Costly LNG terminals in India hit by low utilisation amid supply shock

Newer LNG terminals face viability risks as West Asia conflict cuts supplies, raises prices and weakens demand, even as India expands import capacity and dependence on overseas gas

India’s multibillion dollar LNG import facilities, led by the country’s biggest in Dahej, are operating at the lowest utilisation in years after the war in West Asia shrank imports of the fuel to half, according to oil ministry data, shipping intelligence, and industry sources. Meanwhile, India’s gas production declined by 5 per cent in February year-on-year, increasing the country’s dependence on overseas fuel, oil ministry data showed.

 

Indian companies may have spent over ₹30,000 crore in setting up 52 million tonnes (MT) of LNG import capacity, according to Business Standard calculations based on data from the oil ministry and Nomura Securities.

 

State-run Petronet LNG’s Dahej terminal, which accounted for 65 per cent of India’s LNG imports in 2025 and is underpinned by term contracts from West Asia, is susceptible. Utilisation at the 17.5 MT per year capacity Dahej decreased to 56 per cent in March from 94 per cent in February and 75 per cent a year earlier, DAM Capital said. West Asia, led by Qatar, accounted for three quarters of Dahej’s supplies last year, most of which have disappeared amid the war, according to industry data provider Kpler.

 

All Indian LNG import terminals, excluding Dahej, operated at 35 per cent or lower utilisation in the April–February period of financial year 2025-26, oil ministry data showed. Dahej operated at 94.3 per cent during the period. TotalEnergies-Adani’s Dhamra LNG import facility, which operates on spot volumes, received the lowest volumes on record from the Middle East last month, Kpler data showed.

 

Last month, Dahej received 977,000 tonnes of LNG, the lowest since February 2023, compared to 1.82 MT in pre-war January. Amid a collapse in March capacity usage, Petronet announced the commissioning of its 5 MT per year expansion, delayed by a year, on March 31, increasing installed capacity to 22.5 MT per year. The expansion added to India’s import capacity amid a global shortage of fuel. It is also in advanced stages to build a greenfield LNG import project in Gopalpur in Odisha, Petronet LNG Chief Executive Officer AK Singh said in the last earnings call.

Why are newer LNG terminals more vulnerable?

Newer facilities such as Hindustan Petroleum’s Chhara, Gujarat State Petroleum Corporation’s Mundra, and Indian Oil’s Ennore will be hurt the most from this war as they were constructed at much higher costs compared to Dahej, according to industry data. Dahej, including expansions, was built at an overall cost of ₹360 crore per MT of capacity compared to ₹1,030 crore for Indian Oil’s Ennore and ₹960 crore for Hindustan Petroleum’s Chhara, the country’s newest terminal, Nomura said in a note. (Dahej’s latest expansion cost only ₹110 crore per MT).

 

“Several LNG terminals in India (especially the newer ones with low utilisation rates) may become economically unviable,” said Bineet Banka, an analyst with Nomura Securities. These terminals charge higher regasification tariffs compared to Dahej and suffer from low utilisation levels. India’s total LNG imports at 1.6 MT in March were the lowest in three years as West Asian supplies shrank following the closure of the Strait of Hormuz, through which over half of India’s LNG imports passed.

 

LNG terminals by Hindustan Petroleum Corporation (HPCL) and Indian Oil require a regasification tariff of ₹83–87 per million British thermal units (MMBtu) at a 50 per cent utilisation rate (standard LNG terminal utilisation globally), Nomura said. This is higher than Dahej’s current regasification tariff by 19–26 per cent. Indian regasification costs are among the highest in the world, an industrial user said, but regasification charges by LNG terminals in India constitute only around 5 per cent of the gas cost to the user, Nomura added.

Is demand destruction worsening the LNG outlook?

Of greater concern is the tightening of the global LNG market, as against pre-war expectations of the market being awash with cargoes next year because of new LNG production capacity coming up in the United States and Qatar.

 

That is unlikely now, say international gas experts including Anne-Sophie Corbeau and Greg Molnar, an analyst with the International Energy Agency, after Iran bombed the world’s biggest LNG liquefaction complex in Qatar last month, eliminating a fifth of capacity for years. Corbeau and Molnar expect prices to strengthen, causing demand destruction in South Asia, hurting India’s LNG import infrastructure.

 

LNG prices are already at twice pre-war levels at over $20 per MMBtu, with many Indian factories shutting down output rather than absorb such high costs, a senior trader from a state refiner said. Consumption of LNG declined by 24 per cent to 1.5 MT last month from a year earlier, DAM Capital said.

 

For instance, city gas distributor Gujarat Gas volumes in Morbi shrank to 1 million cubic metres a day compared to the region’s 8 million cubic metres a day potential as most factories remain shut. Propane, an alternate fuel, is unavailable. Gujarat Gas has asked factories for potential demand for April at a tentative price of $25 per MMBtu, twice the pre-war price of $13 per MMBtu, but “factories remain hesitant to commit to this price and hence demand is likely to be negligible in April,” a Mumbai-based analyst said.

Can LNG demand recover after the war ends?

On the flip side, once the war ends, India’s LNG facilities may gain because of New Delhi’s plans to accelerate adoption of piped natural gas (PNG), which will replace liquefied petroleum gas (LPG), currently India’s main fuel for cooking. Since March 15, 2026, on average, more than 10,000 new PNG connections are provided daily, regulator Petroleum and Natural Gas Regulatory Board (PNGRB) said in a note. India has only 1.2 crore households hooked to PNG compared to over 35 crore connected to LPG, oil ministry data showed. These connections use 3 million cubic metres of gas a day, and the government said that domestic production of gas in India can comfortably serve over half of LPG users.

 

Total gas production for February at 93.3 million metric standard cubic metres per day (mmscmd) declined by 5 per cent year-on-year, with the decline led by Reliance Industries’ KG field production at 34.5 mmscmd, down 10.5 per cent. Overall gas production in India remains muted.