India's LPG Imports From West Asia Jump Notably Amid Recovery From Disruptions

India’s liquefied petroleum gas (LPG) imports from West Asia jumped notably over the past couple of months, marking a significant recovery from the hit to supplies from the region in the first few months of the West Asia war. The volume jump comes as Gulf suppliers are increasingly using ship-to-ship (STS) cargo transfers to move LPG through the Strait of Hormuz and showing a higher risk appetite. This is similar to what has been observed in recent months in crude and liquefied natural gas (LNG) flows from the Gulf. Meanwhile, US LPG volumes, which had risen sharply amid the disruption in West Asian flows, declined over the past two months as flows from the Gulf improved. The West Asia conflict started in February-end, with energy supplies via the Strait of Hormuz plummeting from March. In the six months that preceded the war, the UAE, Qatar, and Kuwait were the top three sources of LPG for India, followed by Saudi Arabia in the fourth spot. Except for Saudi Arabia, from where no LPG volumes have been imported for four months now, volumes from the other three rose considerably over the past two months. Overall LPG imports, however, are still lower than the pre-war levels due to a reduction in demand and higher domestic production. The country’s LPG imports from the UAE averaged 565,315 tonnes in September-October, up 240% from the March-August average of 166,315 tonnes, as per provisional vessel tracking data from commodity market analytics firm Kpler. Volumes from Kuwait in September-October averaged 181,746 tonnes, up 248% over the average monthly volumes for the preceding six months. Average monthly volumes from Qatar jumped to 147,133 tonnes in September-October, against 67,527 tonnes for the March-August period. Kpler data shows that India’s US LPG imports averaged 418,291 tonnes in September-October, down 36% from the March-August average of 652,673 tonnes. Prior to the war, the US was the country’s fifth-largest LPG supplier, but in March-August, it was the top source of the fuel. In September-October, the UAE was India’s top supplier of LPG, followed by the US, Kuwait, and Qatar. STS transfers have emerged as a key ploy for West Asian producers to move energy cargoes out of the Persian Gulf. Unlike regular operations, in which the commodity is loaded onto tankers that sail directly to the destination port, STS transfers involve a shuttle tanker that carries the cargo for some distance, often sailing without switching on its location transponder in a bid to avoid detection. The cargo is then transferred to another tanker waiting in safer waters. In STS operations in the Strait of Hormuz, the supplier usually takes on the responsibility — and the risk — of sending the cargo through the strait. As per energy and commodities information provider Argus, STS transfers of West Asian LPG cargoes are largely being done off the coast of Oman or India’s west coast. “What we’re seeing is a partial return of India’s traditional Gulf suppliers, rather than rising domestic LPG demand. Consumption is still below pre-war levels, but more Gulf cargoes are getting through, allowing India to rebalance its supplies after months of disruption. India was particularly exposed when the crisis began: roughly 87% of its LPG imports came from the Gulf, with the UAE and Qatar alone accounting for half,” said Abu Dhabi-based Energy Analyst Natalia Katona. The disruption in energy supplies through the strait caused a headache for various energy importing countries, including India. While the country’s crude oil and LNG supplies were also hit, LPG supplies were impacted the most. The country’s dependence on LPG imports stood at 60%, which meant that the strait effectively saw the movement of over half of India’s LPG consumption before the war broke out. The country’s total LPG imports fell from 2.03 million tonnes (mt) in February to 1.17 mt in March — a drop of over 40% — as the war broke out. Volumes recovered to about 1.52 mt in October, but were still lower than the pre-conflict levels. The disruption in LPG supplies from West Asia forced India to ration LPG supplies to industrial and commercial consumers in a bid to prioritise crores of households that depend on the fuel to run their kitchens. There are over 30 crore households with LPG connections. As a demand management tool, the minimum gap between LPG refill bookings by households was also increased. Moreover, domestic refineries have been maximising domestic LPG production to partly offset the loss in imports, and refiners scrambling for LPG cargoes from alternative geographies. Some of the emergency measures have since been withdrawn as domestic production increased and imports from the alternative geographies picked up, predominantly from the US. According to Katona, if Gulf LPG deliveries keep recovering, Indian refiners will have more room to ease back from emergency LPG production levels, although the supply outlook depends heavily on security in the Strait of Hormuz region. Another major escalation in the conflict could quickly reverse the recovery and force India to seek a lot more long-haul cargoes, like those from the US, again. According to Katona, the US remains an obvious fallback. Its share of India’s LPG imports reached 80–85% during the summer before falling to 31% in October, but still above the pre-conflict level of 12–14%. But quickly ramping up LPG imports from the US could be harder this winter, which typically sees higher competition for American LPG. “Continued Gulf deliveries matter for both availability and affordability; another disruption would leave Indian buyers facing fewer economical alternatives in the upcoming winter months. My base case is a gradual recovery in Gulf supplies, with occasional setbacks. If security deteriorates significantly, India could again need a combination of more expensive imports, higher domestic LPG production and tighter supply for commercial and industrial users,” she said.