India’s energy regulator is moving to plug a widening hole in the country’s gas supply chain as the conflict in West Asia threatens supplies of natural gas that is vital to power, fertiliser and city gas distribution networks.
According to two people aware of developments, the Petroleum and Natural Gas Regulatory Board (PNGRB) is preparing to propose overground storage facilities for natural gas near the country’s existing LNG (liquefied natural gas) terminals—India currently has eight such terminals. The storage would be used for both commercial purposes and for strategic requirements during exigencies, they said.
“PNGRB may propose the government to set up storage reserves for LNG, preferably near existing terminals to support India’s growing demand at times of exigencies and ensure energy security,” one of the two people said on the condition of anonymity, adding that the regulator would approach the ministry of petroleum and natural gas to frame rules under the PNGRB Act.
The urgency follows a halt in tanker traffic through the Strait of Hormuz, which carries more than half of India’s LNG imports, and a spike in prices of LNG after an attack on QatarEnergy’s Ras Laffan complex on Monday.
The move assumes significance considering India imports 55% of its gas requirement and holds barely 20 days of inventory—including supplies in transit. In terms of LNG, India has stocks of up to 21 days, the officials said.
Natural gas imports stood at $14.9 billion in FY25, according to data from Petroleum Planning and Analysis Cell (PPAC), of which Qatar’s share was about 50%. According to government data, natural gas accounts for about 7% of India’s energy basket and the government aims to take it to 15% by 2030.
Another person said the regulator was of the view that a surcharge may be imposed on the usage of gas to fund construction of the reserves. “The surcharge would support the capex (capital expenditure) and do away with the need for viability gap funding for such projects,” the second person said, also requesting anonymity.
This person added that overground storage facilities would require a shorter construction period and lower capex compared to underground salt cavern-based strategic reserves.
Queries emailed to the regulator remained unanswered till press time.
Much-needed move
Experts said there is a need for such reserves considering the rising demand for gas in the country.
“There is a large fleet of CNG-based vehicles and increasing use of piped natural gas (PNG) now,” said Rajesh Kumar Mehdiratta, managing director and chief executive officer of Indian Gas Exchange (IGX). “Fertiliser, industrial and commercial demand too is growing, so it is high time India sets up gas storage reserves for natural gas in the country.”
Data from PNGRB showed that in 2024, India consumed 187 million metric standard cubic metres per day (mmscmd) of natural gas.
Among key consumers, city gas distribution (CGD) companies consumed 36.9 mmscmd (which includes household PNG and CNG), fertilizer sector used 58 mmscmd, and oil refiners consumed 22 mmscmd. CNG is largely catered through domestic gas, while the rest are highly dependent on imports.
The overall consumption of natural gas in the country is projected to reach 297-365 mmscmd by 2030 and 495-630 mmscmd by 2040. Industrial and commercial demand is expected to grow 10-15% by 2030, showed projections by the regulator.
India currently has eight operational onshore LNG terminals, offering a combined regasification capacity of 52.7 mmtpa or million metric tonnes per annum (which translates to 190 mmscmd). Several other land-based terminals and floating storage regasification units (FSRUs) are in various stages of development.
LNG squeeze
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 4.43% higher at $3.091 per mmbtu. In the past five sessions, gas prices have increased about 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 of Hormuz, which carries 20% of global LNG shipments, after the Islamic 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”.
A report by Al Jazeera said at least five tankers have been damaged, two personnel killed and about 150 ships stranded around the strait, which separates Iran and Oman.
According to an analysis by Independent Commodity Intelligence Services, a London-headquartered commodity analysis firm, LNG tanker crossings through the Strait of Hormuz have stopped since 28 February, disrupting around 120 billion cubic metres (bcm) per year of supply from Qatar and the UAE, a volume comparable to the gas Europe has lost from Russia since 2021.
“For India’s natural gas market, a longer-duration stoppage of transits through the Strait of Hormuz would be particularly acute,” said Benjamin Gage, founder of Balance Point Research, a data and analysis firm focused on LNG market, adding that any attempt to find alternative sources of supply would pit India’s buyers with other LNG buyers from around the world.
According to Gage, if transits through the Strait resumed by this week end, gas prices would quickly retrace to last week’s levels. “If the transit stoppage were to persist into a second week or longer, we think prices will quickly race toward $20/mmbtu,” he said.