JM Financial — Oil & Gas Sector Update
Focus: Indian government’s press briefing on energy security amid the Middle East crisis
Crude oil:
India’s daily crude consumption is 5.5 mmbpd. Currently, 70% of crude imports are arriving via non-Strait routes (up from 55% previously due to diversification), meaning 30% of crude requirements remain disrupted.
India’s refining capacity is at ~100% utilization, supported by 10–50 days of crude inventory held at refineries.
Total crude + petroleum product inventory (industrial + strategic) is estimated at 30–40 days of domestic demand, comprising:
IOCL: 45–50 days crude + 10–15 days product inventory
Other refiners: 10–20 days crude + 10–15 days product
Strategic crude reserve: ~6 days (~30 mmbbls)
Conclusion: India’s oil inventory can meet the SoH-related shortfall for 3–4 months.
Natural gas:
India’s total gas consumption is ~189 mmscmd; domestic production covers 97.5 mmscmd, imports cover ~92 mmscmd.
~47.4 mmscmd of imported gas has been disrupted due to force majeure — representing ~25% of total gas supply.
India has minimal gas storage (gas is structurally hard to store), so the only sustainable solution is 20–25% demand rationalisation across sectors.
Two LNG cargoes are en route to India via alternative routes.
The government issued the Natural Gas (Supply Regulation) Order, 2026, which prioritizes supply as follows:
Priority Sector I (100%): Domestic PNG, CNG for transport, LPG production, pipeline compressor fuel.
Priority Sector II (70%): Fertilizer plants.
Priority Sector III (80%): Tea industry, manufacturing, industrial consumers on the national grid.
Priority Sector IV (80%): Industrial and commercial consumers via City Gas Distribution (CGD) networks.
Curtailed sectors: Petchem (OPaL, GAIL Pata), power plants, refineries (~65% of prior 6-month average).
GAIL and PPAC will manage allocation. The order overrides existing Gas Sale Agreements (GSAs).
LPG (most severely impacted energy commodity):
India imports ~60% of LPG requirements; 90% of those imports (~54% of total LPG demand) transit the Strait of Hormuz — now at a halt.
So 54% of India’s LPG supply is currently disrupted.
GoI response: ordered refineries and petchem companies to maximize LPG output by diverting all C3-C4 hydrocarbon streams. This raised domestic LPG production by 25%.
Net result: domestic production now covers ~50% of demand (up from 40%), and another ~6% is met via non-Strait import routes.
Total LPG availability: only 56% of demand. 44% remains unmet.
All domestic LPG production is being diverted to the household segment.
~85% of India’s LPG consumption is residential; ~15% is commercial.
Even the 56% availability falls short of meeting just the domestic/residential segment (which alone constitutes 85% of demand). Therefore, commercial LPG supply (restaurants, hotels, hospitals, etc.) faces severe and ongoing disruption.
The oil ministry has set up a three-member panel of OMC executives to devise a fair and transparent mechanism for commercial LPG allocation.
GoI is using OTP verification to prevent diversion of domestic LPG cylinders to commercial use.
Domestic LPG price: INR 913/cylinder in Delhi; INR 613/cylinder for PMUY beneficiaries (after INR 60 hike).
Minimum booking interval extended to 25 days (from 21 days) as a demand management measure.
Government stated that panic domestic LPG booking is due to misinformation — it maintains there is no shortage of domestic LPG supply (though commercially the supply picture is far more stressed).
