Regardless of how the stop-start-stop war proceeds, the grim reality is that India will feel the effects of the US-Iran war for a long time — in a worsening of the asymmetric supply-demand matrix for liquefied natural gas (LNG). Other than the ones in US, the world’s six largest sets of LNG facilities are in West Asia, all of which have faced some degree of disruption due to the US-Iran war. In March, not a single LNG carrier had crossed the Strait of Hormuz.
The problem is compounded for India because it has just four LNG carriers. Two of these are conventional, i.e. moderate-sized carriers (Disha and Raahi at 138,000 cubic metres each). The other two, Aseem, at 155,000m3 and Prachi at 173,000 m3 are more the standard size of LNG carriers.
But even these are small compared to the global average, or standard size of carriers, at around 200,000 m3. None of India’s four carriers is India-built. They are chartered on 25-year leases with Petronet LNG, each a joint venture with global shipping lines (MOL, NYK Line, K-Line, Milaha, Nakilat), and Shipping Corporation of India Ltd. The lease for the first two, Disha and Raahi, is about to expire in a couple of years.
Before expanding on the complexities India faces, a quick lowdown on the complexity of LNG business of transportation, and where it differs from that of crude.
The LNG market globally does not mirror the diversified network of ships and ports built to handle the global oil business for the better part of 150 years. The demand for LNG began to accelerate only a couple of decades ago, as a transition fuel for world economies, the shift from oil to renewable energy.
This included India, where the demand for natural gas (LNG and PNG) is supposed to reach 15% of total energy mix from the current 6%, by 2040. The global market size of the LNG+PNG business is about $12 billion as of 2025, a quarter of the oil business, the last decade accounting for most of the growth.
LNG carriers are technological marvels. At their core are multiple cryogenic storage units, maintaining temperatures of minus 162 degrees Celsius in each container, cold enough to keep natural gas in liquid state.
Unlike oil, natural gas evaporates at ambient conditions so it can only be stored in these ultra-cool tanks, making it one of the most expensive fuels to handle and store. Gas is released to onshore terminals, precisely on demand, rather than in a continuous flow. This means LNG carriers frequently serve a dual purpose – when there is spare capacity, they double as floating offshore storage reservoirs.
The more sophisticated carriers can regasify the fuel onboard to atmospheric temperatures before it flows directly into pipelines or onward tankers.
The four Indian tankers are not in this league. But these ships are workhorses, continuously running back and forth from Qatar, where the bulk of India’s supply comes from, to the five Indian LNG terminals at Mundra, Dahej and Hazira in Gujarat, Dhabol in Maharashtra, and Kochi in Kerala. On the east coast, IOC built an LNG terminal at Ennore, a Chennai suburb, operational since 2019, with plans for expansion. The biggest among these terminals is Dahej, operated by Petronet. It accounts for 40% of India’s total imports, at 22.6 mT (million tonnes) per annum.
Till now, India’s bet on LNG was simple enough. A Petronet data source notes that the four ships have completed more than 2,000 trips since 2004, when India began to import the gas, mainly from the Ras Laffan terminal in Qatar. That makes an average of 90 trips per year, a record of sorts, in the global LNG business. The frequency was made necessary because of the mismatch between inadequate demand and consequent reluctance to secure long-term supply options such as a floating storage and gasification unit, a sea-based facility, where the fuel is stored and converted to gas for transport to consumption centres. The underdeveloped capacity for the storage of the gas is hurting.
Globally, Qatar understandably has the largest fleet of LNG carriers. The top 15 include Japanese, Canadian, Greek, Malaysian and other European entities. Of the 772 LNG carriers worldwide, as of 2025, including those for storage, not one is an Indian facility, unless the four chartered facilities are included.
These are costly plays, but also with high payoffs. A single LNG shipment from the Gulf to Europe can generate a profit of nearly $200 million. The India-Qatar deal is a $78 billion, 20-year pact, renewed for 20 years in 2024, an assurance of stable, low-cost supply. The basis is a 1999 contract for shipping 7.5mT of natural gas from Qatar at this given rate. The reference rate was of Brent crude, at $80 a barrel. Since LNG prices are benchmarked mostly to Brent, it made sense at the time.
Not so now, after a fifth of the Qatar output was damaged by Iranian bombing and put out of business for close to five years. This means there are no good options for India immediately to import LNG. The business is undercapitalised in India, including an underdeveloped capacity for the storage of the gas. This should surprise no one.
In 2004, India moved its reliance for natural gas from spot market purchases to long-term import contracts, to become a major LNG importer. Now, twenty-two years on, there is a problem. Unlike oil, which can be sourced from a wide range of suppliers, LNG supply is concentrated in just a handful of geographies – Qatar and Iran in the main. This gives importers little room to diversify.
India needs 290 BCM (billion cubic metre) of gas to reach the stated target for natural gas to form 15% of its energy basket by 2030, from about 6.7% as of December 2025. This target has long appeared iffy. Existing gas-based power plants remain underutilised, due to the high cost of electricity generation. These power plants’ PLF (a metric of a power plant’s output) has increased from 11.4% in 2022-23 to just about 15% in 2024-25.
Demand for domestic PNG is less than 2% of total LPG connections. Investment in the terminals will depend on increase in demand for LNG. Even before the US-Iran war, government’s own estimates, at current prices of equipment and services globally, showed that it would need to find the funds to finance a Rs 3 trillion investment.
The challenge is now much higher. Both Asia and Europe need the floating terminals — as of yesterday. Iran gas will not return to the market soon. Even if US sanctions ease, their terminals will need to be rebuilt, especially after Israel bombed the South Pars field. Tehran has hardly the money to repair the wells and draw out gas for at least the next five years. That means the timelines for Iran will be the same as for Qatar to return to full capacity.
The Qatar- India contract of 2024 is possibly dead after the declaration of force majeure. Qatar is unlikely to stick to those numbers, which means shipping costs would rise. As far back as 2014, Cochin Shipyards had announced plans to build three LNG carriers, when GAIL had made plans to import the gas. Nothing came of it. The drawing boards are out again.
