US, West Asia LPG routes show wide cost differences for India: Crisil

The recent US-India LPG import pact marks a major shift in supplier diversification, reducing dependence on West Asian cargoes, though freight-linked cost sensitivities may affect OMC economics

The delivered cost of liquefied petroleum gas (LPG) for India may vary significantly across the routes and origin points, with West Asia cargoes tracking the Saudi contract price benchmark and US-linked supplies following Mont Belvieu-based pricing, where freight plays a proportionately larger role, said Crisil Intelligence on Wednesday.

 

India had earlier this month signed an agreement for the first time with the US to import 2.2 million tonnes per annum of LPG. India is heavily reliant on LPG imports, which meet 55–60 per cent of domestic demand.

 

The country’s LPG import portfolio has traditionally been dominated by the West Asia, which accounts for 91–93 per cent of total import volume. This high reliance exposed India to regional supply volatility, including planned maintenance and shipping bottlenecks, which may constrain scheduling flexibility and tighten short-term procurement conditions, said Crisil.

 

How does the US deal change India’s LPG sourcing strategy?

 

The recent agreement with the US for LPG import signifies a notable shift in supplier diversification by India, reducing historical reliance on West Asian producers. “The US agreement marks a material shift in this backdrop, securing 2.2 MMT of contractual supply from a geopolitically distinct region. The additional corridor eases concentration risk and expands room for optimisation in India’s import basket,” Crisil said.

 

It emphasised that while strategic advantages of the deal are substantial, landed cost sensitivities linked to freight could shape the economics of oil marketing companies (OMCs) in the near term. It takes around 45 days for shipments to reach India from the US, against an average of 7–8 days from the West Asia.

 

What is happening to global LPG prices?

 

Meanwhile, international LPG prices have been falling, enabling importers from the Asia-Pacific region, including India, to optimise their LPG sourcing.

 

The Saudi contract price for LPG has been declining, reaching its lowest point since August 2023 due to muted global demand. The Mont Belvieu price benchmark has also dropped.