Fueling Trade Ties: Indian Refiners Eye US LPG Imports Amid 2026 Deal Talks

Image Source : CNBC TV18

India is preparing to significantly ramp up its imports of liquefied petroleum gas (LPG) from the United States in 2026, as part of a broader strategy to rebalance its trade relationship with Washington. The move comes amid ongoing negotiations for a bilateral trade deal and reflects New Delhi’s intent to diversify energy sourcing while leveraging geopolitical shifts in global LPG markets.

Key Highlights From Industry Sources

- Indian refiners plan to source a substantial portion of LPG imports from the US starting in 2026
- The shift is aimed at reducing India’s trade surplus with the US and easing tariff tensions
- US LPG is currently available at discounts of up to 2–3 percent compared to Middle Eastern supplies
- Indian Oil Corporation recently secured a US cargo at a $15 per tonne discount over West Asian benchmarks
- State-run refiners are exploring swap deals to replace contracted Middle Eastern volumes with cheaper US shipments

Strategic Drivers Behind The Shift

Trade Diplomacy

- India’s $12 billion LPG market accounts for nearly one-third of its trade surplus with the US
- Increasing US energy imports could help India negotiate more favorable terms in the upcoming trade pact
- The Trump administration has flagged India’s high tariffs and trade imbalance as key concerns

Market Dynamics

- US-China trade tensions have redirected US LPG flows, creating surplus availability for India
- China imposed steep tariffs on US LPG, prompting suppliers to seek alternative buyers
- Indian refiners are capitalising on this window to secure long-term contracts at competitive rates

Operational And Pricing Benefits

- US LPG deliveries are expected to match FOB pricing of Middle Eastern cargoes, reducing transport costs
- Indian refiners may save up to $20 per tonne on select shipments
- Increased US sourcing could help offset domestic LPG under-recoveries, which stood at Rs 19,900 crore in FY2024–25

Infrastructure And Supply Chain Readiness

- India imported 20.8 million tonnes of LPG in 2024–25, covering 66 percent of its national demand
- The country’s refining giants—Indian Oil, BPCL, HPCL, and GAIL—are leading the sourcing push
- Adnoc has agreed to supply US LPG to India under existing contracts, enabling smoother transition

Outlook And Policy Implications

The proposed shift to US LPG imports signals a recalibration of India’s energy diplomacy and trade strategy. If successful, it could:

- Enhance India’s energy security by diversifying supply sources
- Strengthen bilateral ties with the US ahead of the 2026 trade agreement
- Pressure Middle Eastern suppliers to offer more competitive terms

Sources: Business Standard, OilPrice.com, Deccan Herald, Offshore Technology, AGBI, Economic Times, Reuters, Kpler Analytics, Ministry of Petroleum and Natural Gas India, NPPA filings