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Informist, Thursday, Mar. 5, 2026

 

--Gujarat ceramic ind body head: Units to shut ops in 2 days on lack of gas 

--Gujarat govt official: GAIL says gas supply reserved for fertiliser cos 

--Gujarat govt official: GAIL says gas supply reserved for distribution cos 

 

By Anand JC and Sunil Raghu

 

NEW DELHI/AHMEDABAD - Companies that manufacture glass, ceramics, textiles, and chemicals, and oil refineries may be able to cope with the current gas shortage for up to a week before operations get affected, according to industry sources. Gas distributors have already cut supply to industries by up to 50% following the attack on Iran by the US and Israel and Tehran's retaliation, which has affected supplies from Qatar, the world's largest liquefied natural gas producer and India's largest supplier.

 

GAIL (India) Ltd. has cut gas supply to industries by 50% following the shortage and will supply gas only to fertiliser companies and city gas distributors going ahead, a Gujarat government official said. India depends on imported LNG to meet roughly half of its gas demand. In the event of a shortage, the country has regulations in place to ensure household piped natural gas and compressed natural gas supplies. Fertiliser plants get priority access while industrial consumers will have to bridge the gap from the spot market.

 

Fears of a supply crunch grew over the weekend after the US and Israel launched joint airstrikes in Iran. Iran, in retaliation, has attacked several countries across the Persian Gulf region while also shutting access to the Strait of Hormuz for almost all shipping. While roughly 20% of global LNG is shipped through the chokepoint, India receives around 54% of its LNG imports through this route.

 

QatarEnergy shut down LNG production Monday after a drone attack caused an explosion at its Ras Laffan industrial complex. "The stoppage of operations at the complex removes about 20% of global LNG capacity from the market and has seen European LNG prices spike 45–50% while Asian spot LNG prices have doubled to $25/mBtu (million British thermal unit) levels in the last 2–3 sessions," ICICI Securities said in a note Thursday.

 

The shutdown in Qatar prompted Petronet LNG Ltd., India's largest LNG importer and largest LNG terminal operator, to issue a force majeure notice to QatarEnergy as well as to its consumers in India. GAIL, which procures LNG from Petronet LNG, Thursday informed the exchanges that allocation of LNG to the company has been reduced to zero from Wednesday due to supply restrictions. "The notice has been served due to constraints faced by certain LNG vessels arising from maritime navigation restrictions related to the Strait of Hormuz during transit between India and Qatar, and as well as possibly due to reported shutdown of liquefaction facility at Ras Laffan," GAIL said.

 

Industries in India have typically used propane as a backup in case of a gas shortage. India sources most of its propane also from West Asia, prompting the government to take preventive measures for this commodity, too. "Nearly 600 of the 900-odd ceramic units and 150 sanitaryware units in Morbi (in Gujarat) rely on imported propane, consuming about 5,500 tonnes daily, and about 2.4 mscmd (million standard cubic metres per day) of natural gas from Gujarat Gas," K.G. Kundariya of the Morbi Vitrifed Tiles Association told Informist. "All these units will have to be shut down one by one from today (Thursday) as no propane is available or stored," Haresh Bopaliya of the Morbi Ceramic Association said. Ceramic companies may operate at lower or nil utilisation levels in part because of the LNG shortage, Crisil Ratings said in a note Thursday.

 

GAS CONCERN

India imports nearly 25 million tonnes per annum of LNG on a long-term basis. Of this, 9 million tonnes per annum is sourced from Qatar and 4 million tonnes per annum from Abu Dhabi. Tankers transport these supplies via the Strait of Hormuz.

 

GAIL has a contract to source 5.8 million tonnes per annum of LNG from the US. Of this, it sends 2.9 million tonnes per annum to Europe and gets an equivalent quantity from West Asia under a swap deal. The current crisis in the region has rendered this LNG unavailable. In all, nearly 16 million tonnes per annum of LNG supply to India is now stuck. Apart from West Asia, Indian companies source 9 million tonnes per annum of LNG from Australia, Russia, Nigeria, and South America.

 

The current concern about LNG is about arranging supplies first and assessing prices later. "Spot LNG prices have increased in the last seven days," Sumit Pokharna of Kotak Securities said. "Companies will be able to manage the issue if it is sorted within a week. If the disruption persists beyond the very short term, supply-side stress will intensify rapidly. We expect gas supplies to be rationed in the near term."

 

Kotak Securities expects margins of city gas distributors and LNG importers to come under pressure in the current scenario, where input costs are climbing rapidly but the companies do not have the regulatory leeway to raise prices for end consumers. Companies such as Mahanagar Gas Ltd. and Indraprastha Gas Ltd., which import gas for only a quarter of their supplies, may not see as big an impact on their margins, but others, like Gujarat Gas Ltd., which rely on imported gas for two-thirds of their supplies, may see higher pain, Pokharna said.

 

Choking of supplies through the Strait of Hormuz is a major worry. Crude oil prices have shot up and are expected to go over $100 per barrel if the hostilities continue. India has a strategic petroleum reserve that can help to meet demand for up to six days in the case of a supply crunch. No such reserve exists for natural gas, given the nature of the commodity. LNG is predominantly methane cooled to (-)162 degree Celsius. This helps to reduce its volume significantly, allowing shipments via specialised tankers instead of through pipelines.

 

India's hierarchy-based allocation for gas means industrial consumers may need to pick up gas through the spot market to bridge the shortage. However, spot LNG prices have flared up to $24-$25 per million British thermal units, up from $10 a week ago, making spot purchases a difficult financial proposition for industries.

 

"If supply tightness persists, price-sensitive industrial consumers may seek alternative fuels such as liquefied petroleum gas, furnace oil, or naphtha," Sehul Bhatt, director, Crisil Intelligence, said. "The extent of this feedstock diversification will be a function of the cost-benefit math. Elevated LNG prices can also translate to costlier gas supplies to fertiliser plants." India consumed roughly 195 million standard cubic metres per day in FY25, of which a third was consumed by fertiliser factories and 25% by city gas distributors.  End

 

Edited by Rajeev Pai

 

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