India is weighing a plan to prioritize natural gas supply to critical sectors after LNG (liquefied natural gas) shipments from Qatar were disrupted following an attack on QatarEnergy’s Ras Laffan liquefaction complex on Monday, three people aware of the matter said.
The move assumes significance as India imports about 55% of its natural gas requirement. Further, of the $14.9 billion worth of natural gas imports in FY25, Qatar’s share was about 50%, according to data from Petroleum Planning and Analysis Cell (PPAC).
“The government is looking at multiple options to ensure uninterrupted supply of natural gas,” one of the three people mentioned above said on condition of anonymity. “One of the options is reprioritizing gas allocation across sectors. That will be looked at if need arises.”
Such a move would require discussions between different ministries including petroleum and natural gas, power and fertilizers, the first person added.
A second person, also requesting anonymity, said: “There would not be any impact on farmers and CGD (city gas distribution) consumers.”
According to the officials, if such a move is implemented, gas allocation for CGD networks—which involve piped cooking gas for households and compressed natural gas for transport—may be increased, with supplies diverted from non-priority sectors such as industries and power. Under the current norms, too, CGD is prioritized; however, the allocation may be further increased.
Alongside, the officials said that India is looking at increasing LNG imports from alternative sources such as Australia and Papua New Guinea.
“Fertilizer uses 85% natural gas and it is a key sector,” Prashant Vasisht, senior vice president and co-group head, corporate ratings, Icra Ltd said. “The government will have to see which sectors are absolutely in need of gas and which can do without it for a certain period.”
Queries emailed to the ministries of petroleum, chemicals & fertilizers, and power on Thursday evening were not immediately answered.
Gail, Petronet LNG alert
The development comes after state-run Gail (India) Ltd and Petronet LNG Ltd indicated that supplies linked to Qatar have been affected.
“Gail is currently assessing the situation with respect to any supply curtailment that may need to be imposed on its downstream customers,” the state-run natural gas supplier said in a statement to the exchanges on Thursday.
This comes only a day after Petronet LNG's key supplier QatarEnergy declared a force majeure on all its contracts, indicating that it will not be able to supply resources to buyers due to unforeseen circumstances.
Petronet is a joint venture entity of GAIL, ONGC, India Oil Corp Ltd and Bharat Petroleum Corp Ltd. The company, which is a supplier to GAIL, also issued a force majeure notice on 3 March due to disruptions in West Asia, GAIL said in its filing.
QatarEnergy has a long-term sales contract with Petronet for 7.5 million tonnes per annum (mtpa) of LNG, of which 60% is delivered to Gail after regasification. The remaining 40% is split between Indian Oil Corp. Ltd (30%) and Bharat Petroleum Corp. Ltd (10%). Petronet’s LNG facility in Dahej, Gujarat, supplies LNG to Gail after regasification.
Global LNG market hit
Notably, LNG prices have sharply risen across the globe after the attack on the Ras Laffan plant. QatarEnergy’s entire operations, which account for a fifth of global LNG supply, were closed down after the complex was hit.
At the time of writing this article, the most traded Henry Hub futures of natural gas was trading at $2.943 per mmbtu, higher by 1.1%. The price surge has somewhat eased after the US announced to provide cheaper insurance cover. In the past five sessions, gas prices have increased around 10%. Further, prices in Europe surged over 40% after the closure of QatarEnergies’ operations.
Alongside, the closure of the Strait of Hormuz, which accounts for 54% of India’s LNG imports, is also squeezing supply.
Ships are avoiding the Strait, which carries 20% of global LNG shipments, after the Iran Revolutionary Guard Corps (IRGC) said on Monday that the Strait was “closed” and that any vessel attempting to pass through the waterway would be set “ablaze”.
The Strait also carries about 20% of global crude shipments. Already, other countries have also begun taking action, with Bloomberg reporting that China has asked the country’s top oil refiners to suspend exports of diesel and gasoline to prioritize its domestic needs.
Low-cost insurance
The third official also said that the government is in talks with the US authorities and the United States Development Finance Corporation (DFC) over the latter's plan to provide low-cost insurance to vessels carrying energy from West Asia and providing them protection.
On Tuesday, US President Donald Trump said that he has directed the USDFC to offer political risk insurance and financial guarantees for maritime trade, particularly energy shipments moving through the Gulf.
In a post on the social media platform Truth Social, Trump said the coverage would be available to all shipping lines at reasonable cost.
“If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible. No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD. The United States’ ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH—More actions to come. Thank you for your attention to this matter! President DONALD J. TRUMP,” the post read.
At the time of writing the article, the benchmark April contract of Brent crude was trading at $83.05 per barrel, 2.03% higher from its previous close.