OMCs turn to ‘non-Hormuz’ LNG, LPG supplies as West Asia disruption hits imports: Sources

New Delhi: State-run oil marketing companies (OMCs) have started procuring Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) from “non-Hormuz” sources, with deliveries expected to begin in March, government sources said on Tuesday.

Follow The PSUWatch Channel on WhatsApp

The move comes as the conflict in West Asia intensifies, affecting the transit of critical commodities through the global chokepoint of the Strait of Hormuz for the past 10 days. India depends on imports to meet about 50 percent of its LNG consumption, roughly 30 percent of which is routed through the Strait of Hormuz. The country is more vulnerable in LPG, where around 65 percent of the demand is met through imports and nearly 80 percent of those shipments pass through the strait. The Petroleum Ministry has been reviewing supply positions daily since the disruption began, according to officials.

India is expecting deliveries from the US and Canada, another source said, adding that the delivery timeline will depend on the geography from which the cargoes are shipped, though supplies are likely to begin within March.

OMCs increase LPG production by 10%

In addition to securing supplies from alternative routes, the government has asked oil refiners to ramp up LPG production from all available domestic sources.

PSU Watch reported earlier on March 6 that the government had directed all oil refining companies operating in India to maximise the use of propane and butane streams for LPG production and supply it exclusively to the three public sector oil marketing companies (OMCs) — Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL). It also barred refiners from diverting these streams to petrochemical production or downstream derivatives.

“Domestic LPG production is up 10 percent. No distributor in the country is dry,” said the source, adding that the daily disbursement of LPG cylinders remains unchanged at 60 lakh, compared with the period before the crisis erupted in West Asia.

Procurement of crude oil from non-Hormuz sources at 70%: Source

While disruptions to LPG and LNG supplies are more pronounced, India is also moving to mitigate the impact on crude oil supplies. The impact is expected to be relatively milder due to the presence of strategic reserves, which can cover crude oil and petroleum product consumption for 74 days.

The source said the country has started procuring crude oil from non-Hormuz sources to cushion any supply disruption. “Ten days ago, crude oil procurement from non-Hormuz sources stood at 55 percent. Today, the figure stands at 70 percent. Due to a long effort aimed at diversifying crude oil supplies, India has entered this disruption better prepared in terms of energy security,” said the source.

“In fact, state and private refiners have secured more crude oil than they would have received without any disruption. Our refineries are operating at 100 percent throughput. And we do not see any need to curb exports as energy imports are in place,” the source added.

Crude oil prices touched a three-year high on March 9, breaching the USD 100-per-barrel mark before correcting to USD 85 per barrel on Tuesday.

Follow PSU Watch on LinkedIN

India depends on imports to meet around 89 percent of its crude oil consumption. However, diversification efforts that began in 2022 after Russia invaded Ukraine have expanded India’s supplier base significantly. The country now imports crude oil from about 40 countries across the globe.

These include Argentina, Australia, Brazil, Canada, Colombia, Greece, the US, the UK, Venezuela, Mexico, the Netherlands, Norway, Algeria, Angola and Belgium, among others, in addition to OPEC+ producers.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)