India seals first structured US LPG deal; state refiners to import 2.2 mil mt in 2026

Indian oil marketing companies have sealed a one-year deal to import about 2.2 million metric tons of LPG from the US in 2026, marking the first structured contract for US LPG in the Indian market, Petroleum Minister Hardeep Singh Puri said Nov. 17 via LinkedIn.

"In our endeavor to provide secure, affordable supplies of LPG to the people of India, we have been diversifying our LPG sourcing," Puri said.

"This purchase is based on using Mount Belvieu as the benchmark for LPG purchases. A team of our officials from Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd., and Hindustan Petroleum Corp. Ltd. had visited the US and engaged in discussions with major US producers over the last few months, which have been concluded now," he said, adding that the volume would account for close to 10% of India's annual LPG imports.

The volumes will be sourced from the US Gulf Coast in 2026, Puri said.

Govt initiative

The Indian government's recent approval to grant an additional 2.5 million LPG connections to eligible adult women from low-income households under the Pradhan Mantri Ujjwala Yojana scheme is expected to modestly increase the country's overall demand for the fuel, according to a recent S&P Global Energy research report.

"It strengthens the structural demand story for imports, reinforces the need for supply-chain preparedness, and will be relevant to short-term dispatch and storage planning, rather than being a game-changer for global LPG balances by itself," the report said. "Indian imports are expected to increase amid additional PMUY connections the government is promoting, while infrastructure is also developing, like underground caverns," the report said.

In early September, HPCL made its underground LPG cavern operational by beginning to fill it with the fuel, as part of efforts by the country's energy companies to hold larger stocks of energy products and cushion against price and supply fluctuations amid geopolitical tensions, while expanding their stockholding strategies beyond crude oil.

According to Energy, India's total LPG storage capacity -- including both above-ground tanks and underground caverns -- currently stands at about 1.93 million mt, providing roughly 22 days of supply cover.

India plans to add about 326,000 mt of storage over the next two to three years to bolster strategic reserves and guard against market disruptions, such as the price spikes observed during the Russia-Ukraine conflict, according to Energy. Additionally, the startup of the upcoming 2,800-km-long Kandla-Gorakhpur pipeline sometime in 2025 is expected to further enhance distribution efficiency.

In fiscal year 2024-25 (April-March), India imported 20.667 million mt of LPG, accounting for 40.6% of the country's overall refined product imports, government data show.