India's energy trade with US facing price and transport challenges

India is facing hurdles in expanding energy trade with the US because of price and transport challenges and competition from Russia and nations of West Asia.

 

Crude oil purchases are facing hurdles, LNG imports are crashing and potential LPG purchases are falling hostage to tariff and geopolitics, according to industry sources and ship tracking data. 

Jacking up purchases of US energy would have placed India in a better bargaining position, as it seeks to close the first phase of a trade deal with the US by early July, when a 26 per cent reciprocal tariff may be reinstated by the Trump administration. “I am confident that in the coming days India will be able to conclude mutually beneficial trade deals with the US and other countries,’’ said Commerce Minister Piyush Goyal at an industry event this week. A favourable deal involves not only tariff reductions for US products, but measures taken to improve sourcing of US energy products led by coal, oil and LNG, a demand made by US President Donald Trump. The share of US LNG in India’s overall LNG trade declined by more than half in the January-May period of 2025 to 9 per cent from 19 per cent in calendar 2024, according to calculations based on data from Paris-based market intelligence agency Kpler. Market leader Qatar boosted its share by 7 percentage points on the year to 49 per cent. India’s overall LNG imports at 10.4 million tons declined by 5 per cent in the first five months of this year, buffeted by high prices, but purchases of the fuel from the US crashed by 37 per cent during the period, Kpler data showed. 

Purchases of US LNG totalled 940,000 tons in the first five months of this year compared to around 1.5 million tons in a year earlier period. 

On an annualised basis, India bought a record 5.1 million tons of LNG from the US in calendar 2024 during the Biden administration, equating to an average 420,000 tons every month. That average has dropped by half this year during Trump’s presidency, reflecting the role of the market in decision making rather than political pressure. 

Petronet LNG CEO AK Singh said at a media briefing this month that high LNG rates on the spot market had discouraged Indian customers from sourcing spot cargoes, reflected in falling US shipments. 

US LNG purchases declined this year after spot cargoes supplied by global traders like Gunvor, Trafigura and JERA among others disappeared. They constituted 32 per cent of US LNG imports in 2024, ship data showed. 

Yet, another major issue for India is that a substantial chunk of the 5.8 million tons a year in US LNG contracted to state-run Gail India is not delivered to India, for it to be counted as imports. Gail only brought in 1.8 million tons of US cargoes last year, Kpler data show. Most of Gail’s 85 cargoes secured under two US term contracts annually are swapped or sold elsewhere for lack of ships, a senior company official said. 

Swaps offer better returns to Gail, said Narendra Taneja, a leading energy expert.  “It is a normal global practice.,” he said. 

Crude Oil 

Crude oil purchases from the US are also facing limitations with Indian refinery configurations and competition from Russian oil, refining officials said. Imports of crude oil from the US averaged 274,000 b/d in the January-May period, around 27 per cent higher from 199,000 b/d for the entire 2024, Kpler data showed. That’s still well below the 415,000 b/d that the US supplied India in 2021, for a 10 per cent share. This year, US oil accounted for only 6 per cent of overall Indian imports but still higher from 4 percent a year earlier. 

But US share may hit the brakes, industry officials said, because discounted Russian oil is aggressively competing with US grades this year, refining officials said. 

Russia’s share this year is 38 per cent and it has been displacing higher quality US sweet crude oil this year, the officials said. 

Indian refiners face no western sanctions to transport Russian oil now because most grades trade at sub $60 per barrel levels, a price cap instituted by western nations over which sanctions kick in, which prevent Russian oil suppliers from using Western shipping and insurance services and rely on an unreliable, partly sanctioned dark fleet of vessels. In May, lighter Russian oils, including ESPO and Sokol among others, made up 584,000 b/d of the 1.96 million b/d of total Russian supplies imported. US grades were around 250,000 b/d in May. 

“We see more value in Russian lighter grades than US oil,” a state-run refiner said. It is much easier to transport the oil now after oil prices fell, he added. 

Moreover, state Indian refiners have upgraded their facilities to process cheaper, lower quality oil while most of the oil shipped from the US is of an expensive, lighter, premium variety. Indian refineries do not require large volumes of premium light, sweet crude oil something they once did. 

They can now make do with medium, sour grades.