News
04/03/26
LNG supply crunch from Iran war hits India's downstream
Mumbai, 4 March (Argus) — An LNG supply crunch due to the ongoing Iran war has
dealt a blow to India's industrial gas users and could soon hit other downstream
markets like fertilisers, city gas, and power generation — all of which depend
on imported LNG to meet over 50pc of their gas needs. Gujarat Gas, India's
state-run city gas firm and operator of the ceramic industrial cluster in
Gujarat's Morbi, has reduced the volume of daily gas supplied to customers by
50pc over 6-31 March. The firm has informed customers to limit usage and could
also suspend gas supply depending on availability, sources told Argus . The
state-run Gujarat State Petroleum Corporation (GSPC), its parent company, has
cut industrial gas supply by nearly 70pc. It is currently supplying only to the
domestic piped natural gas (PNG) network, which serves residential households
and compressed natural gas (CNG) used in vehicles, sources added. Market
participants expect the industrial cluster to soon run out of gas supply as the
availability of competing fuel propane remains under serious pressure . India
may only have up to 10 days of LPG stocks to cover demand and the country is
scrambling for cargoes outside of the Mideast Gulf as the Iran-US conflict has
effectively dried up exports from the region. The decline in LNG volumes has
come amid the backdrop of rapidly depleting stocks of the super-chilled fuel at
Indian terminals and storage tanks. India's state-controlled Petronet LNG has
issued a force majeure note to its offtakers that include Gail, IOC, and BPCL on
3 March after receiving a "notice indicating a potential event of force majeure"
from upstream firm state-controlled QatarEnergy (QE) of its 77mn t/yr Ras Laffan
LNG export terminal, it said in a stock exchange filing. Petronet has issued a
force majeure notice to QatarEnergy regarding its LNG tankers Disha, Raahi, and
Assem, the filing showed. Petronet LNG's tankers cannot safely transit through
the strait of Hormuz, and acts of war are excluded under the company's
insurance, the firm said. Only one out of Petronet's three captive LNG tankers
plying between India and the Middle East, has managed to unload LNG at the
17.5mn t/yr Dahej terminal. The 138,000m³ Raahi unloaded 60,000t of LNG at the
Dahej terminal on 1 March, while another vessel the 138,000m³ Disha, carrying a
similar volume, has not been able to transit the strait and has been waiting
around the Ras Laffan LNG terminal since 28 February. The 155,000m³ Aseem has
rerouted away from the strait of Hormuz while it was back on its way to Ras
Laffan after unloading LNG at Dahej on 24 February, Vortexa data show. This has
left Petronet with only two days of supplies at Dahej, traders said. State-run
gas distributor Gail and GSPC issued two tenders seeking March delivery LNG
cargoes on 3 March, that were heard to have been not awarded, as offers received
were over $25/mn Btu at India's west coast, traders said. Available March
deliveries on water remained limited. Argus has so far determined there is about
1.056mn t of LNG loaded onto 13 vessels — but it is trapped in the Mideast Gulf
west of Hormuz as of 3 March, according to data from ship-tracking firm Kpler.
There are also three empty vessels potentially ready for loading whenever QE's
production restarts. Asia is likely to face LNG supply disruptions because of
QE's production halt, as well as shipping restrictions in the strait of Hormuz.
The Argus -assessed prices for deliveries to west and east India for first-half
April rose to $23.3/mn Btu and $23.5/mn Btu, respectively on 4 March, higher by
$7.8-7.9/mn Btu from the previous session. Sector-wise usage LNG is a critical
component for Indian downstream industries. In 2025, LNG accounted for 80pc of
gas demand from the fertiliser sector and for 36pc from city gas usage, oil
ministry data show. [ See graph- Gas Usage in 2025 ] LNG usage in India's power
sector was at 30pc, at refineries 75pc, and for petrochemicals at 54pc in 2025,
the same data show. There has been an increase in reliance on imported LNG at
Indian downstream units over the last two years as domestic gas production in
the country has also dwindled to 34.7bn m3 in 2025, down by 3pc on the year, oil
ministry data show. India's fertiliser plants were earlier told about limited
supplies and offered take-or-pay contracts on 3 March. The take-or-pay contracts
require buyers to either accept goods or pay a penalty, ensuring risk-sharing
between suppliers and buyers. But intervention by some officials have now
restored supplies, industry executives said. An interruption in urea production
is likely to trickle down to the farming community — a politically sensitive
group. The city gas firms would be prioritised over industrial supply because
domestic PNG and CNG are essential sectors, the sources added. LNG supplies to
petrochemical plants may decrease as they scale back operations, while
refineries may turn to other sources. For the power sector, India's gas-fired
power plants may also limit generation soon if they fail to receive LNG
supplies. But this may have limited impact on overall power demand as gas
accounts for less than 4pc of India's power generation. India's coal-fired
generation averaged just over 149GW in January, representing over 86pc of
aggregate generation from non-renewable and large hydro sources, while gas-fired
generation averaged just 2.43GW, the latest Central Electricity Authority (CEA)
data show. India's lack of investments in its LNG and LPG storage infrastructure
have become increasingly apparent as the crisis in the Middle East unfolds. By
Rituparna Ghosh LNG disruptions hit Indian downstream markets LNG disruptions
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