‘Most expensive in years’: Iran war, Hormuz closure forces India to pay high prices for LNG

India has generally relied on long-term LNG contracts with Qatar, the world’s second largest supplier of the fuel.

Middle East war impact: The ongoing marine traffic disruptions in the Strait of Hormuz due to the US-Iran conflict are forcing India’s energy majors to purchase liquified natural gas or LNG at some of the highest prices seen in recent years.Gail India Ltd., the state-run gas company, recently paid more than 23 per million British thermal units for a cargo scheduled for delivery in September, according to people familiar with the matter who spoke to Bloomberg. Gujarat State Petroleum Corp gave the mid-$23 range per mmbtu for a September cargo, the report said.These cargoes are the most expensive LNG shipments imported into India since 2022, according to the people.State-backed energy companies are increasingly going to the spot LNG market and bidding up prices as the government seeks to support fertilizer producers that use natural gas.India has generally relied on long-term LNG contracts with Qatar, the world’s second largest supplier of the fuel. But Iranian attacks in March damaged Qatar’s massive export terminal, while ships remain largely unable to pass through the Strait of Hormuz.

US, Qatar, Australia dominate LNG supply

Indian companies are also competing with LNG buyers in Europe, where gas prices have surged to a five-month high.Bharat Petroleum Corp., another Indian buyer, also agreed to purchase LNG cargo from the spot market this week, according to the people. Bloomberg couldn’t confirm the price.

India widens LNG basket

India has broadened the list of countries it relies on for energy imports, with LNG now being sourced from 15 countries, compared with six earlier, while crude oil is being procured from 41 countries, up from 27, according to a government statement in the Rajya Sabha earlier this month.The expansion comes amid geopolitical tensions and disruptions along important maritime routes that have raised concerns about the reliability of energy supplies.

Most of Qatar’s LNG exports goes to Asia

The Ministry of Petroleum and Natural Gas told the upper House that the wider sourcing network was aimed at reducing India’s vulnerability to disruptions in any one market or shipping route. “This diversification has reduced dependence on any particular country, region or transit route and enhanced India’s ability to manage supply disruptions and market volatility,” Minister of State for Petroleum and Natural Gas Suresh Gopi said in a written reply, as quoted by ANI.The larger pool of LNG suppliers is the latest sign of India’s efforts to distribute its energy procurement across a wider range of markets. The number of countries supplying crude oil to India had earlier risen to 41 as the country responded to risks affecting energy shipments through the Middle East.The ministry said it was monitoring possible threats to energy flows and reviewing global supply conditions in coordination with public-sector oil and gas companies and other stakeholders.

“Government, in consultation with Public Sector Oil and Gas Companies and other stakeholders, continuously assesses global supply conditions and acts appropriately to ensure uninterrupted availability of crude oil, LNG and petroleum products,” the reply said.