Iran Conflict Disrupts India’s Gas Supply, Prices Surge

The ongoing conflict in Iran has severely impacted India’s natural gas imports, resulting in skyrocketing prices and potential ramifications for various sectors. Following an attack on Qatar, the world’s third-largest exporter of liquefied natural gas (LNG), the country halted production for an estimated month. This disruption has cut off approximately 20% of the global LNG supply, leading to immediate financial consequences.

As a result of this crisis, gas prices in Europe surged by 54% on March 4, 2024. India is particularly vulnerable, relying on Qatar for about 40% of its LNG imports. With contracted supplies now unavailable, India is forced to turn to the spot market, where prices have dramatically increased. Gas that was priced at $10 just days ago is now being sold for around $25.

The implications of these rising prices are profound, affecting everything from household kitchens to industrial operations. A significant portion of imported gas, around 28%, is used to produce fertilizers like urea, which are essential for agricultural productivity. The demand for city gas, which includes piped natural gas (PNG) for cooking and compressed natural gas (CNG) for vehicles, is also growing rapidly. Notably, CNG vehicles outsold diesel cars in India for the first time last year, capturing 21% of the market share.

Despite the challenges, the Indian government prioritizes city gas supply. Even if all imports cease, domestic production can cover around 50% of annual demand. However, the blending of domestic gas with imported gas means that consumers will still face high costs. This situation may dampen demand for CNG vehicles, particularly if prices continue to rise and fuel shortages lead to longer wait times at pumps.

The crisis extends beyond natural gas, impacting liquefied petroleum gas (LPG) as well. Approximately 33 million households in India rely on LPG for cooking, with 60% of the supply imported, predominantly from West Asia. The prolonged nature of the conflict in Iran could exacerbate challenges for households, especially if the government does not absorb increased costs, which many experts consider imprudent.

To mitigate the impact of this crisis, India must explore alternative gas suppliers, such as Australia and Canada. In the long term, enhancing biogas production could provide a sustainable solution. Currently, agricultural and urban waste could potentially meet India’s gas needs. For example, cattle dung could generate 39,000 tonnes of gas daily, while paddy straw could contribute an additional 16,000 tonnes. However, India produced only 31,000 tonnes of biogas in the entire fiscal year of 2024-2025, highlighting a significant gap in utilizing these resources effectively.

As the situation develops, the focus on diversifying gas supplies and investing in renewable energy sources will be crucial for India to navigate this crisis successfully.