India’s Record LNG Buying Meets Record-High Prices

India’s LNG imports are heading for a record in October 2026, even though imported gas costs far more than a year earlier. About 2.5 million tonnes had already arrived, and full-month imports were expected to reach 2.8 million tonnes. That would be 18% above October 2025.

The main reason is a widening gap between gas demand and domestic supply. India’s gas consumption reached 68.5 billion cubic metres in 2025, while domestic production stayed near 34–36 billion cubic metres annually. Imports are filling the shortfall, especially for fertilizer makers and city gas networks.

Supply options also improved. Qatar and UAE arrivals rose 80% and 30% month-on-month, respectively, as Gulf flows partly recovered. Fertilizer producers kept buying despite West Coast India marker prices of $32–33/MMBtu, while city gas consumption rose about 20%.

LNG means liquefied natural gas: natural gas cooled into a liquid so large quantities can be transported by ship. After arrival, it can return to gaseous form and enter India’s gas networks. This gives India access to overseas supplies when local production cannot meet demand.

India’s gas consumption rose from 60 billion cubic metres in 2022 to 68.5 billion cubic metres in 2025. Domestic production, however, remained around 34–36 billion cubic metres annually for four years. In 2026, output fell 4% year-on-year, reaching 2.73 billion cubic metres in September.

As a result, LNG covers a growing share of consumption. Domestic gas supplied 57% of demand in 2022, but only 50% in 2025 and 47% during April–September 2026. Imports must fill the remaining gap, especially for fertilizer and city gas users.

India’s gas supply gap is large because consumption has outpaced local production. In 2025, the country used 68.5 billion cubic metres but produced only around 34–36 billion cubic metres. That implies a shortfall of roughly 32.5–34.5 billion cubic metres, which imports increasingly have to cover.

The domestic share has fallen sharply. Local production met 57% of consumption in 2022 and 50% in 2025. During April–September 2026, it covered just 47%. Domestic output also declined 4% year-on-year in 2026, with September production falling to 2.73 billion cubic metres from 2.86 billion.

The gap is likely to keep supporting LNG demand while consumption grows and production remains weak. Fertilizers and city gas are especially important because they continued buying gas despite high prices. Their resilience is pushing imports toward record levels.

India’s gas demand is concentrated in fertilizer production and city gas distribution. Fertilizers account for about 29% of consumption, while city gas distribution accounts for 28.5%. Power generation, refineries and petrochemicals each represent much smaller shares, and most other sectors cut gas use by 10–25% in the past six months.

Fertilizer demand is less price-sensitive because the government protects urea and DAP supplies with subsidies and policy pressure. Urea production rose 4.5% year-on-year during April–September 2026, even though sales fell 4%. LNG provides 85% of fertilizer production’s gas, so makers continued buying at $32–33/MMBtu.

City gas demand is growing for structural reasons. Network coverage and customer numbers are expanding, while LPG disruptions pushed restaurants, hotels and households toward piped gas. City gas use rose about 20% in August, reaching 1.67 billion cubic metres.

The US-Iran war, which began in late February 2026, reshaped India’s LNG supply. Qatar had previously supplied roughly 45% of India’s 24.9 million tonnes of LNG imports in 2025. Its near-disappearance caused Indian imports to fall sharply during the spring months.

US cargoes stepped in to replace much of the missing supply. They covered around one-third of India’s monthly arrivals through September. The Gulf crisis and closure of the Strait of Hormuz also disrupted LPG imports, adding pressure to India’s energy supply and encouraging some users to switch toward piped gas.

Gulf flows began returning gradually in September, although security risks remained. Qatar and UAE arrivals rose 80% and 30% month-on-month in October. This widened India’s options and helped push monthly LNG arrivals toward a record 2.8 million tonnes.

Expensive imported LNG squeezes industries because buyers exposed to global prices face higher fuel costs. In the past six months, most gas-consuming sectors reduced use by 10–25% as prices rose and supply tightened. This can constrain industrial activity, although the source does not quantify the wider economic effect.

Fertilizer makers behaved differently because government subsidies and political priorities protected production. Fertilizer producers continued substantial LNG purchases at $32–33/MMBtu, compared with $11 a year earlier. City gas users also kept growing, partly because LPG imports fell from 2 million tonnes in February to 1.1 million tonnes in March.

Restaurants, hotels and some households switched to piped supplies after LPG disruptions. City gas consumption consequently rose about 20% in August. The current result is uneven: exposed industries cut demand, while protected fertilizers and expanding city networks keep imports rising.

A country cannot rely only on domestic gas when consumption grows faster than production. India’s demand increased from 60 billion cubic metres in 2022 to 68.5 billion in 2025, while domestic output stayed around 34–36 billion cubic metres. Output then fell 4% year-on-year in 2026, widening the need for imports.

LNG availability depends on whether overseas cargoes can be bought and delivered safely. India lost much of Qatar’s supply after the US-Iran war began, then relied more on US cargoes. Gulf shipping disruptions also reduced energy flows. Prices reflect this supply pressure: West Coast India marker prices rose to $32–33/MMBtu from $11 a year earlier.

Policy also changes who can access gas and at what price. India set a $4/MMBtu floor and $6.5/MMBtu ceiling for domestic gas, while subsidizing much of residential demand. Industrial buyers outside fertilizer remain more exposed to global prices.