INDIA NEED LPG

S&P GLOBAL - April 16, 2026 - India is accelerating plans to build strategic LPG storage and expand its stockholding strategy beyond crude oil, as the war in the Middle East highlights supply vulnerabilities in a market reliant on the region for imports, government, industry sources and analysts said April 16.

Although opportunities to increase domestic LPG production in the near term remain limited, and importing large volumes from distant suppliers such as the US incurs higher costs, constructing both underground and above-ground storage facilities may offer a more practical solution and help cushion supply fluctuations amid rising geopolitical turbulence, while strengthening energy security, according to the sources.

"Holding plentiful LPG inventories is now a priority, and it is a no-brainer now that the government has started looking at options to expand storage," said a senior petroleum ministry official on April 16.

India has above-ground and underground storage for LPG, owned by oil marketing and refining companies. Given the push for LPG as a clean cooking fuel, especially in rural households and lower-income groups, LPG consumption has risen considerably, though this has been partly offset by the use of piped natural gas in urban areas, Mukesh Kumar Surana, former chairman and managing director of state-run Hindustan Petroleum Corp. Ltd., told Platts, part of S&P Global Energy.

"It may be worthwhile to consider strategic LPG cavern storage of some capacity to provide cushion to future supply shocks," Surana said.

India's underground storage capacity is limited to two caverns. In 2025, Hindustan Petroleum Corp. Ltd. commissioned its 80,000-metric-ton underground LPG rock cavern in Mangalore, raising the country's total underground cavern LPG storage capacity to about 140,000 mt. The other operational cavern, with a capacity of 60,000 mt, is operated by South Asia LPG Co. Pvt. Ltd. Combined with above-ground storage, these facilities provide roughly 22 days of supply cover.

India could add about 410,000 mt of overall LPG storage capacity over the next two to three years to bolster strategic reserves and safeguard against market disruptions, according to S&P Global Energy CERA.

The Indian government could establish an LPG reserve sufficient to cover 30 days of national consumption, said Ravi Sharma, analyst for NGLs at CERA. This proactive approach could involve developing additional underground storage caverns, representing a significant step toward enhancing energy security, Sharma said.

"While no specific timelines, new locations or precise capacity targets have been publicly disclosed, the planning and evaluation process is underway, with oil marketing companies identifying potential sites and conducting feasibility studies," Sharma said. "This indicates an encouraging shift from planning to tangible action."

Supply diversification

India relies on the Gulf region for about 60% of its LPG consumption. The Middle East conflict has triggered urgent government intervention to secure alternative supplies and encourage the use of kerosene and coal in restaurants and other lower-priority sectors to alleviate supply pressures.

Analysts note that if the war continues, India may have to rely more on long-haul spot cargoes, which could lead to higher freight costs and affect domestic prices.

India consumed 33.2 million mt of LPG in the fiscal year 2025-26 (April-March), up 6% from the previous fiscal year's 31.3 million mt, according to provisional oil ministry data. Domestic production supplies about 40% of the country's LPG demand, while the remaining volumes are imported.

"There are a few learning points here. We should look to expand our domestic LPG storage capacity since we are so dependent on imports," said Pawan Soni, general secretary of the Federation of LPG Distributors of India. "Secondly, we should diversify our import sources and not depend so much on the Middle East. And lastly, we should study domestic requirements of industrial and cooking fuels more closely."

Following the start of the war in the Middle East, India has diversified its LPG supplies, including the US, Australia, Singapore and Iran.

As of April 15, total LPG flows from the US to India -- including volumes discharged and in transit -- reached 1.4 million mt, surpassing the full-year volume of 1.39 million mt received from the US in 2025, according to S&P Global Commodities at Sea data as of April 15.

"Diversification, both in terms of origin as well as type of energy sources, along with cushions for supply shocks, will be key to future energy security for India," Surana said.

Production constraints

India has an average LPG yield of about 7.5%, according to CERA. LPG typically constitutes up to 10%-11% of total refining output when advanced processes are employed.

To significantly increase LPG production, a refinery must either adopt advanced processing technologies or process a substantially larger volume of crude oil. As Indian refineries typically operate above their nameplate capacities, this leaves limited scope to further increase refinery runs, CERA analysts say.

As the Indian government directs oil refiners to boost LPG output and ensure supplies to households and priority sectors, diverting LPG components such as propane and butane from high-value petrochemical feedstocks and gasoline blending could significantly erode petrochemical unit margins, according to CERA.

Reliance Industries Ltd. said March 10 that it aims to maximize LPG production at its refining and petrochemical complex in Jamnagar to ensure ample domestic fuel supplies.

State-run Indian Oil Corp. said in a statement March 10 that steps were being taken to enhance LPG production and prioritize its availability for domestic consumers and essential non-domestic sectors, such as hospitals and educational institutions.

"In the near term, India is likely to focus on boosting domestic LPG production, increasing commercial allocations, expanding the distribution of smaller 5-kg cylinders and accelerating the rollout of piped natural gas connections," Sharma said.

"These measures will provide immediate relief and strengthen supply resilience," Sharma said. "Simultaneously, they will expand their underground storage capacity in phases, as this remains a crucial long-term strategy to reduce dependence on vulnerable supply routes further, positioning India for a more secure energy future."

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