India's decision to import LPG from the US helps it to diversify sources as it reduces almost full reliance on West Asian countries for supply of the country's primary cooking fuel.
India's 2.2 million tonnes (mt) liquefied petroleum gas (LPG) term deal with the United States (US) is likely to insulate the country amid geopolitical disruptions in global energy markets, according to an expert.
From 2026, Indian State-run oil marketing companies (OMCs) would import 10 per cent of the country's total LPG imports from the US.
Indian companies did not have a term deal for LPG imports with the US until now.
India, which is 60 per cent import dependent for domestic LPG requirements, secures around 90 per cent of its LPG imports from West Asian countries, including the United Arab Emirates, Qatar, Saudi Arabia, and Kuwait.
India's decision to import LPG from the US helps it to diversify sources as it reduces almost full reliance on West Asian countries for supply of the country's primary cooking fuel.
"US is a major natural gas liquids producer. Importing LPG from the US is in line with the ongoing trade negotiations and helps India in diversifying sources amid geopolitical tensions globally," said Prashant Vasisht, senior V-P & co-group head, corporate ratings, Icra.
India has been exposed to LPG supply disruptions earlier in the year when the conflict between Iran and Israel in June posed serious threat to the closure of Strait of Hormuz, a narrow strategic trade route through which the Middle East countries ship energy to Asian markets.
India's Oil Minister Hardeep Singh Puri had said the LPG contract will help in strengthening India's energy security while ensuring affordable access to clean cooking fuel for millions of households.
Without disclosing the pricing of the deal, the minister said the contract uses Mount Belvieu, a major pricing hub for LPG in the US, as the benchmark for LPG purchases.
According to maritime intelligence firm Kpler, India imported around 36 per cent of LPG from UAE, 21 per cent from Qatar, 16 per cent from Kuwait and 6 per cent from the US in 2025 so far.
Share of the US in India's LPG imports has ranged between 0.5-2 per cent in the last three years.
Experts believe US LPG would be costlier for India on account of longer freight route.
"Indian majors will be paying more for US-origin LPG barrels than if they were to contract those volumes from the Middle East next year," said Ciaran Tyler, lead research analyst, natural gas liquids (NGLs) & naphtha at Kpler.
It takes around 45 days for shipments to reach India from the US, against an average of 7-8 days from the Middle East.
The recent decline in LPG prices and cost negotiations with the US, however, may help Indian companies to limit the impact of costlier freight.
"International LPG prices have dipped since April this year. Saudi CP (contract prices) have reduced significantly while crude oil prices are also likely to sustain around $60-$65 per barrel. This gives India the bandwidth to increase LPG imports from the US.
"Freight costs would definitely be higher but the US may offer finer prices to India to partially offset the impact," said Vasisht.
International price of LPG is linked to crude oil and natural gas prices as it is produced during refining of the fuels.
In October, Saudi Aramco reduced benchmark Saudi contract prices to the lowest since August 2023 for propane and butane to $495 and $475 a tonne, respectively.
Energy: A focal point in trade negotiations
As India and the US negotiate a bilateral trade deal (BTA), the energy sector is expected to play a pivotal role in shaping the deal.
Earlier in the month, US President Donald Trump said the countries were "pretty close" to reaching a fair trade deal and Washington may relook at the tariff imposed on New Delhi.
In August, the US administration slapped a 25 per cent penalty on India, bringing the total tariff to 50 per cent, for purchasing energy from Russia.
Besides ramping up LPG imports, India has been increasing crude oil supplies from the US in 2025.
Indian refiners in October imported the highest level of crude oil from the US since March 2021 as Trump pushes New Delhi to reduce trade surplus with Washington.
Feature Presentation: Aslam Hunani/Rediff
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