India Readies Big LPG Output Boost as Hormuz Uncertainty Lingers
(Bloomberg) -- India has directed its state companies and private refiners to prepare for a sharp increase in cooking gas production, seeking to bolster domestic supplies as the Iran war prolongs uncertainty over the Strait of Hormuz, the key waterway for about 90% of the country’s liquefied petroleum gas imports.
Refiners and crude oil explorers have been ordered to “implement all technically and economically feasible measures” to maximize LPG output beyond current minimum producible levels, according to an Aug. 13 government notification. That includes exploring alternative uses of feedstocks, such as converting naphtha into LPG.
India, which relies on imports for about two-thirds of its LPG consumption, has scrambled to secure enough cooking fuel since the US-Iran war disrupted traditional supply routes. Buyers have turned to the US and newer suppliers including Algeria following the closure of the Strait of Hormuz.
Domestic refiners, which produced about 36,000 tons of LPG a day before the war, have already lifted output to as much as 54,000 tons a day to help meet demand.
The government now wants the industry to be capable of producing as much as 63,810 tons a day, according to the notification. It has set upper-limit production targets for individual refiners, with Reliance Industries Ltd.’s domestic-market-focused unit assigned the largest target at 18,000 tons a day.
State-run explorers Oil and Natural Gas Corp. and Oil India Ltd., along with the national gas pipeline utility Gail India Ltd., have also been asked to contribute about a tenth of the nationwide target.
The South Asian nation had traditionally relied on LPG imports rather than domestic production because the fuel is less profitable than gasoline and petrochemical feedstocks.
Refiners have additionally been told to expand infrastructure for LPG storage, evacuation and transportation. Companies will be required to raise production within stipulated timelines, while the government plans to review the output targets every January and July.
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