IOC, HPCL and BPCL consortium in talks with Equinor to secure LPG contract

The consortium comprises Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum corporation Ltd (BPCL).

The talks with Equinor come in the backdrop of growing tensions in West Asia, as a potential escalation of the Israel-Iran conflict could affect energy prices and supplies. Currently, United Arab Emirates (UAE), Qatar, Saudi Arabia and Kuwait are India’s top LPG suppliers.

“We are in talks with Equinor for sourcing LPG, the demand for which is growing in India," one of the two people cited above said, requesting anonymity. “Equinor is offering us LPG from Norway. The terms and commercial agreement are under discussion."

The move to diversify LPG sourcing also assumes significance as the fuel comprises an estimated 62% of all cooking fuels used across households in the country, with more than 60% of LPG being imported.

LPG is a new area of discussions between India and Equinor, with the two already speaking on multiple issues such as the company's participation in India's strategic petroleum reserves (SPR), and long-term deals for supply of liquified natural gas (LNG) from Equinor’s extensive portfolio in the US and Qatar as reported by Mint earlier.

Queries emailed to the spokespersons of Indian Oil Corp, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd and India’s ministry of petroleum and natural gas on Sunday evening remained unanswered.

Also read: India in talks with Equinor for crude reserves, long-term LNG deals

An Equinor spokesperson in an emailed response said, “Equinor’s policy is to not comment on rumors and market speculations."

First oil, now LPG

India's new LPG playbook is on the lines of what it has been trying to do on the crude oil sourcing front.

Apart from its major oil suppliers such as Iraq, Russia, Saudi Arabia, the UAE and US, India has been trying to diversify its oil supplies by procuring from countries such as Colombia, Brazil, Libya, Gabon and Equatorial Guinea, taking the total number of crude oil suppliers to 39.

The market for LPG has grown with the popularity of the Centre's Pradhan Mantri Ujjwala Yojana (PMUY) scheme.

The LPG market

India’s LPG market has significantly grown over the past few years. LPG consumption in FY24 rose 3.7% year-on-year (y-o-y) to touch 29.6 million tonne (mt) from 28.5 mt in the previous fiscal, according to data from the Petroleum Planning & Analysis Cell. So far this fiscal, in the April-June period, India's total LPG consumption stood at 7.06 mt, 4.67% higher y-o-y.

To meet this growing demand of essential domestic cooking gas, India imported 4.5 mt LPG in the first quarter of FY25, which is around 17.7% higher than the 3.7 mt imported in the same period of last fiscal. The imports helped meet 64% of the country’s LPG demand in the first quarter.

“The government of India has promoted the use of LPG as a clean cooking fuel starting with the Pradhan Mantri Ujjwala Yojana (PMUY) scheme in 2016, which called for the distribution of 50 million LPG stoves and connections to women below the poverty level for families," the International Energy Agency (IEA) said in its report titled ‘Indian Oil Market - Outlook to 2030’.

Also read: ONGC, Indian Oil tie up to set up LNG plant near Hatta gas field in Madhya Pradesh

The report added that the objective was to replace the use of highly-polluting solid fuels that could lead to premature death among women and children.

"These schemes, including the provision of stoves and subsidies, have contributed to substantially higher LPG demand, which grew by a total of 51% (5.3% per year) between 2015 and 2023. By 2021, 62% of Indian households used LPG as their primary cooking fuel," the report said.

India’ LPG imports are slated to grow.

“Despite India maintaining its hefty export potential for light and middle distillates in the coming years, the structural shortfall in LPG supplies will expand and the need to import supplies will increase. Such is the scale of the current and prospective import requirement that India’s refiners are unable to adjust yields to compensate. Furthermore, the relative value of LPG to gasoline, jet fuel and diesel argues for continued two-way trade," the IEA report said.

The Equinor playbook

Equinor has also tied up with state run Oil and Natural Gas Corporation (ONGC) for carbon capture, utilization and storage (CCUS), offshore wind and green hydrogen.

Equinor-backed Scatec ASA has also formed an equal joint venture (JV) with India’s Acme Group for designing, developing, building and operating a large green hydrogen and green ammonia project at the SEZ at Duqm in Oman, which will require an investment of around $6 billion to supply emission-free fuel to Europe and Asia.

The proposed LPG and LNG deals with Equinor is part of India’s efforts to fortify its clean fuel energy imports, with state run IOCL earlier signing a long-term LNG contract with France’s TotalEnergies for supply of 1 mmtpa of LNG to IOCL for around 10 years, with plans to sign a long-term LNG deal to buy 1 million metric tonnes per annum (mmtpa) of clean fuel from state-run Abu Dhabi National Oil Co (Adnoc).

Also read: Oil retailers hike ATF rates, slash commercial LPG cylinder prices

Energy security is key to India’s national security as the country imports over 87% of its oil requirements and 55% of gas.

India is particularly vulnerable as any increase in global prices can affect its import bill, stoke inflation and widen the trade deficit.

The country's import bill for crude oil and petroleum products fell 15.45% to $155.9 billion in FY24 due to fall in prices from the highs of FY23, at the peak of the Ukraine war, although the volume of imports rose 1.6% to 281.8 million metric tonne in FY24.