Why in news?

India plans to increase its oil and natural gas imports from the U.S., following Prime Minister Modi’s meeting with President Trump in February. Indian officials stated that energy purchases could rise from $15 billion to $25 billion.

A Reuters report showed that U.S. crude exports to India reached 3,57,000 barrels per day in February, up from 2,21,000 bpd last year.

What’s in today’s article?

• India's Commitment to U.S. Energy Imports
• Expanding U.S. Energy Supply to India
• India’s Growing Oil and Gas Demand
• India’s Diversified Energy Strategy
• India’s Growing LNG Demand
• Conclusion

India's Commitment to U.S. Energy Imports

• India, the world's third-largest oil importer, has agreed to increase its oil and gas purchases from the U.S.
• This is to strengthen energy ties and secure hydrocarbon supplies, crucial for meeting its 85% import-dependent crude oil needs.
• Boost to Bilateral Trade
  • This move aligns with efforts to double U.S.-India bilateral trade to $500 billion over the next five years.
  • Currently, trade favors India, with a $45.7 billion goods trade surplus in 2024, a 5.4% rise from 2023.
• Diversifying Energy Sources
  • According experts, increasing U.S. energy imports will enhance India’s supply diversity and strengthen long-term energy security.

Expanding U.S. Energy Supply to India

• India aims to establish the U.S. as a key supplier of crude oil, petroleum products, and liquefied natural gas (LNG) to diversify its energy sources and enhance security.
• Strengthening Hydrocarbon Trade and Investments
  • Both countries have agreed to increase trade in hydrocarbons, including ethane and petroleum products, while boosting investments in oil and gas infrastructure and fostering collaboration between energy companies.
• Broader Energy Cooperation
  • Discussions also covered strengthening civil nuclear energy ties and U.S. support for India's full membership in the International Energy Agency (IEA).

India’s Growing Oil and Gas Demand

• In 2023-24, India imported 234.26 million tonnes of crude oil, with import dependence rising to 87.8%.
• Domestic production remained stagnant at 29.36 million tonnes, covering less than 13% of total demand.
• Despite similar import volumes, the import bill fell to $133.37 billion due to lower global prices, compared to $157.53 billion in 2022-23.
• Petroleum and LNG Imports
  • India spent $22.93 billion importing 48.69 million tonnes of petroleum products like LPG and fuel oil while exporting 62.59 million tonnes worth $47.72 billion.
  • The country also imported 31.80 billion cubic metres (bcm) of LNG for $13.405 billion in 2023-24, up from 26.30 bcm in the previous fiscal.
• Strategic Focus on Clean Energy and U.S. LNG
  • India aims to increase natural gas consumption from 6% to 15% of its energy mix, strengthening ties with the U.S. as a key LNG supplier.
  • If sanctions on Russia are lifted, Europe may resume Russian gas imports, prompting the U.S. to expand its customer base and secure new markets.

India’s Diversified Energy Strategy

• While strengthening energy ties with the U.S., India continues to engage with multiple suppliers, including Brazil, Argentina, Suriname, Canada, and Guyana, to ensure supply security and price stability.
• Russia’s Growing Role in India’s Oil Imports
  • Since the Ukraine war, Russia has become a key crude oil supplier to India, offering discounted prices amid G7-imposed sanctions.
  • India purchased Russian crude worth €49 billion in the third year of the conflict.
• Shift in India's Oil Sourcing
  • Traditionally reliant on West Asia, India’s imports from Russia surged from less than 1% to 40% of its total crude oil imports within a short period, making Russia a dominant supplier.

India’s Growing LNG Demand

• India’s natural gas consumption is projected to reach 103 billion cubic meters (bcm) annually by 2030.
• After a decade of slow growth, demand surged by over 10% in both 2023 and 2024, signaling a turning point.
• Domestic Production and Supply Challenges
  • Domestic gas production, which met 50% of demand in 2023, is expected to rise to nearly 38 bcm by 2030.
  • However, India will still rely heavily on LNG imports to meet its growing energy needs.
• Key Drivers of Growth
  • Three major factors—rapid infrastructure expansion, recovering domestic production, and an expected easing of global gas market conditions—are driving India’s gas market transformation.
• Strategic Planning for Energy Security
  • With a wave of new global LNG supply expected, India must ensure supply security through strategic planning and market coordination to maintain competitiveness in its price-sensitive energy market.

Conclusion

The government is implementing a multi-pronged approach to reduce import dependency by promoting alternative energy sources and domestic production. India is expanding the use of ethanol, compressed biogas, and biodiesel to substitute crude oil demand and enhance energy security.

The country is actively developing EV charging infrastructure to support the transition to cleaner mobility and reduce reliance on fossil fuels.