Hormuz shock hits India’s urea plants as LNG disruption halves output ahead of kharif

Force majeure on LNG cargoes curtails gas supply to 60–65%; plants run inefficiently at low loads as kharif season approaches

• Urea output at plants has dropped by around 50 percent
• LNG supply disruptions through Hormuz trigger force majeure
• Fertiliser plant energy use up 40% despite lower output

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India’s fertiliser sector is facing a sharp disruption, with urea plants operating at sharply reduced levels after LNG supply disruptions through the Strait of Hormuz triggered force majeure declarations, industry sources told PTI.

Petronet LNG Ltd, operator of India’s largest liquefied natural gas terminal, declared force majeure after upstream suppliers flagged their inability to deliver contracted cargoes amid disruptions in the key shipping corridor, sources told PTI.

Supply cut, output halves

The supply shock has cascaded through the system.

State-run gas distributors, GAIL (India) Ltd, Indian Oil Corporation (IOC), and Bharat Petroleum Corporation (BPCL), have curtailed supplies under RasGas contracts to fertiliser units across the country.

“Gas supplies have been curtailed to approximately 60–65 per cent of normal levels,” a senior industry official told PTI.

Factoring in scheduled plant turnarounds over the past six months, effective gas availability at some units has fallen below 50 per cent, the official added.

The impact on production has been immediate: Urea output at affected plants has dropped by around 50 per cent.

More fuel, less output

The disruption has also exposed a structural inefficiency.

Running large ammonia-urea complexes at reduced loads has sharply increased energy consumption. Plant officials said energy use has risen by as much as 40 per cent, even as output declines.

“Plants of this scale are not designed to ramp up and down at will,” a plant operations manager told PTI. “Operating under these conditions means you are burning more energy to produce less fertiliser, and that is a direct financial hit.”

Operational stress and safety risks

The situation has been aggravated by coordination issues.

Following the force majeure invoked by Ras Laffan LNG Company, fertiliser units have sometimes received gas consumption instructions late at night, forcing abrupt operational changes.

“Sudden load variations of this nature are not practically feasible for large train-based ammonia-urea plants,” another industry source told PTI. “They risk equipment failures, plant tripping and, most critically, safety risks to operating personnel.”

Several plants were forced to temporarily overdraw gas allocations to maintain operational safety, sources said.

Pricing uncertainty adds to pressure

The disruption has also spilled over into pricing.

In a letter dated March 15, GAIL informed fertiliser companies that long-term RLNG supplies would now be billed at multiple price benchmarks, including contract price, GAIL pooled price, and Gazette pooled price, effective March 1, 2026.

Industry sources said the pooled price remains provisional and subject to retrospective adjustments under government guidelines, adding a layer of financial uncertainty for producers already dealing with reduced output and higher operating costs.

Why this matters: Kharif risk ahead

India is one of the world’s largest consumers of urea, and any sustained production disruption could affect fertiliser availability ahead of the critical kharif sowing season.

While current stock levels offer some cushion, 61.14 lakh tonnes as of March 19, compared with 55.22 lakh tonnes a year ago, analysts warn that prolonged supply constraints could tighten availability if disruptions persist.

The larger trigger: Hormuz disruption

The disruption traces back to escalating tensions in West Asia, which have impacted LNG cargo movement through the Strait of Hormuz, a key global energy chokepoint.

With gas supply curtailed and costs rising, India’s fertiliser sector is now caught in a squeeze that links geopolitics directly to farm economics.