Longer LNG import routes may raise logistics and insurance costs: Govt source

Qatari liquid natural gas (LNG) tanker ship being loaded up with LNG at Raslaffans Sea Port, northern Qatar. (AP File/Representative image)

• India's LNG import costs may rise due to longer shipping routes
• Long-term contracts secure most LNG imports, reducing disruption
• Asian LNG prices rise to $15 per mmBTU due to West Asia tensions

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Growing tensions across West Asia are beginning to affect global energy trade flows, with early ripple effects visible in Asian liquefied natural gas (LNG) markets. A senior government official said India’s LNG imports are expected to continue despite the disruptions, though shipments may be rerouted through longer passages, which could push up logistics and insurance costs.

“India’s imports may continue but through longer routes, leading to higher logistics and insurance costs,” the official said, pointing to emerging risks to maritime trade routes in the Gulf region.

Shipments may be rerouted 

The official said geopolitical tensions in the region are affecting energy trade routes, particularly across the Gulf, which is a key transit corridor for LNG shipments headed to Asian markets.

“West Asia tensions are affecting trade routes, especially through the Gulf region,” the official said.

According to the official, cargo movements are likely to continue but shipping companies may need to alter routes depending on the evolving security situation, potentially increasing transit time as well as transportation costs.

Long-term contracts 

Despite the uncertainty in shipping routes, India’s LNG supply is unlikely to face prolonged disruption because most of the country’s imports are governed by long-term supply agreements.

“Changes in LNG supply are difficult because most imports are tied to long-term contracts,” the official said.

“Temporary delays are possible,” the official added, noting that long-term disruption in LNG availability is not anticipated.

India depends heavily on imported LNG to meet its natural gas demand across sectors such as fertilisers, city gas distribution and power generation. Long-term contracts with suppliers, particularly from the Gulf region, provide stability in supply and pricing compared with the volatile spot market.

Supply diversification

Rising prices in the Asian LNG market could also change sourcing dynamics if elevated price levels persist.

“If Asian LNG prices rise above $10 per mmBTU, imports from the U.S. or Norway become viable,” the official said. LNG prices are typically quoted in dollars per million British thermal units (mmBTU), which is a standard unit used globally to measure the energy content of natural gas.

Higher price levels could allow LNG cargoes from producers in the Atlantic basin, including the United States and Norway, to compete economically with supplies from traditional Gulf exporters, potentially opening the door for greater diversification of supply sources.

Asian LNG prices surge

The geopolitical tensions have already pushed up spot LNG prices in Asia, reflecting concerns about potential disruptions in supply and shipping routes.

“Recent disruptions have pushed Asian LNG prices to around $15 per mmBTU,” the official said.

This is significantly higher than the typical price range associated with long-term LNG supplies from Qatar, which are estimated to be around $6–8 per mmBTU, the official added.