ADNOC to Substitute Some LPG Supply to India with US Cargoes

Abu Dhabi National Oil Company (ADNOC) is set to commence replacing a portion of its liquefied petroleum gas (LPG) deliveries to India with more economical U.S. shipments, beginning in June. This adjustment is attributed to the reconfiguration of global trade dynamics spurred by U.S.-China tariffs, according to industry sources.

This strategic shift will enable ADNOC to redirect a greater volume of its LPG to China. Chinese purchasers are offering elevated premiums to compensate for the decline in U.S. supply following Beijing’s imposition of substantial tariffs on U.S. goods. Simultaneously, this move is anticipated to lower LPG expenses for India, the world’s second-largest importer.

India procures over 80% of its imported LPG from Middle Eastern nations, including Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait, under established annual contracts.

Earlier in the month, Indian refining companies made an uncommon request to Middle Eastern vendors, seeking to exchange a segment of their contracted supply for U.S.-sourced LPG. The Indian refiners stipulated that the U.S. LPG should be priced with deductions relative to the Middle Eastern benchmark, the Saudi Contract Price (CP), sources revealed.

According to insiders, ADNOC, operating through its trading divisions, has consented to provide specific quantities of U.S. LPG to Indian refining entities under the terms of their yearly agreements, starting in June-July.

The trade conflict between the U.S. and China has broadened the differential between Middle Eastern and U.S. LPG prices, sources indicated. However, one source cautioned, “Substituting the entirety of the volumes with U.S. LPG presents considerable challenges.”

June Goh, a commodities analyst at Sparta, observed that, “Unlike China, the majority of India’s LPG consumption caters to domestic needs, necessitating a greater proportion of butane in the blend.”

She further added, “Therefore, India stands to gain from the redirected U.S. LPG shipments, but not necessarily from propane shipments.”

Neither Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp, nor ADNOC offered comments when approached for clarification.

Government statistics indicate that India imported approximately 60% of its total LPG consumption, amounting to 29.66 million metric tons, in the fiscal year 2023/24.