Indian importers could make $20-30/t if they swap Middle Eastern term imports with US cargoes, writes Rituparna Ghosh
Indian LPG importers are considering swapping contracted imports from the Middle East with US cargoes to enable them to ship the former supply to China, owing to its 125pc tariff on US LPG, according to market participants.
Abu Dhabi's Adnoc has offered to supply Indian buyers with discounted US cargoes compared with Mideast Gulf exports priced on the basis of state-run Saudi Aramco's contract price, traders say. The Middle Eastern supply can then be sold to China to meet its shortfall from lost US imports of mainly propane because of the tariff. Indian state-run refiner BPCL says it can make a $20-30/t profit on swapping Mideast Gulf and US cargoes. Rival firms and importers IOC and HPCL have yet to disclose if they are considering cargo swaps.
Delhi has directed importers to guarantee enough supply arrives if the US-China tariffs lead to such swaps, which is likely to include more imports from the US. The US loaded four evenly split propane-butane cargoes on to the VLGCs Eneos Gunjo, BW Mindoro, Shahrastani and Vivit Dubhe over 14-23 April, which are headed to India for delivery in the second half of May, ship tracking data show. Traders in Singapore have meanwhile approached Indian refiners to purchase their term imports from the Middle East for resale in the spot market — an offer that has been declined by the refiners.
Delhi has said it is considering eliminating a 2.5pc import tax on US LPG and ethane in order to strengthen trade ties with the US. But the rate is small and IOC, HPCL and BPCL are already exempt from it, meaning the impact would be negligible, market participants say. Private-sector firm Reliance Industries would benefit from the move as India's sole importer of US ethane, bringing in around 1.3mn t in 2024, down by a fifth from a year earlier, Kpler data show.
India's LPG imports from the US have historically been miniscule. The country brought in 120,000t of US LPG from a total of 21.4mn t last year, with most of its supply coming from the UAE at 8.2mn t, Qatar at 5.1mn t and Saudi Arabia at 3.4mn t, according to Kpler. Around 85-90pc of India's LPG imports are tied to long-term contracts with these three Middle Eastern countries, while spot trading represents just 10-15pc. India also imports mainly evenly split propane-butane cargoes, while US exporters ship more full propane cargoes to China.
Ethane appeal
The removal of the tariff on US ethane is unlikely to have much impact on imports in the short term given a lack of infrastructure to accommodate it. But it will support India's long-term plan to use more US ethane for its expanding petrochemical industry. BPCL and state-owned gas firm Gail are investing in new ethane-fed cracker projects at existing petrochemical facilities to capitalise on the abundant availability of cheap US ethane and the growing fleet of very large ethane carriers. This follows Reliance switching to US ethane at its 1.5mn t/yr ethylene cracker in Jamnagar in west India's Gujarat state over the past few years, having previously relied on ethane extracted from LNG imports from the Mideast Gulf.
Gail operates two 450,000 t/yr crackers at its Pata petrochemical plant in Uttar Pradesh in northern India, which can use either ethane or propane. This arrives through the Hazira-Vijaypur-Jagdishpur pipeline having been fractionated and processed from LNG at Hazira on the west coast of Gujarat. BPCL is also increasingly integrating its refining operations with petrochemicals, but only has 500,000 t/yr of propylene capacity at its 310,000 b/d Kochi refinery in Kerala.
BPCL is investing close to $6bn to develop a petrochemical complex including an ethane-fed cracker at its 156,000 b/d Bina refinery in Madhya Pradesh, while Gail is spending a similar amount on a facility that will include a 1.2mn t/yr ethane-fed cracker near its 5mn t/yr LNG plant at Dabhol in Maharashtra.
