Indian refiners are considering West African nations and other alternative energy sources to secure additional fuel supplies, should Iran attempt to block the Strait of Hormuz — a critical choke point for global oil and gas transit —as its conflict with Israel intensifies, said oil industry executives.
Since the outbreak of the Iran-Israel hostilities on Friday, top oil ministry officials and industry executives are analysing various scenarios and evaluating all possible responses to potential supply disruptions and price spikes. About 40% of India’s total crude imports, and 54% of its liquefied natural gas (LNG) supplies, would be at risk if the conflict leads to a closure of the Strait of Hormuz, the narrow sea passage between Iran and Oman that carries nearly 30% of global oil trade and 20% of LNG shipments.
Executives at Indian refiners and gas companies, however, believe Iran won’t enforce a blockade, citing history. A potential closure would likely send prices soaring, drawing the US into a direct confrontation with Iran, while alienating Gulf nations and other oil import-dependent countries, executives said. Blocking the strait would not only disrupt Gulf oil and gas exports, including Iran itself, but also hinder imports of essential items. This, an executive said, would serve as a strong deterrent to Tehran.Indian refiners are not resorting to ‘panic buying’ for now, a second executive said.India may Lead Flow to West Africa
However, they are prepared for any eventuality, the executive said, adding that “closure of the strait would shrink the global pool of available oil and gas. No matter how carefully you prepare, every economy would feel the impact of a supply crunch and price spike.” “If India turns to West Africa for additional supplies, other importers are likely to follow,” another executive said, underscoring the complexity of the situation.
India imports about 90% of its crude oil needs, with local refiners relying on the Gulf for a major portion of their supplies. Of India’s total crude imports, around 35% comes from Russia, a little over 40% from the Gulf, and the rest from Africa, the US and other sources. Africa’s share of imports dropped to 5% in May from 12% in April.
In 2024, India sourced 54% of its LNG requirements from the Gulf, with Qatar supplying 80% and UAE the remainder. Qatar, among the world’s top three LNG exporters, plays a key role in global gas supply, and any disruption to its exports could send spot LNG prices soaring. Even long-term LNG prices could rise, as 60% of India’s long-term contracts are linked to crude rates.
The global LNG market is not as evolved as the oil market, with very limited sources of alternative supplies. During the 2022 global energy crisis, a former Gazprom unit reneged on its LNG supply contract with India’s GAIL, forcing the latter to cut supplies to domestic users. India does not have strategic gas storage, though it does maintain strategic crude reserves. However, New Delhi does not disclose data on national oil and gas inventories.
According to the oil ministry, India has total crude and petroleum product storage ‘capacity’ equivalent to 74 days of national consumption. This includes strategic reserves that can cover 9.5 days of demand. Total capacity includes inventory at refineries, pipelines, ships enroute, product depots, and empty tanks that can hold crude or refined products, executives said.
