Whalesbook
Indian public sector oil companies have signed a one-year agreement to import approximately 2.2 million tonnes per annum (MTPA) of liquefied petroleum gas (LPG) from the United States. This historic deal, the first of its kind, aims to diversify India's LPG sourcing, strengthen energy security, and ensure affordable supplies, especially for beneficiaries of the Pradhan Mantri Ujjwala Yojana. The imports will be sourced from the US Gulf Coast and priced against the Mount Belvieu benchmark.
Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, announced a significant development for India's energy sector: the signing of a one-year liquefied petroleum gas (LPG) import deal with the United States. This marks the first time Indian public sector oil companies have entered into such a structured, long-term agreement with the US for LPG.
The deal involves Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited importing around 2.2 million tonnes per annum (MTPA) of LPG for the contract year 2026. This volume is equivalent to nearly 10 percent of India's annual LPG imports and will originate from the US Gulf Coast. The pricing for this import is benchmarked against Mount Belvieu, a crucial pricing hub for the global LPG trade.
Minister Puri highlighted this as a "historic first" and a crucial step in diversifying India's LPG sourcing strategy. The agreement is expected to bolster the country's energy security and ensure the consistent availability of affordable LPG for its citizens. He also emphasized the government's commitment to supporting programs like the Pradhan Mantri Ujjwala Yojana, ensuring that subsidized LPG remains accessible to women in households, even amidst global price volatility. The government has previously absorbed significant costs, exceeding ₹40,000 crore, to maintain low prices for Ujjwala consumers.
Impact
This agreement strengthens India's energy security by reducing reliance on a single sourcing region and ensuring a stable supply of LPG. It could positively impact the financial performance of Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited by securing imports at competitive, benchmarked prices. The deal also deepens bilateral energy trade ties between India and the United States. The overall impact on the Indian stock market is likely to be neutral to moderately positive for the energy sector, reflecting improved operational stability for these PSUs. Impact rating: 7/10.
Difficult Terms
Liquefied Petroleum Gas (LPG): A flammable mixture of hydrocarbon gases used as a fuel for cooking and heating.
Public Sector Oil Companies: Companies owned and operated by the Indian government, such as Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited.
Million Tonnes Per Annum (MTPA): A unit of measurement indicating the quantity of material (in this case, LPG) handled or transported per year, expressed in millions of tonnes.
US Gulf Coast: The coastal region of the United States along the Gulf of Mexico, a major hub for oil and gas production and export infrastructure.
Mount Belvieu: A major storage and distribution hub for natural gas liquids (NGLs) and petrochemicals located near Houston, Texas. It serves as a key pricing benchmark for many North American energy commodities, including LPG.
Pradhan Mantri Ujjwala Yojana: A flagship scheme of the Government of India launched to provide clean cooking fuel to poor households, primarily women, by providing LPG connections.
