India Orders State Refiners to Lock In 15% of 2027 LPG Imports From US Term Deals
New Delhi's directive to its three major state refiners marks a sharp acceleration of the shift away from Middle East supply that began with the Iran war.
India's government has instructed Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. to source at least 15% of the country's 2027 LPG imports through US term contracts, according to people familiar with the matter. The directive, reported on Thursday (2026-08-13), moves the target significantly above the roughly 10% share secured under the country's first-ever structured US LPG contracts, a 2.2-million-ton annual deal arranged earlier this year.6
The scale of what New Delhi is asking for comes into focus when set against where India was importing from just eighteen months ago. Persian Gulf producers supplied 92% of India's LPG imports in 2025, Vortexa data show. The Strait of Hormuz carried 90% of all inbound LPG shipments. When the Iran war disrupted those flows, India had almost no alternative supply chains in place.3
The shortfall hit consumers directly. LPG consumption dropped more than 16% year-on-year to 2.35 million tons last month, as households and industries shifted to piped natural gas, biomass and kerosene, according to Rigzone's report citing people familiar with the matter. Around 60% of Indian households depend on LPG as their primary cooking fuel, which means supply disruptions translate almost immediately into visible political pressure on New Delhi.6,3
The government's response has been to move fast on diversification. India contracted 2.2 million tons of US LPG for 2026 — the first structured term deal between the two countries — and US shipments have already reached a record 3.9 million tons through August of this year, making the US India's top LPG supplier. That surpasses South Korea's previous record for US LPG imports. Indian refining sources told Reuters on Tuesday (2026-06-23) that India was on track to receive between 1.1 million and 1.2 million tons of American LPG in June alone, nearly double the 648,300 tons imported in May, per Kpler data.6,3
Securing supply is one problem. Getting it there cheaply is another. Indian Oil Corp. is seeking 50% ownership stakes in very large gas carriers — a first for an Indian refiner — as it prepares for higher US LPG volumes, according to a report from late July (2026-07-29). The freight economics on a US Gulf Coast-to-India voyage are materially different from a Middle East run, and locking in shipping capacity through equity stakes rather than spot charter markets reflects how seriously the company is treating the volume commitment.5
The 15% target for 2027 would require a substantial increase over 2026 contracted volumes. India's total LPG import base is large enough that 15% represents several million tons annually. Negotiating that volume in term deals, rather than through the spot market, exposes Indian refiners to basis risk if US Mont Belvieu prices diverge from Middle East contract benchmarks, but it also insulates them from the kind of acute spot-market scramble seen earlier this year when Hormuz flows tightened.6
India has pursued parallel diversification on other fronts. The country's Indian Strategic Petroleum Reserves Limited signed a memorandum of understanding with Abu Dhabi's ADNOC in May (2026-05-18) covering LPG supply cooperation, though that arrangement has not yet produced volume commitments. State refiners are also increasing spot purchases from non-Middle East sources following the Iran supply shock, according to people familiar with those plans.1,4
The broader crude diversification effort mirrors the LPG shift. India imports about 90% of its crude needs, averaging around 5 million barrels a day, Rigzone noted. Russian crude's share of Indian imports had already dropped to under 20% in January 2026, constrained by sanctions dynamics, according to Atlantic Council analysis. The Iran war added another layer of Middle East concentration risk that New Delhi is now actively managing across multiple commodity streams.4,2
For US LPG exporters, the Indian government's directive represents a reliable demand signal going into 2027 contract negotiations. Whether the three state refiners can actually execute term deals at the 15% threshold depends on how willing US exporters are to commit volumes at prices that work for both sides, and on whether India's own shipping capacity expansion moves fast enough to keep delivered costs competitive. Indian Oil's carrier stake negotiations are the near-term indicator worth tracking on that front.6,5