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Informist, Wednesday, Apr. 29, 2026

MUMBAI – Analysts at rating agency ICRA Ltd. Wednesday said India must diversify its sources of liquefied natural gas to create a buffer when geopolitical pressures, such as the ongoing war in the Persian Gulf, flare up. The war has disrupted LNG flows through the Strait of Hormuz, through which roughly 20% of global LNG trade normally passes. No LNG vessels have cleared the strait since Mar. 1, halting exports from Qatar and the UAE and forcing buyers to seek replacement cargoes from the Atlantic Basin.

"Within that context, India will have to diversify the sourcing of gas from other markets. Now, which are these other markets which are available to India? Obviously, the US is one option where, over the last four months, the share of gas exports has gone up," ICRA's Senior Vice President and group head Girishkumar Kadam said during a webinar. 

India relies on Qatar and the UAE for almost 60% of its LNG supplies. It is expected that even if the conflict is resolved soon, it will take several months for the infrastructure to be repaired and for the flows to normalise. India has increased shipments of LNG from the US, Oman, and Nigeria in the absence of LNG supply from West Asia.

"In the pre-war situation, we had a view that given the large capacity expansion and addition which was expected to happen, prices of LNG was slated to soften and moderate to the extent of around $8 per MBTU (million British thermal units)," Kadam said. "The situation has taken a beating after the February 28th and the West Asia war crisis, which happened. It had disrupted these assumptions of these capacities coming up online. Essentially, there are large capacities scheduled to come up, particularly in Qatar," he said.

The war in West Asia caused significant infrastructural damage to energy assets in the region, including Qatar, which is a major exporter of LNG. An LNG shipment appeared to have crossed the chokepoint in recent days, the first since the war broke out, news agency Bloomberg reported citing ship-traffic data. However, Informist has not been able to confirm this independently.

LPG

India relies on imports to meet around 60% of its liquefied petroleum gas needs. "India depends heavily on West Asia for LPG imports, up to the extent of 55% to 60% of our domestic consumption, and higher freight rates, tighter shipping availability, and ensuring costs have further increased the landed cost of LPG, even as demand for domestic LPG is relatively inelastic," said Prashant Vasisht, ICRA's senior vice president and co-group head.

The prices of crude oil have shot up to around $110 per barrel since the war broke out, from around $73 before Feb. 28. If the oil prices hover around $100-$105 per barrel, the LPG under-recoveries of India's oil marketing companies are expected to swell to INR 500 billion. If the prices inch higher to around $120-$125, under-recoveries are expected to balloon to INR 800 billion, ICRA said.

ICRA has a negative outlook for oil marketing companies as it expects their operating profitability to be under pressure because of negative marketing margins, despite healthy gross refining margins.

FERTILISERS

India's fertiliser sector is heaviliy dependent on West Asia for key inputs like ammonia and sulphur, along with finished products like urea and diammonium phosphate. Prices of these input materials and finished products have shot up, which is expected to increase the cost of production for the urea sector, ICRA said.

The Centre has fortified up to 95% of the urea sector's natural gas requirement amid the ongoing war. Additionally, it has mandated surplus production of ammonia from urea units to be supplied to manufacturers of phosphatic and potassic fertilisers. 

The rating agency expects the government subsidy for fertilisers for 2026-27 (Apr-Mar) to be INR 2.05 trillion–INR 2.25 trillion, which is higher than the budgetary allocation of INR 1.71 trillion. The outlook for the fertiliser sector remains negative, ICRA said, given the constraints in the availability of raw materials and elevated commodity prices. These are expected to hamper the profitability of manufacturers of phosphatic and potassic fertilisers.  End

US$1 = INR 94.76

Reported by Anand JC and Ashutosh Pati

Edited by Akul Nishant Akhoury

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