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India’s Energy Strategy: Expanding U.S. Oil and Gas Imports
Context:
India, the world’s third-largest oil importer and consumer, relies on imports for over 85% of its crude oil requirements. To ensure energy security and supply diversification, India is expanding its energy ties with the United States. The commitment to increase oil and gas purchases aligns with broader economic and geopolitical considerations.
India’s Commitment to U.S. Oil and Gas
- India has agreed to enhance oil and gas procurement from the U.S., potentially increasing purchases from $15 billion to $25 billion.
- The U.S. exported 357,000 barrels per day (bpd) to India in February 2025, compared to 221,000 bpd in 2024.
- The agreement is expected to contribute to the target of doubling bilateral trade to $500 billion over five years.
Strategic Importance of Expanding Energy Ties with the U.S.
- Diversification of Supply: Reducing dependence on West Asian and Russian oil.
India’s Oil and Gas Needs and Imports
- Crude Oil:
- 234.26 million tonnes imported in 2023-24
- 87.8% import dependence (up from 87.4% in 2022-23)
- Domestic production: 29.36 million tonnes
- Petroleum Products:
- Import: 48.69 million tonnes (cost: $22.93 billion)
- Export: 62.59 million tonnes (revenue: $47.72 billion)
- LNG Imports:
- 2023-24: 31.80 billion cubic metres (bcm) ($13.405 billion)
- 2022-23: 26.30 bcm ($17.11 billion, price surge due to Ukraine war)
- Bilateral Trade Balance: Helps offset India’s trade surplus with the U.S.
- Strengthening Energy Infrastructure: Investment in oil and gas infrastructure, including LNG facilities.
- Energy Transition Goals: U.S. energy supplies support India’s aim to increase natural gas consumption from 6% to 15%.
Reasons for Change in India’s Energy Strategy
- Impact of U.S. Energy Policies
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- President Donald Trump’s push for maximising U.S. energy output has resulted in greater oil availability in global markets.
- Increased U.S. oil and LNG supply benefits India amid tightening U.S. sanctions on Russian oil.
- India’s Energy Sources Diversification Strategy
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- West Asia: Traditional supplier but facing geopolitical uncertainties.
- Russia: Became India’s largest crude supplier after Ukraine war sanctions.
- Russian oil accounted for 40% of India’s imports.
- India purchased Russian crude worth €49 billion in 2024.
- Emerging Suppliers: Brazil, Argentina, Suriname, Canada, Guyana, and the U.S.
- Helps reduce over-reliance on a single region and mitigate price volatility.
- Rising India’s LNG Demand
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- Gas demand to reach 103 bcm by 2030 (India Gas Market Report, IEA).
- Domestic gas production will grow but will meet only 38 bcm by 2030.
- Factors driving LNG growth:
- Infrastructure Expansion
- Increasing Domestic Production
- Easing Global Gas Market Conditions
- Fulfilling India’s Energy Transition and Security
- Multi-pronged strategy to reduce import dependency:
- Ethanol blending, compressed biogas, biodiesel.
- Electric vehicle (EV) charging infrastructure.
- Government’s renewable energy push:
- Expanding solar and wind energy capacity.
- Increasing the share of clean fuels in India’s energy mix.
- Multi-pronged strategy to reduce import dependency:
- Geopolitical Considerations and Future Outlook
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- U.S.-India Energy Relations: Likely to strengthen further amid rising trade and investment in the sector.
- Russia-India Energy Ties: India will continue purchasing discounted Russian oil despite Western sanctions.
- Middle East Volatility: Necessitates supply diversification to avoid disruptions in crude imports.
- Global Energy Markets: India’s strategy will be influenced by U.S. production levels, OPEC policies, and geopolitical events.
Conclusion
- India’s commitment to increase oil and LNG imports from the U.S. is a step towards energy security and supply diversification.
- The move balances economic interests, geopolitical considerations, and India’s clean energy transition goals.
- With evolving global energy dynamics, India’s flexible approach will be key to ensuring stable and affordable energy supplies.
