Oil refining companies in India told to prioritize propane and butane for LPG, supply IOCL, HPCL, BPCL

Oil refining companies in India told to prioritize propane and butane for LPG, supply IOCL, HPCL, BPCL

India’s state-owned oil refining companies are shifting focus to prioritize propane and butane procurement for liquefied petroleum gas (LPG) supply to Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL), aligning with broader diversification goals. This strategy aims to secure 10% of India's LPG imports from the United States by 2026, up from 7% in 2025, as part of efforts to reduce reliance on Middle Eastern suppliers and address trade tensions with Washington.

The move follows the successful award of India's first long-term U.S. LPG contract in November 2025, covering 2 million metric tons of propane and butane for delivery starting in 2026. A second tender, expected to secure four additional very-large gas carrier (VLGC) cargoes, will further expand U.S. participation in India's LPG supply chain. This shift is driven by geopolitical factors, including U.S. tariffs on Indian goods and New Delhi's push to counterbalance trade imbalances. India has also proposed eliminating import duties on U.S. propane and butane to incentivize procurement.

LPG, a critical component of India's energy mix, accounts for 65% of the country's 31 million-ton annual consumption, with over 90% previously sourced from Gulf suppliers. The U.S. has emerged as a strategic alternative due to favorable pricing arbitrage opportunities, particularly after China imposed retaliatory tariffs on U.S. propane. Analysts note that diversifying LPG sources enhances energy security while supporting India's goal of narrowing its $30+ billion trade surplus with the U.S..

The refiners' focus on propane and butane underscores a calculated balance between supply reliability, cost efficiency, and diplomatic objectives in an evolving global energy landscape.