 "crude oil, oil, lng")
The Iran-Israel war is likely to see a surge in India’s share of Russian crude in the coming months beyond the 10-month high seen in May. This comes even as discounts on Russian crude grades have shrunk to their lowest in two years, said officials.
However, they added that it will be difficult to replace liquefied natural gas (LNG) flows from Qatar and the UAE.
The threat of a choked Hormuz strait has pushed importers to contract more July-August cargoes from Russia even though tighter sanctions on the Russian fleet have pared discounts.
“We expect discounts to remain at low levels of around $2 per barrel given the demand for Russian crude. There will also be pressures from China. But Russia remains a reliable source,” a refinery official said.
With the Iranian regime being sanctioned heavily by the United States, most nations do not officially deal in Iranian crude.
But China remains the largest buyer, purchasing 80–90 per cent of Iran’s oil exports, which averaged 1.38–1.7 million barrels per day (b/d) in 2024 and early 2025.
In March 2025, imports reportedly surged to a record 1.71–1.8 million b/d due to fears of tighter US sanctions, global news outlets tracking energy flows have reported.
Importers have doubled down on Russian crude in recent months, imports of which rose to 1.96 million b/d, energy cargo tracker Kpler estimated.
Russia accounted for 35.14 per cent of India’s crude imports by value in the first nine months of FY25, up from 33.37 per cent.
As part of its diversification policy, Indian refineries have also started reducing their reliance on Middle Eastern grades of crude, whenever possible, sources said.
According to ICRA, around 45–50 per cent of India's crude oil imports and 54-60 per cent of inbound natural gas pass through the Hormuz strait corridor.
With $6.3 billion and $2 billion worth of imports, Qatar and UAE sent more than 56 per cent of the $14.8 billion worth of LNG imported by India in 2024-25.
A large chunk of it was under long-term contracts. State-owned Petronet LNG and GAIL currently hold several long-term contracts for supply of LNG from Qatar.
The largest of this is Petronet's 7.5 million metric tonnes per annum (MTPA) contract signed with QatarEnergy in 1999.
Set to expire in 2028, the contract was renewed earlier this year for 20 more years.
It was renewed at a significantly lower price than the earlier deal, and is expected to save India about $0.8 per million British thermal units (mmBtu). This would translate into $6 billion in savings over the contract period.
QatarEnergy also won a bid to supply 12 cargoes a year to GAIL under a five-year supply contract beginning in April, 2025. On the other hand, BPCL's 2.4 million tonnes supply deal with UAE's ADNOC over five years began in April.
The single largest alternative source was the US despite logistical and price challenges.
“LNG imports from the US have already been a key focus, and spot buying of US volumes was already expected to increase in 2025, even before the latest hostilities started. But the cost will be higher,” said a refinery official.
Sending LNG worth $2.46 billion, the US became the second-largest source of LNG for India in FY25, up from third position in the preceding year.
Given the flexibility in trade, US LNG has great potential for offtake. If Henry Hub prices are in the $3.5-4 range, it makes good sense to import US volumes, GAIL officials had said earlier.
There is great flexibility in contracting on a free-on-board (FOB) basis, and cargoes can be swapped at an opportune time.
GAIL is currently importing 5.8 MTPA of LNG annually from the US as part of earlier contracts.
