India LNG Supply Crisis: Spot Cargo Challenges Threaten Fertilizer Production

India is facing a growing LNG supply crisis as companies struggle to secure spot cargoes amid volatile prices and repeated tender cancellations. This situation is now raising serious concerns for fertilizer production and industrial supply chains.

India LNG Supply Crisis Intensifies

Indian companies are finding it difficult to procure urgently needed LNG cargoes. The problem has worsened after tensions in the Middle East escalated in late February.

Out of 15 LNG tenders issued for delivery over the next two months, only four have been successfully awarded. Several tenders were either cancelled or not awarded due to pricing challenges.

This highlights a major weakness in the current procurement system.

Why LNG Tenders Are Failing

The core issue lies in the mismatch between tender structure and market conditions.

• Sellers must submit fixed prices valid for a few hours
• LNG prices fluctuate rapidly within the same day
• Sellers face high financial risk

Because of this:

• Sellers are either withdrawing from tenders
• Or adding a risk premium, making LNG more expensive

Buyers, on the other hand, try to renegotiate when prices fall. However, when prices rise, sellers cannot adjust their bids.

Prompt LNG Demand Increasing Costs

India is increasingly seeking prompt LNG deliveries, which is pushing prices higher.

For example:

• LNG for early April was assessed at $22.892/MMBtu
• Prices for later delivery were slightly lower

This shows a clear premium for urgent cargoes.

Short delivery timelines force suppliers to redirect cargoes from other regions like Northeast Asia or Europe. This adds extra costs and logistical challenges.

Tender Cancellations Reducing Market Confidence

Frequent cancellations and rescheduling of LNG tenders are damaging trust in the Indian market.

Each cancellation leads to:

• Recalculation of prices
• Increased risk for sellers
• Higher premiums in future bids

It also reduces the time available between tender closure and delivery, making procurement even more difficult.

Middle East Supply Disruption Hits India

India depends heavily on LNG imports from the Middle East.

• Over 60% of LNG imports come from Qatar and UAE
• Disruptions in the Strait of Hormuz are impacting supply

In March 2025, around 20 cargoes from these regions were delivered to India, showing their importance.

Impact on Fertilizer Sector

The LNG supply crisis is directly affecting the fertilizer industry.

• LNG is a key feedstock for urea production
• India also imports urea from the Middle East
• Supply disruption can lead to fertilizer shortages

Experts warn that this could impact food security, as fertilizer availability is critical for agriculture.

Industrial Demand Weakening

High LNG prices are also impacting industries.

• Many companies are not willing to buy at elevated prices
• Some industries are temporarily shutting down
• Demand uncertainty is increasing

This adds another layer of complexity to LNG procurement.

Government Measures to Control Supply

To manage the crisis, India has taken steps to prioritize supply:

• Domestic gas and RLNG redirected to critical sectors
• Focus on fertilizer and essential industries

However, experts believe securing stable LNG supply remains crucial.

Conclusion

The ongoing India LNG supply crisis is exposing structural issues in procurement systems. Rising prices, tender failures, and geopolitical risks are creating uncertainty.

If the situation continues, it may:

• Increase fertilizer shortages
• Affect industrial production
• Impact overall energy security

India will need to rethink its LNG sourcing strategy to ensure stable supply for key sectors.