India's LNG Imports Set October Record Despite Price Shock

By Elena Vasquez

India's LNG imports are expected to reach a record 2.8 million tonnes in October, up 18% year on year, even as domestic gas output is down 4% in 2026.

Across India's city-gas network, LNG supplied about 45% of gas in recent months, up from 38% a year earlier. Import dependence is rising even as New Delhi tries to keep lower-priced domestic gas flowing to households and industry.

How did Gulf cargoes change India's supply mix?

Oilprice.com reported that Qatar supplied roughly 45% of India's 24.9 million tonnes of LNG imports in 2025. Its near-disappearance after the US-Iran war began in late February 2026 drove a steep spring import decline; US cargoes then covered around one-third of monthly arrivals through September.

Gulf flows began returning in September, although security disruptions remain a risk. About 2.5 million tonnes had arrived by October, with arrivals from Qatar and the UAE rising 80% and 30%, respectively, month on month. The record reflects wider supplier access, but it does not erase India's gas supply gap.

Why is India's gas gap widening?

Government figures show gas consumption rose from 60 billion cubic metres in 2022 to 68.5 billion in 2025, while domestic production has stayed around 34-36 billion annually for four years.

Output fell 4% year on year in 2026 so far, with September production at 2.73 billion cubic metres versus 2.86 billion a year earlier. Domestic gas covered 57% of consumption in 2022, 50% in 2025 and 47% in April-September this year.

The demand mix is concentrated:

• Fertilizer production uses about 29% of India's gas.
• City-gas distribution uses 28.5%.
• Power generation uses about 10%.
• Refineries and petrochemicals together use about 10%.

Most consuming sectors cut gas use by 10-25% over the past six months amid higher prices and tighter availability. Fertilizer demand fell only about 2%, while city-gas use rose roughly 20%. The supply gap now depends most on two sectors that kept buying through the price shock.

Can fertilizer plants keep buying LNG?

The government has prioritized urea and diammonium phosphate supply, particularly in Uttar Pradesh and Punjab, ahead of elections expected in February and March 2027. Poor rains linked to El Niño and subsequent drought in southern states weakened urea sales, but New Delhi has pressed producers for higher output and imports.

Domestic urea output rose 4.5% year on year in April-September 2026, while sales fell 4%. State-owned fertilizer manufacturers also faced pressure to import more LNG; LNG accounts for 85% of fertilizer-industry gas consumption.

Fertilizer-sector LNG use has hardly changed from last year, but purchases remain substantial at $32-33/MMBtu on the West Coast India marker, compared with $11 a year earlier. Government subsidies and policy support have insulated the sector from the price shock. That support has kept fertilizer gas demand firm.

What is driving city-gas growth?

City-gas consumption rose from 1.38 billion cubic metres in August 2025 to 1.67 billion in August 2026, an increase of roughly 20%, as network coverage and the customer base grew. Domestic factors remain the main drivers of the expansion, even as LNG takes a larger supply share.

Disruption to LPG supplies added to the switch to piped gas. The Gulf crisis and closure of the Strait of Hormuz cut India's LPG imports from 2 million tonnes in February to 1.1 million in March, prompting restaurants, hotels and some households to use piped supplies.

New Delhi has redirected domestic gas toward city-gas distribution. It set a $4/MMBtu floor for the next two years, allowing ONGC and Oil India to break even, and a $6.5 ceiling. The state subsidizes 55% of residential buyers' gas costs, while industrial buyers largely face global prices. The government's split leaves higher LNG costs as a potential drag on industrial profitability outside fertilizer.

Adani Total Gas, one of India's largest city-gas distributors, attributed 91% of its incremental sales volumes this year to compressed-natural-gas growth. In August, the government announced a scheme to accelerate active household piped-gas connections through more lower-priced domestic-gas allocations to distributors.

With domestic production stagnant, more household connections would ultimately increase the system's need for LNG. City gas is the clearest source of demand growth, but industrial users carry more of the import-price exposure.

Could gas-fired power add another bid for LNG?

Since the crisis began in March, coal has carried much of the burden of meeting electricity demand. Summer hydropower output fell 20% year on year as insufficient monsoon rainfall constrained water availability, while higher temperatures drove an 11% increase in total generation. Coal-fired output rose 12.5% in July-September to help close the gap.

Coal consumption averaged roughly 79 million tonnes a month in July-September, while combined domestic supply and import deliveries fell to 66 million tonnes in August. Ninety-five of India's 191 coal-fired plants had critically low fuel stocks. Rainfall in coal-producing areas disrupted supplies and slowed rail movements, while inadequate precipitation elsewhere constrained hydropower. Higher import prices discouraged overseas purchases and increased reliance on domestic inventories; September coal imports were 12% below a year earlier.

Coal purchases are expected to rise 10% year on year in October to 21.3 million tonnes, which could ease the pressure. If shortages persist, India may need more gas-fired generation as a short-term remedy, adding to LNG demand. A coal shortfall could make power another major buyer just as imports reach a record.

Who absorbs the remaining cost?

Supplier diversification has helped India overcome gas shortages since the crisis began, but it cannot remove exposure to global prices. The unresolved question is how much of that cost the government, businesses and private consumers can absorb as imports become harder to avoid.

The watch item is October coal purchasing: if the 21.3 million-tonne plan fails to relieve plant shortages, gas-fired generation could add demand for LNG at a marker nearly three times last year's level.