Escalating geopolitical tensions in West Asia are beginning to ripple through India’s energy system, with natural gas supplies to industrial users now being curtailed after disruptions to liquefied natural gas (LNG) imports. The crisis follows a halt in production by QatarEnergy amid regional conflict and the sharp decline in shipping traffic through the Strait of Hormuz — a critical route for global oil and gas shipments.
As LNG cargo availability tightens, Indian energy companies including GAIL and Petronet LNG have begun reducing supplies to industrial consumers while protecting priority sectors such as household gas and transport fuel. The episode highlights India’s growing reliance on imported LNG and the structural vulnerabilities that geopolitical disruptions can expose.
Indian energy companies have begun curtailing natural gas supplies to industrial users as concerns mount over potential disruptions to LNG imports from the Middle East after Qatar suspended production.
Qatar halted its liquefied natural gas output on Monday (March 2, 2026) amid escalating regional tensions, with Iran launching strikes across Gulf countries in retaliation for attacks by Israel and the United States. The conflict has also disrupted oil and gas shipments through the Strait of Hormuz, driving up global energy prices as well as freight and insurance costs.
Liquefied natural gas (LNG) is natural gas that has been cooled well below its freezing point to convert it into liquid form, enabling storage and long-distance transport.
While domestically produced natural gas meets just about half of the demand, India meets the rest through LNG imports.
India, the world’s fourth-largest LNG importer, depends heavily on the Middle East for its gas supplies. Nearly two-thirds of India’s liquefied natural gas and about half of its crude oil come from the Middle East. Qatar supplies 40% of the 27 million tonnes of LNG that India imports annually. Even emergency purchases from the U.S. would not arrive before April.
Reports indicate that the ongoing conflict has effectively closed the Strait of Hormuz, a vital channel for global energy shipments. Around one-third of the world’s seaborne crude oil exports and about 20% of liquefied natural gas (LNG) shipments pass through this narrow strait.
Normally, some 20.8 million barrels per day of oil and petroleum products transit the route, with over 80% heading to Asian markets, including India. Roughly 20% of global LNG also moves through the waterway.
For India, the Strait—under Iran’s control—handles about 50% of crude oil imports and around 54% of LNG supplies, covering shipments from both Qatar and the UAE. Following US and Israeli strikes on Iran, vessel traffic has fallen sharply, with only 26 ships traversing the Strait recently, compared with 91 on February 28 and a February daily average of 135.
Indian energy firms curtail gas supply
Indian energy companies have begun curtailing gas supplies as disruptions to LNG imports tighten availability. The supply cuts, estimated at 10–30%, have been calibrated around minimum lifting quantities to help companies avoid contractual penalties. To bridge the shortfall, firms such as Indian Oil Corporation (IOC), GAIL and Petronet LNG are planning to issue spot tenders for additional cargoes, even as spot LNG prices, freight rates and insurance costs surge amid geopolitical tensions.
At the same time, sources said gas supplies to priority sectors such as domestic piped natural gas (PNG) and compressed natural gas (CNG) will remain unaffected.
Petronet LNG has issued force majeure notices to major buyers, including GAIL, IOC and Bharat Petroleum Corporation Ltd (BPCL), citing reduced cargo availability. The company imports liquefied natural gas and regasifies it at its terminals in Dahej, Gujarat, and Kochi, Kerala, before supplying it for fertilizer production, power generation and city gas distribution.
GAIL and IOC had already alerted their customers late on Monday (March 2, 2026) that gas deliveries would be reduced.
Indian Oil, which supplies propane to ceramic factories in Morbi, said current stocks would last only three days. Industry sources warned that if tensions in West Asia persist, deeper supply cuts could follow, while Gujarat Gas has also cautioned industries about potential disruptions.
Disruptions to energy supplies from West Asia have prompted Mangalore Refinery and Petrochemicals Ltd to suspend refined fuel exports and shut down some units at its refinery.
Meanwhile, Adani Total Gas, the city gas joint venture between the Adani Group and France’s TotalEnergies, has nearly tripled gas prices for large industrial consumers following the disruption in LNG supplies, sources said.
Imported LNG has become indispensable for Indian downstream industries, with its share in key sectors continuing to rise. According to oil ministry data, in 2025, LNG accounted for 80% of gas demand from the fertiliser sector and 36% from city gas usage. Usage in the power sector was 30%, at refineries 75%, and for petrochemicals 54% the same year.
Over the past two years, reliance on imported LNG has increased as domestic gas production fell to 34.7 billion cubic metres (bn m) in 2025, down 3% from the previous year.
Amid supply disruptions from West Asia, fertiliser plants were initially offered take-or-pay contracts on 3 March, which require buyers to either accept supplies or pay a penalty, ensuring risk-sharing between suppliers and buyers. Officials’ intervention has reportedly restored part of the supply, industry executives said. Any interruption in urea production could affect farmers.
City gas firms supplying domestic piped natural gas (PNG) and compressed natural gas (CNG) will be prioritised over industrial users, as these sectors are considered essential.
LNG deliveries to petrochemical plants may decline as operations scale back, while refineries may turn to alternative sources.
Gas-fired power plants may also limit generation if LNG supplies are delayed, though this is expected to have a minimal effect on overall power demand, as gas accounts for less than 4% of India’s electricity generation.
The crisis has underscored India’s inadequate investment in LNG and LPG storage infrastructure, leaving the country exposed to supply shocks as Middle East tensions continue. India consumes around 195 million standard cubic metres per day (mmscmd) of natural gas. Of this, nearly 60 mmscmd has become unavailable following the halt in production by QatarEnergy. If the disruption persists, authorities may be forced to reprioritise domestic allocations, with industrial consumption likely to bear the brunt of the cuts.
In the wake of Qatar’s unprecedented halt in LNG production, Indian energy firms have begun reducing natural gas supplies to industrial users as a pre-emptive response to tightening global supplies. QatarEnergy, which accounts for a significant share of India’s LNG imports, suspended production after its facilities were struck amid escalating Middle Eastern tensions, and subsequently declared a force majeure on export contracts — a move expected to delay full output restoration by several weeks.
The disruption in LNG exports stems from heightened conflict involving the United States, Israel and Iran, which has effectively throttled shipping through the Strait of Hormuz — a critical chokepoint for global energy trade carrying significant volumes of crude oil and liquefied natural gas. In retaliation, Iran’s forces have targeted Gulf energy infrastructure, directly impacting Qatar’s ability to maintain LNG shipments. With transit routes constrained and maritime risks elevated, shipping firms have curtailed operations, contributing further to supply contraction.
As a result, major Indian gas distributors, including Petronet LNG and GAIL, have informed industrial customers of supply cuts typically in the range of 10–30% and, in some cases, complete halts of contracted gas deliveries. Some firms, such as Adani Total Gas, have reacted by raising industrial gas prices sharply to manage scarce volumes.
The implications extend beyond immediate energy supply. Small steel producers in Gujarat have warned of significant production cuts, with some considering partial shutdowns if gas scarcity persists. Meanwhile, fertiliser plants have already trimmed output due to disrupted feedstock supplies, although government assurances about strategic prioritisation have sought to protect essential segments.
Analysts point to the sharp rise in global LNG and freight prices as importers compete for alternative cargoes, which could inflate India’s import bill and heighten inflationary pressures at home. The crisis lays bare India’s structural dependency on imported LNG, particularly from the Middle East, and the limited domestic gas storage and supply buffers that leave downstream industries vulnerable to geopolitical volatility.
If tensions endure, policymakers may need to further reprioritise gas allocations, expand strategic reserves, and accelerate diversification of energy sources to reduce future vulnerability. These steps will be essential to shore up India’s energy security amid an increasingly uncertain global landscape.
Read more
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