India's Historic LPG Deal with the US
India has recently made a significant move in its energy sector by signing a historic deal to import approximately 10% of its liquefied petroleum gas (LPG) from the United States by 2026. This one-year contract marks the first structured agreement for US LPG in the Indian market, signaling a shift in India's energy sourcing strategy.
Petroleum Minister Hardeep Singh Puri announced the deal, emphasizing that it opens up one of the largest and fastest-growing LPG markets to the US. This contract, which accounts for around 2.2 million tonnes per annum (MTPA), is a strategic step towards diversifying India’s energy imports, reducing its dependence on traditional suppliers from West Asia, including Saudi Arabia and Qatar.
The agreement was concluded by three major public sector refiners: Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL). They have awarded their joint tender for US LPG imports to prominent companies such as Chevron, Phillips 66, and TotalEnergies Trading. While commercial details of the deal remain undisclosed, the implications for India’s energy security are substantial.
In India, LPG is primarily used as a cooking fuel, and the government has been actively working to increase its penetration, especially among the poorer and rural households. This initiative is part of a broader effort to reduce reliance on traditional and polluting cooking fuels. The new deal is expected to support these goals while also providing more competitive pricing through diversification.
This strategic move comes at a crucial time as India seeks to address its trade surplus with the US amidst delicate negotiations for a trade pact. The increasing imports of energy products from the US may play a pivotal role in achieving this objective. Historically, trade tensions have affected relations, especially with tariffs imposed on Indian goods during the Trump administration. However, the current trajectory indicates a willingness from both sides to engage in more substantive energy trade.
Prime Minister Narendra Modi’s previous discussions with US President Donald Trump highlighted a mutual interest in making the US a leading supplier of oil and gas to India. As India continues to be one of the world’s largest consumers of crude oil and LNG, the involvement of American energy resources could significantly influence its energy landscape.
Overall, this deal not only enhances India’s energy security but also strengthens diplomatic and economic ties with the US, paving the way for a more resilient and diversified energy future.
