NEW DELHI: Algeria, which started supplying liquefied petroleum gas (LPG) to India in June after shipping in the Strait of Hormuz was disrupted by war, has emerged as the third-largest supplier of the cooking fuel to the country.
Algeria sent 110,711 tonnes of LPG to India so far in August, about a 10th of the overall imports of about 1.08 million tonnes (mt) in the month, according to data from commodities and ship-tracking firm Kpler.
The US was the largest supplier in August with 622,536 tonnes, followed by the UAE with 140,266 tonnes. Supplies from the African nation shot up from 22,243.79 tonnes in June and 21,642.23 tonnes in July. Algeria’s state-owned Sonatrach is the world’s second-largest LPG exporter after state-run Saudi Arabian Oil Co. (Saudi Aramco).
The development assumes significance for India, the second-largest global buyer of domestic cooking gas, and its 340 million LPG consumers. India imports up to 65% of its annual LPG requirement of 33 million tonnes valued at $11 billion, with 90% of the supplies from West Asia. In August, LPG supplies almost halved from 1.91 mt a year earlier, according to Kpler.
LPG supplies have been affected ever since the West Asia war broke out on 28 February and led to the blockade of the Strait of Hormuz. Amid the supply woes, the Indian government has imposed procurement limits for domestic cooking gas and halted new LPG connections.
State-owned Indian Oil Corporation has finalised a major LPG deal with Sonatrach to buy 55,000 mt of LPG per month in 2027, with the Algerian LPG priced below the Saudi Aramco contract price, according to a recent Reuters report.
Ensuring supplies
Experts said that amid the volatile geopolitical situation, diversification would continue and India must evaluate newer sources of LPG and other commodities.
“Energy diversification has been at the heart of India's growth strategy, and continuously evaluating and expanding our sources to ensure consistent supplies is critical for it,” said Gaurav Moda, partner and energy sector leader at EY-Parthenon India.
Earlier this month, the ministry of petroleum and natural gas set cooking gas production targets for refineries in the country for the first time in the wake of the supply squeeze due to the war in West Asia.
The ministry also directed all refiners and upstream oil companies, both public and private, to build and maintain adequate LPG storage, evacuation and transport infrastructure, either on their own or via railways and road tankers, to meet their allocated quantities.
“The government has been ensuring availability of domestic LPG at affordable prices to households in the country for which the government has paid to the OMCs a compensation of ₹22,000 crore in FY 2022-23 and paying ₹30,000 crore during FY 2025-26 and FY 2026-27," minister of state for petroleum and natural gas Suresh Gopi said in response to a question in the Rajya Sabha.
US dependence
As the supply shift from West Asia continues, the share of US LPG has grown since the start of the war and currently comprises about 57.7% of the overall imported supplies.
“The shift towards the US has broadly continued over the past few months, particularly for LPG. I would, however, be cautious about viewing this purely as India deliberately replacing Middle Eastern supplies with US volumes. A large part of the change has been driven by constrained Middle Eastern availability and the need for Indian buyers to diversify and secure replacement cargoes," said Sumit Ritolia, senior manager, modelling, at Kpler.
As of FY25, the bilateral trade between India and Algeria stood at $1.71 billion, with Indian exports amounting to $947 million and imports at $760 million. Major items exported from India to Algeria were rice, pharmaceutical products, polyethylene terephthalate, granite, iron & steel and boneless meat. Exports from Algeria to India were crude oil, liquefied natural gas, natural calcium phosphates, saturated methanol and urea.
Although India's reliance on Africa could be a short-term dependence, given the LPG surplus of Algeria, it could become a regular source of the fuel in the future, said Gopal Sarangi, associate professor in the department of policy studies at the TERI School of Advanced Studies.
"However, the constraints are domestic demand for energy in Africa and associated infrastructure bottlenecks and high shipping costs. Africa could be the second-best option after the Gulf,” he said.
Sarangi noted that India is increasingly engaging with Africa as far as energy dependence is concerned. India is partnering with African countries such as Algeria, Nigeria, Angola and Mozambique to explore energy trade possibilities.
He said India needs a diplomatic, country-specific approach when it comes to establishing strategic relationships with African countries for LPG import.
Queries mailed to the ministry of petroleum and natural gas, Indian Oil, Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd, the Algerian embassy in India and Sonatrach remained unanswered till press time.