With India making it clear that the US doesn’t have enough spare capacity for crude oil, Washington, DC, now wants India to sign fixed-term liquefied natural gas (LNG) contracts with American producers, multiple sources in the know said.
“The US currently doesn’t have enough crude volumes ready for offtake.
"The planned rise in production will take some time to arrive. We have communicated this.
"The discussion has thus been on establishing term contracts for LNG with (US) suppliers,” a petroleum and natural gas ministry official said.
This dovetails with India’s efforts to raise its overall LNG imports, given that its energy import basket is currently dominated by crude oil, he said, indicating the government welcomes talks between companies on both sides.
However, such discussions have historically been drawn out over a long period with US companies, he stressed.
State-owned GAIL (India) had, in December 2011, signed a 20-year sale and purchase agreement with US-based Cheniere Energy Partners for the supply of 3.5 million tonnes of LNG annually, with deliveries commencing in 2017.
Supplies began flowing in from 2018.
According to the International Energy Agency, the gap between contracted LNG supply and projected LNG requirements is set to widen markedly after 2028, leaving India more exposed to the volatility of the spot LNG market unless additional LNG contracts are secured in the coming years.
Meanwhile, in the April–December period of 2024–25, LNG imports stood at $11.6 billion, or 2.12 per cent of overall merchandise imports.
By comparison, crude oil imports were nearly 10x higher at $109.3 billion, or 20 per cent of overall imports.
The US and Qatar — the two largest producers globally — currently supply India with LNG through multiple contracts.
The third-largest producer, Australia, mostly supplies China.
About half of India’s local gas demand is met through imports
On the other hand, while gas meets only 6.7 per cent of India’s energy needs, the Centre has been planning to raise this figure substantially to reduce dependence on petroleum.
US LNG shipments are expected to double by the end of this decade, driven by Trump administration policies, including the reversal of a temporary pause on pending decisions regarding LNG exports to non-free trade agreement nations.
This pause had been imposed by the previous Joe Biden administration in January 2024.
Data from the US Energy Information Administration (EIA) show LNG shipments to India began rising rapidly from early 2020 as the pandemic hit.
Monthly traded volumes rose to a high of 28,259 million cubic feet (mcf) in May 2021 before falling.
Volumes stood at 13,698 mcf as of October 2023, after which the EIA discontinued publishing monthly data.
Finding the price
Finding the right price is also a challenge, an official with a public sector oil and gas major said.
“Globally, term contracts are available only periodically.
"But a large volume of gas is expected to reach the markets from this year onwards.
"It will be incumbent on the importing entity to factor in changes in prices over time to ensure the contract doesn’t end up being more expensive than necessary,” the official said.
India’s demand for spot cargoes of LNG is expected to decline as importers shift towards medium- and long-term contracts over the next two years, as a result of multiple deals that come into effect from April onwards, S&P Global Commodity Insights said last month.
But the higher reliance on term contracts could be poorly timed, as the market expects a flush of new supply that could drive spot prices lower, leaving Indian buyers exposed to more expensive contracted LNG, it pointed out in a note.
Historically, LNG prices were linked to oil prices via long-term contracts.
But in the past 10–15 years, especially with the rise of spot LNG markets like the Japan/Korea Marker in Asia, prices have become more volatile.
LNG prices are highly seasonal due to heating demand in Europe and summer demand in Japan and China.
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