Iran conflict: India boosts LPG production as Strait of Hormuz disruptions hit supplies

Indian refiners have stepped up cooking gas (LPG) production to cushion potential supply losses as tanker traffic through the Strait of Hormuz slows to a near halt amid the widening West Asia conflict.

LPG carriers, crude tankers and LNG vessels stationed in the Persian Gulf are reluctant to transit the strait, disrupting a logistics artery that underpins energy supplies to India and much of the world. Oil and LNG prices are expected to surge when markets open on Monday after the effective blockage of the waterway, through which roughly a third of global seaborne crude and a fifth of LNG trade pass.

Petroleum and natural gas ministry officials and industry executives held multiple meetings over the past two days to assess contingency plans. Executives told ET they do not expect the disruption to last beyond a week.


“The world — and the US — cannot afford very high energy prices for long,” a senior industry executive said on condition of anonymity, expressing confidence that diplomatic and strategic pressure would build quickly.

Another senior executive said Iran’s retaliation was predictable but unlikely to be sustained. “They won’t be able to keep it this way for long as the world will turn against them,” he said, adding that countries across West Asia — and crucially China, a friend of Iran — would push for restoration of normal flows.

India has sufficient inventories to manage a short-term disruption, executives said. The country holds crude stocks covering 17–18 days, refined products such as petrol and diesel for 20–21 days and LNG for about 10-12 days.

The immediate focus is LPG, India’s most vulnerable fuel. The country has about two weeks of LPG stocks, including onshore inventories and cargoes already past Hormuz and headed to Indian ports, executives said. Nearly two-thirds of domestic LPG consumption is met through imports, 85–90% of which come from the Gulf, with about 10% sourced from the US.

Indian Oil Corp., HPCL and BPCL are increasing LPG output at their refinery-petrochemical complexes, which offer some flexibility to tweak product yields, an executive said. ONGC and GAIL are also exploring options to raise LPG extraction from natural gas streams, he added.

The incremental supplies may be modest, but collectively they could amount to the equivalent of one additional very large gas carrier — a meaningful buffer in a tight market, the executive said. Companies have not yet firmed up plans to source LPG from alternative regions.

Refiners are less concerned about shortages of petrol, diesel or jet fuel, given that India is a net exporter of these products. Retail pump prices are also unlikely to rise immediately, despite the expected spike in international benchmarks.

Spot LNG prices, however, are likely to increase sharply, complicating efforts by price-sensitive Indian buyers to secure replacement cargoes. India imports long-term LNG from Qatar under crude-linked contracts and also buys the commodity from the US.

Refiners are simultaneously reviewing alternative crude sourcing options, including lifting cargoes from Saudi and UAE ports that bypass the Strait of Hormuz and placing incremental orders with producers outside the Gulf, executives said.