GAIL hints at potential cuts in gas quotas of companies due to escalating conflict in middle east

India’s largest LNG terminal operator, Petronet LNG, has also invoked force majeure for its affected tankers after insurers pulled out of key Middle East routes leading to choking of supplies in the Strait of Hormuz.

• Gail warns of potential gas quota cuts amid Gulf supply issues
• Retail needs like CNG and cooking gas given top priority
• Industries may face supply cuts if Gulf tensions persist

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State owned Gail India, which handles about 70% of the  Indian gas transmission market has written to some  companies on Thursday saying their gas allotment quotas may be reduced on account of Force Majeure in Gulf which has disrupted oil and gas supplies across the world, said people with direct knowledge of the matter. In the communication, the public sector undertaking(PSU) also said retail needs including cooking gas and Compressed Natural Gas(CNG) for vehicles was being given top priority currently, the people cited above added.

The development assumes significance as a wide array of industries including fertilizer, some petrochemicals, textiles, and food processing use liquefied gas for production. Fertilizer industry is a key user of such gas as it is used for producing Ammonia which is base for urea fertilizer while in case of the petrochemicals sector the gas is used to create compounds such as ethylene and methanol, say market participants.

An email sent to GAIL remained unanswered.

“GAIL is currently assessing the situation with respect to any supply curtailment that may need to be imposed on its downstream customers. Notwithstanding the above, LNG supplies to GAIL from other sources/suppliers are currently unaffected. At this stage, the potential impact of the ongoing Force Majeure situation cannot be quantified. The Company is closely monitoring developments and will continue to keep the stock exchanges informed of any material updates,” the company said in a stock exchange filing on Thursday.

“While we have been told there will be cuts to our supply, we don’t know yet to what extent. If the cuts are below 15% of the normal quota, we don’t expect any major issues for industrial units, however if the cuts go beyond the 15% threshold, they could put the companies in a tight spot,” said a senior corporate executive on condition of anonymity. “However, we are optimistic that the gas cut is a short term measure and war situation in the Middle East would improve,” the executive added.

India is facing concerns of potential CNG shortage due to escalating conflict in West Asia. Recent attacks on Qatari facilities and the closure of the Strait of Hormuz have blocked 45% about of India's LNG imports.

Re-prioritisation of Gas Allocation?

The Indian government has also hinted it may re-prioritise gas allocation to different sectors in case gas supply tightens amid the escalating Gulf tensions and shut down of QatarEnergy's LNG production facility, government sources said.

"If gas supply tightens, the country can look at several options including re-prioritisation of gas allocation among various industrial sectors as alternate fuels are available. Any deficit (in gas supply) is managed in a manner that no one is at inconvenience,” official sources said.

India’s largest LNG terminal operator, Petronet LNG, has also invoked force majeure for its affected tankers after insurers pulled out of key Middle East routes leading to choking of supplies in the Strait of Hormuz. State-run Gail India also said that allocation of LNG quantities to the company has been reduced to zero with effect from March 4, 2026 due to supply restrictions imposed by Petronet LNG.

“Our main concern is shutting Qatar's LNG production facility because 25% of global LNG supply comes from Qatar," said the official.