsidy for gas, rates for which are linked to international prices.
Long-haul transportation, a big polluter, offers the biggest scope for LNG use with the right incentives, industry officials said. (China has substituted polluting diesel in tens of thousands of trucks with LNG.) “There is no substitute for diesel now, electric is a long way off,” said Maqsood Shaikh, CEO of Ultra Gas & Energy, a LNG retailer and an Essar venture. About 43 per cent of total diesel that is produced or consumed in India goes to long-haul trucking. And that is the potential to be replaced with LNG, he added.
“Targeted policy support can significantly accelerate LNG adoption,” said Madhur Taneja, CEO of GreenLine Mobility Solutions, India’s biggest operator of LNG trucks and an Essar venture. Taneja highlighted the need for toll concessions, inclusion of LNG heavy-duty vehicles under a FAME-type incentive framework, green logistics procurement mandates, and lower permit fees for LNG commercial vehicles. “Such measures would help bridge the higher upfront acquisition cost of LNG vehicles while enabling operators to benefit from lower operating expenses over the vehicle life cycle.”
“In gas, there is a pressing issue of GST for a long time, gas coming under GST will solve a lot of issues,” rather than direct subsidies, Sah said.
There is some additional focus on CBG (after the war), said Rajesh Medi-ratta, CEO of IGX, India’s biggest gas exchange. A comprehensive policy on subsidies to CBG producers is expected, he said.
High state taxes on the fuel coupled with geopolitics-led volatility in LNG prices have been a disruptor, government data showed.
Despite adding LNG import terminals and pipelines, gas demand has been uneven, dropping from 64 billion cubic metres (BCM) in 2022 to 60 BCM the following year, climbing to 71 BCM in FY25 before dipping to 68 BCM last fiscal-as cheaper domestic gas supplies shrank. LNG imports surged to 25.1 million tonnes in FY21 from 13.5 million tonnes in FY13 but dipped to less than 20 million tonnes in FY23 fiscal when prices soared to $60 per million Btu (British thermal units). A decline in rates sent imports higher to 27 million tonnes in FY25 before dropping to 26 million tonnes in FY26.
Inadequate demand is hurting utilization of LNG import terminals and gas pipelines, industry officials said.
“If you have a viable domestic gas market, it works reasonably in a range, said Anish De, global head of energy and chemicals practice at KPMG. “But because we are so dependent on imports and the price volatility of imports, it’s going to be very hard to plan more gas usage.”
IGL, the country’s biggest city gas utility, said in its latest earnings call that a surge in LNG prices because of the West Asian war increased input costs by 25 percent—it paid $7.7 per million British thermal units (MMbtu) for locally procured gas from older areas (APM gas), $13/MMbtu for gas from new wells, and $17-$18/MMbtu for spot LNG, around 50 percent more than pre-war levels.
“Ultimately, it is not the LNG infrastructure that dictates the growth of gas in India but the price of the molecule,” said Petronet LNG CEO AK Singh in a recent media call. Price expectations from Indian consumers are for LNG to remain in the single-digit dollar range per MMBtu, he said.
But Singh and his industry counterparts believe a glut in LNG supplies, by 2028, could drive down prices sharply.
Source: Business Standard
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