Trade thaw apart, road ahead for India's energy imports from US not easy

Despite a thaw in trade talks, higher costs, logistics challenges and refinery constraints may limit any near-term boost in India's crude oil, gas and LPG imports from the US

The government may be celebrating the latest thaw in trade discussions with the US, but it may be a little early to claim any significant and immediate upside, at least on the energy front. India currently imports crude oil, liquefied natural gas (LNG), liquefied petroleum gas (LPG) and coking coal worth over $12 billion annually from the US.

 

A host of factors, ranging from high freight costs, pricier crude and technical limitations posed by refinery configurations to the geopolitical complexities of switching from Russian Urals to US oil grades, will come in the way of India quickly boosting energy imports from the US.

 

“The expected additional cost per barrel is estimated to be in the range of $12–15 per barrel, taking into account the discount currently offered to India by Russia. An additional consideration is the longer voyage time, which ranges from 32 to 40 days compared with 25 to 30 days previously,” said Pankaj Srivastava, senior vice-president of commodity markets oil at Norway-based energy research and intelligence firm Rystad Energy.

 

He added that while the West Texas Intermediate (WTI) discount would be a key driver for increased supply to India going forward, Russian Urals and US WTI cannot be considered direct replacements due to significant differences in crude quality and yield profiles.

 

“Refineries process crude on a blended basis to achieve their design crude properties. The crude basket for major Indian refineries typically ranges from 80 to 100 different grades. Given the significant differences in properties between WTI and Urals, a one-to-one replacement is not feasible,” he said.

 

In a joint statement issued last week, the US and India said they have reached the “framework” for an interim trade agreement, including additional market access commitments and support for more resilient supply chains. India intends to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years, it said.

 

The statement did not share details of the expected boost to trade on the energy front. Asked to share his comments on the additional cost associated with switching to US crude, commerce and industry minister Piyush Goyal, in a press briefing, said the Ministry of External Affairs would share the details.

 

“According to Rystad Energy’s analysis of Urals replacement with WTI in a typical bottom-of-the-barrel conversion-focused refinery, such a shift would result in an estimated 25 per cent reduction in effective refinery capacity, driven by the higher gasoline-range yield associated with WTI and lower vacuum gas oil and vacuum residue yield,” Srivastava said.

 

He added that the US–India deal on $500 billion of energy product purchases is expected to be more focused on gas and LNG, and possibly ethane, rather than crude. “The WTI quality is not suited for diesel-focused Indian refineries’ configuration,” he said.

 

India agreeing to buy $500 billion worth of US imports in energy, technology, agriculture and coal, as claimed by US President Trump, can raise some concerns, equity research firm Elara Capital said in a note. “Increasing US energy imports or imports of Venezuelan oil (lower grade than others) may limit gains due to cheaper Russian crude. However, we continue to monitor the upcoming developments and expect that India is likely to follow the FTA rulebook,” it said.

 

India imported 243 million tonnes (mt) of crude oil worth $137 billion last financial year. While Russia accounts for around 30 per cent of these imports, crude oil purchases from the US have also increased. According to data from maritime intelligence firm Kpler, India’s average crude oil imports from the US stood at around 318,000 barrels per day (bpd) in 2025, a jump from nearly 200,000 bpd in 2024.

 

In October 2025, India’s monthly crude oil imports from the US climbed to their highest level since March 2021, as Indian refiners bought over 550,000 bpd of crude oil from the country. At the same time, oil imports from Russia have tapered in the past few months.

 

In an executive order issued on 6 February, the White House said India has committed to stop directly or indirectly importing Russian Federation oil and has indicated that it will purchase US energy products from the United States. It also stated that if India resumes buying Russian oil, the US can take action to reimpose the 25 per cent additional duty on imports of Indian goods.

 

The order shows how India’s energy purchases have been central to the ongoing trade agreement negotiations. India has been significantly ramping up energy supplies, including crude oil, LPG and LNG, from the US in the last year.

 

In a first, Indian oil public sector undertakings (PSUs) last month finalised a one-year contract to import around 2.2 million tonnes of LPG from the US. The LPG volumes to be imported from the US Gulf Coast for the contract year 2026 represent close to 10 per cent of India’s annual LPG imports.

 

India is import-dependent for around 60 per cent of its domestic LPG requirements. To secure supplies, the country has been looking to diversify sources, as around 90 per cent of total LPG imports come from West Asian countries such as the UAE, Qatar, Kuwait and Saudi Arabia.

 

Despite deepening energy ties between India and the US, Indian officials have repeatedly said purchases would be based on the economics of the deal. Importing energy from the US is comparatively costly due to higher freight costs. Also, cargoes arriving in India from the US take around 45–50 days, compared with a freight time of 7–8 days from the Middle East and 30–45 days from Russia.

 

The US has also offered India the option to purchase Venezuelan oil to replace lost Russian barrels. Indian refiners are seeking steeper discounts on Venezuelan oil, as its highly viscous and acidic nature makes it difficult to process. Mukesh Ambani-led Reliance Industries Limited (RIL) and Russia-backed Nayara Energy were the top Indian buyers of Venezuelan crude prior to the US sanctions imposed on Caracas. Historically, Indian state-run refiners have not processed Venezuelan crude, with only limited volumes supplied to Indian Oil.

 

US President Donald Trump, after capturing Venezuelan President Nicolás Maduro, said American oil companies would “rebuild the oil infrastructure” of the South American nation. Global trading houses Vitol and Trafigura obtained the first US licences to load and export Venezuelan oil.

 

Experts believe Indian refineries with deep bottom-of-the-barrel conversion capabilities can process heavy Venezuelan crudes without any processing-related concerns. Historically, India has processed Venezuelan crude without operational challenges. For example, average monthly intake stood at 2–2.5 million barrels during the first half of 2024, declining to around 1.6 million barrels per month in the first half of 2025.

 

“The primary consideration remains the level of discount, which will need to be negotiated. Given the current US–India engagement, this issue is expected to be addressed. However, Venezuelan crude cannot fully replace Urals. In the near term, Indian refineries are likely to process Venezuelan crude alongside increased supplies from the Middle East, Latin America and Africa,” said Rystad’s Srivastava.

 

He added that in the current geopolitical environment, the optimal strategy for India is to diversify crude sourcing and avoid excessive reliance on any single supply source, as expanding procurement from Brazil, Guyana, Venezuela, Argentina and the US, and selectively from Russia, would provide much-needed stability and resilience to the crude sourcing strategy.