LNG Supply Disruptions Force Indian Urea Plants to Cut Output Amid West Asia Tensions

New Delhi: India’s fertiliser sector is facing mounting pressure as urea manufacturing units scale back operations בעקבות disruptions in liquefied natural gas (LNG) supplies routed through the Strait of Hormuz. The supply constraints, triggered by force majeure declarations linked to escalating geopolitical tensions in West Asia, have forced several plants to operate at significantly reduced capacity.

Petronet LNG Ltd, which operates the country’s largest LNG import terminal, invoked force majeure after upstream suppliers failed to deliver contracted volumes due to shipping disruptions tied to the ongoing conflict involving the United States, Israel, and Iran.

In response, major state-run distributors—GAIL (India) Ltd, Indian Oil Corporation, and Bharat Petroleum Corporation Ltd—have curtailed gas supplies provided under agreements with Ras Laffan LNG Company to fertiliser plants across the country.

Industry sources indicate that gas availability has dropped to approximately 60–65% of normal levels. When combined with scheduled maintenance shutdowns at several facilities in recent months, effective supply at certain plants has fallen below 50%, leading to a sharp contraction in urea output.

As a consequence, production at affected units has declined by nearly half. Compounding the challenge, energy consumption has surged—rising by as much as 40%—as large ammonia-urea complexes lose operational efficiency when run below optimal capacity.

“Facilities of this scale are not designed for frequent load adjustments,” a plant operations manager noted. “Operating under constrained conditions means higher energy input for lower output, resulting in a direct financial burden.”

Operational challenges have further intensified the situation. Industry officials report that directives to adjust gas consumption have often been issued at short notice, sometimes late at night, following force majeure notifications from suppliers. This has made it difficult for plant operators to respond effectively.

“Sudden load fluctuations are not practically feasible for large, train-based ammonia-urea plants,” an industry source explained. “Such variations increase the risk of equipment failure, plant tripping, and, most importantly, safety hazards for personnel.”

Adding to the uncertainty, GAIL (India) Ltd has informed fertiliser manufacturers that long-term regasified LNG (RLNG) supplies will now be priced using multiple benchmarks from March 1, 2026, introducing further volatility in input costs.

Despite the disruptions, India’s urea inventory remains relatively stable in the near term, with stocks recorded at 61.14 lakh tonnes as of March 19—higher than the 55.22 lakh tonnes reported during the same period last year. However, industry analysts caution that prolonged supply constraints could impact fertiliser availability ahead of the critical kharif sowing season, potentially affecting agricultural output.

As geopolitical tensions persist, the fertiliser sector remains vulnerable to further supply shocks, underscoring the broader economic implications of disruptions in global energy supply chains.