Indian refiners to issue second tender to secure four more US LPG cargoes

Indian state-run refiners will issue a second tender in a few months to secure four more cargoes of LPG on a short-term basis from the US. Purchases will be on free on-board terms, enabling Indian refiners to deploy their own charters for long distance LPG transportation for the first time to cut costs, according to two top refining sources. 

Indian refiners will also issue some spot tenders for purchase of US LPG for deliveries early next year, the sources said. Details are not yet available. 

Spot purchases of the fuel from the US have already soared to a record 1.42 million tonnes in the January-November period from 0.1 million tonnes in 2024 and 0.4 million tons in 2023, according to ship tracking data by Kpler. India typically imports over 60 per cent of its LPG consumption, most of which are sourced from Gulf nations. 

Contract prices of LPG from the Gulf were sticky at over $600 a tonne levels earlier this year, despite a sharp decline in crude prices, a senior trader from a state refiner said.  But Saudi Arabia started cutting rates once India decided to buy LPG under a term contract for the first time from a non-Gulf nation, the trader said. Indian state oil marketing companies agreed with three traders earlier this year to source as much as 2 million tonnes of US LPG in 2026 under a term contract.

 

If India continues to buy spot LPG at current levels next year, and after including the term contract, US supplies to India will be valued at around $2 billion for 2026, sharply higher from the $60 million in 2024, according to calculations based on shipping data and current LPG rates, eroding India’s trade surplus with the US. 

Separately, Saudi Aramco, whose prices of LPG are a benchmark for other Middle East suppliers, increased benchmark contract prices for propane and butane for December to $495 a metric tonne and $485/t, respectively, according to a company document. Propane will cost $20/t more this month from November and butane is $25/t higher, but the rates are still well below $575/t levels charged by Aramco in July, when refiners launched a tender for US LPG, sources said and pricing documents show. Aramco had cut propane and butane prices to the lowest level in 27 months, or since August 2023, to $475/tonne and $460/tonne in November. 

Own charters to cut transport costs 

Chartering its own tankers will help Indian Oil, Bharat Petroleum and Hindustan Petroleum manage logistics costs of shipping the fuel from the US, because transportation costs of propane and butane, which is blended to form LPG, from the US is thrice that of supplies from the Gulf countries, sources said. 

If successful, Indian refiners plan to negotiate future term contracts from the US on FOB terms rather than on a delivered basis. Using our own charters will help bring parity between the cost of importing LPG from the US and from the UAE or Saudi Arabia, sources said. Earlier this year, India concluded a deal to buy 48 cargoes of propane and butane from the US in 2026. Beginning January, Indian state refiners will receive two cargoes each of propane and butane every month, sources said. 

Indian Oil will receive 24 cargoes with the remaining shared equally between BPCL and HPCL, the sources said. P66, a US LPG producer and trader was awarded 24 cargoes under the tender with Chevron and Total securing contracts to supply 12 cargoes each, the sources said. At least 75 per cent of the propane and butane shipments will come from the US, with the rest possibly from non-US sources. Details of the tender awards have not been reported earlier. 

LPG pricing 

India imported 21.5 million tonnes of LPG in 2024 and 21.2 million tonnes in the first 11 months of 2025, according to data from maritime intelligence agency Kpler. Middle East nations led by the UAE, Qatar, Kuwait and Saudi Arabia accounted for nearly all LPG shipments in 2024. 

India may end up paying at least 10 per cent more for LPG supplies from the US for 2026 on delivered basis compared to imports from the Middle East because of high freight costs, the sources said. US supplies are linked to pricing agency OPIS price assessments at Mont Belvieu hub, the sources said. 

US rates are typically at a $100 per tonne discount to Saudi contract prices for propane and butane, but freight costs from the US at $130-$140 a tonne are much higher than shipping LPG from Gulf countries, the sources said.However, the higher costs for US LPG have been compensated by a sharp cut in benchmark rates of Middle East supplies in the last few months, sources said. 

Saudi Aramco sharply cut monthly contract prices of propane and butane only after India announced a term tender for US LPG, sources said, reflecting the competitive pressures piling on Saudi Aramco, which until a few months had continued to keep prices of LPG high, industry officials said. 

“We pay more for US LPG, but are getting much lower prices for 90 per cent of our LPG imports, which comes from the Middle East,’’ a senior trader from a state refiner said.