The Hormuz crisis, which disrupted global energy flows for more than 100 days, has raised questions over India’s ability to diversify fuel supplies beyond the Strait and the Middle East. India’s energy sector is closely monitoring the situation, with the Middle East continuing to remain the country’s most reliable source of LPG, Pulkit Agarwal, Head of India Content at S&P Global Energy said. Speaking to ANI on the sidelines of the S&P Global Energy New Delhi Energy Briefing on Tuesday, Agarwal said that the region remains uniquely positioned to meet India’s LPG requirements. “Middle East continues to remain and today still is one of the most reliable and the only source of LPG which can supply the kind of LPG that India needs,” Agarwal told ANI in an exclusive interview.
Alternative sources unable to bridge supply gap
During the disruption, India sought to increase LPG imports from alternative suppliers such as West Africa and the United States. However, Agarwal said these markets were unable to fully offset the decline in supplies from the Middle East. “India tried to maximise where it can buy LPG from. It can be West Africa, it can be the US, which is the world’s largest producer of LPG. Not exactly the kind that India needs, but to some extent India did rely quite heavily on the US to fill in LPG demand,” he said. He noted that there were limits to how much LPG India could procure from other sources. “There was a physical constraint on how much India can buy from the US in the world,” he said.
LPG imports fall, sector watches Hormuz traffic
According to Agarwal, LPG imports into India have fallen significantly in recent months, making the resumption of normal traffic through the Strait of Hormuz a key development for the sector. “As we know, the imports of LPG in the country have fallen off quite noticeably in the past few months,” Agarwal said. He added that a normalisation of LPG shipments could help reduce the supply pressures that have emerged in recent months. “If LPG traffic returns to normalcy, we could see the downstream impact of that constraint, which had kicked in over the past few months, starting to ease slightly,” he said.
LNG demand hit by higher prices
On liquefied natural gas (LNG), Agarwal said India is in a more flexible position as supplies can be sourced from multiple regions, although higher prices during the disruption weighed on demand. “LNG is a homogeneous commodity. You can buy LNG from other places in the world. You need to pay up for it, but the molecule availability is there,” he said. He said LNG prices remained elevated during much of the crisis period, with landed prices in India staying above $16-$17 per mmBtu (Metric Million British thermal unit), leading to a decline in demand. “The prices of LNG went up. The landed price of LNG into India remained above 16-17 dollars per mmBtu for most of this crisis, which means there was a lot of price-led demand destruction,” he said. Agarwal added that demand could improve if prices fall to around $11 – $12 per mmBtu, a level at which LNG becomes more attractive for discretionary consumers.Looking back at the disruption, he said the episode highlighted India’s reliance on energy supplies from the Middle East and could shape future developments in energy sourcing and trade. “The market is looking forward to how people buy and sell oil and other energy commodities and how that evolves out of this crisis,” he said.
