India LNG Imports Rise 25% by Value Despite Spot Price Surge

India’s natural gas imports continued to expand in both volume and value during the April-July period, even as spot liquefied natural gas prices spiked to $25 per mmbtu. According to data reported by the Economic Times, imports rose 5% year-on-year by volume, reaching a higher level, while the total value surged 25% to $5.6 billion. This trend indicates that domestic demand remains robust despite the cost pressures emerging from global market disruptions.

The increase in import value is directly linked to the volatility in spot markets. With Gulf supplies disrupted by the Iran conflict, India has been forced to source 35-40% of its LNG from the spot market. The Asian spot benchmark, JKM, averaged $19 per mmbtu from April to August, a significant jump from $12 in the same period last year. In contrast, long-term contract prices, which are often linked to crude oil or US gas benchmarks, have risen much less, creating a widening price gap that suppliers are managing through blending strategies.

Fertilizer sector drives import volume

The fertiliser industry remains the primary engine for LNG demand, accounting for a quarter of total imports in the April-July window. Imported gas consumption for this sector was 5% higher than in the previous year. Because this segment is heavily supported by government subsidies, it is relatively insulated from immediate price shocks, allowing demand to persist even as input costs rise. This stability in consumption has directly contributed to the overall growth in import figures.

City gas distribution represents another key pillar of demand growth. Analysts note that city-gas networks benefit from priority allocation of domestic gas, which helps shield end-users from the full brunt of international price spikes. This structural support ensures that consumption in this segment remains stable, contributing to the overall 0.5% year-on-year increase in domestic gas consumption to 22.9 billion cubic meters. The resilience of these two sectors is the main factor preventing a demand collapse despite the price surge.

Spot pricing outpaces long-term contracts

The divergence between spot and contract prices has created a complex procurement landscape. While spot LNG hit $25 per mmbtu, long-term contracts linked to Brent crude, which averaged $90 per barrel, would have priced LNG at roughly $11-12 per mmbtu. US gas-linked contracts have remained largely unchanged from last year. To keep rates acceptable for customers, local suppliers are increasingly blending expensive spot volumes with cheaper long-term contract gas, effectively averaging down the landed cost.

Supply chain shifts alter sourcing mix

Geopolitical tensions have forced a significant shift in India's sourcing strategy. The disruption of Gulf gas supplies due to the Iran war has pushed the country to rely more heavily on the spot market, where 35-40% of imports are now sourced. This shift has exposed the market to greater price volatility. Kpler data shows that August imports rose 5% over July, suggesting that despite the high prices, the volume requirement remains unchanged. The market is currently absorbing the higher costs without a corresponding drop in physical demand.

The fiscal impact of this trend is becoming apparent. Higher import prices, particularly for the fertiliser sector, are set to inflate the government’s subsidy bill. As imported gas consumption rises while prices remain elevated, the financial burden on the state increases. This dynamic highlights the tension between maintaining energy security and managing fiscal costs. The market’s current trajectory shows that physical demand is prioritizing continuity over cost optimization in the short term.