India Orders LPG Surge as Hormuz Stays Shut
India Orders LPG Surge as Hormuz Stays Shut
The News
India has ordered its state companies and private refiners to prepare for a sharp increase in cooking gas production, because the Iran war keeps the Strait of Hormuz — the route for about 90% of the country's liquefied petroleum gas imports — in doubt, Bloomberg reported Sunday.
An August 13 government notification tells refiners and crude oil explorers to "implement all technically and economically feasible measures" to push LPG output beyond current minimum producible levels.
The goal is a national capability of as much as 63,810 tonnes a day. Before the war, India's refiners made about 36,000 tonnes a day.
Timeline
India's domestic refiners produce roughly 36,000 tonnes of LPG a day, with the country importing about two-thirds of what it burns. Domestic production was never a priority — LPG is less profitable than gasoline and petrochemical feedstocks.
India scrambles for cooking fuel, turning to the United States and newer suppliers including Algeria. Refiners lift output to as much as 54,000 tonnes a day.
The government issues a notification setting upper-limit LPG production targets for individual refiners and explorers, and telling them to maximize output.
Bloomberg and Reuters report the targets.
Reactions
The notification assigns the largest single target to Reliance Industries' domestic-market-focused unit: 18,000 tonnes a day, according to Bloomberg.
State-run explorers Oil and Natural Gas Corp and Oil India, along with national pipeline utility GAIL India, have been asked to supply about a tenth of the nationwide target.
Companies were also told to explore alternative uses of feedstocks — converting naphtha into LPG, for one — and to expand storage, evacuation and transportation infrastructure.
What's Next
Refiners must raise production within timelines set by the government, which plans to review the output targets every January and July.
Whether India needs all of it depends on Hormuz. As long as the waterway stays disrupted, the world's biggest LPG importers keep bidding for cargoes from outside the Gulf — including American ones.
More
Why it matters to American readers: this is the second-order economic shock from the Iran war, the part that shows up after the shooting stops being the headline. A country that used to take nearly all its cooking gas through one Gulf chokepoint is now buying US cargoes and building its own supply buffer at the same time. Those shifts in who buys what, and from where, are what move fuel prices at home.
Reporting from Bloomberg and Reuters.
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