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US LPG contract: Two birds with one stone

We view India’s contract to import 2.2 mmt of LPG in 2026 from the US as a positive. It adds to measures to reduce trade balance and pacify the US. This will also help India diversify its large LPG sourcing. India is the world’s 2nd largest LPG importer, and the US is the largest exporter, with the bulk of its exports to Asia. Yet, historically, India had relied on the Middle East (90-95% share). With Mount Belvieu benchmark at a good US$150-200/ton discount to Saudi CP, despite higher logistics costs, land prices of US LPG are comparable to Middle East LPG. This deal could pave the way for more US LPG contracts over the longer term.

India contracts 2.2 mmt of LPG from US in 2026

Likely to pacify the US government and to get better tariffs on India-US trade, apart from agreeing to reduce Russian imports, India has been increasing its energy imports from the US. From negligible in 2024, US LPG exports to India are nearly 1.5 mmt (~3.4% of US exports, ~8% of India’s imports) till Oct 2025. India has now announced a one-year structured contract to import 2.2 mmt of LPG from the US Gulf Coast. Three OMCs (IOC ~50%, BPCL/HPCL ~25% each) will purchase contracted volumes based on Mt Belvieu benchmark. In addition, spot imports could also continue, in our view.

US largest LPG exporter, India 2nd largest importer; mutual trade could rise

With a sharp rise in shale oil/gas production, the US is now by far the largest LPG exporter, with 2024 exports of 67 mmt (up 2.5X since 2016), nearly 45% of global LPG trade. With Mt Belvieu benchmark significantly lower than Saudi contract prices (CP), the share of US exports to Asia has been rising (>55% in 2024).

Despite being the 2nd largest LPG importer, 90-95% of India’s LPG imports have come from the Middle East (see Exhibit 3). While there are benefits of proximity and lower freight costs, a less diversified import mix has risks as well, in our view.

The share of US LPG in India’s imports has increased to ~7.3% in 1HFY26 (from just 0.5% in FY2025; see Exhibit 3). The new 2.2 mmt contract itself will raise the share of US LPG in India’s LPG imports to ~10%. As spot imports are also likely to continue, the actual share could be higher in FY2027, in our view. At 2.2-3 mmt, India’s share in the US LPG exports would still be low, 3-4%. We believe LPG trade could rise further if the current contract does not face many issues.

Delivered prices of US LPG comparable to Middle East

As we have noted earlier, as India switches the bulk of 1.7-1.8 mb/d of Russian crude imports with alternates (from Middle East, US, etc.), apart from likely higher global oil prices, India’s average crude import costs (versus benchmarks such as Dubai) would increase.

However, in our view, increased LPG imports from the US would not be onerous. As the US has looked to export more of its LPG to Asia, Mt Belvieu prices are US$150-200/ton lower than Saudi CP (see Exhibit 8-9). These are good enough to take care of the increased logistics cost. Additionally, the landed prices of US LPG in recent months have been marginally lower than landed prices from Middle East (see Exhibit 11).

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