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

The ongoing conflict between the United States and Iran has resulted in heightened costs for India's energy sector as they grapple with the repercussions of a disrupted Strait of Hormuz. State-owned energy firms, such as Gail India Ltd. and Gujarat State Petroleum Corp., have been compelled to purchase liquefied natural gas (LNG) at some of the highest prices in recent years due to the maritime traffic disruptions.

Gail India Ltd. recently made a purchase for a cargo set to arrive in September at over 23 per million British thermal units (mmbtu), while Gujarat State Petroleum Corp. cited a price within the mid-$23 range for a similar September shipment. These prices make them the most expensive LNG imports into India since 2022. State-owned energy companies have increasingly turned to the spot LNG market, driving up prices as the government seeks to support the fertiliser industry, which relies heavily on natural gas.

India has traditionally depended on long-term LNG contracts with Qatar, the world's second-largest supplier. However, Iranian attacks in March damaged Qatar's major export terminal, and ships are still restricted from passing through the Strait of Hormuz. Indian companies are also competing with European LNG buyers, whose gas prices have soared to a five-month high.

The country has expanded its LNG sourcing to 15 countries, up from six, while crude oil procurement has increased to 41 countries, up from 27, according to a government statement. This diversification aims to reduce India's vulnerability to disruptions in any single market or shipping route. The larger pool of LNG suppliers represents the latest effort by India to distribute its energy procurement across a broader range of markets, reflecting the government's commitment to ensuring uninterrupted availability of crude oil, LNG, and petroleum products.