Indian Oil Nears LPG Import Deal With Algeria's Sonatrach For 2027

Indian Oil Corporation (IOC), the country's largest refiner, is reportedly close to finalising a long-term deal with Algeria's state-owned energy company Sonatrach to import liquefied petroleum gas (LPG) starting in 2027, according to a Reuters report citing sources familiar with the negotiations.

What the deal involves

Under the proposed arrangement, IOC would lift one very large gas carrier (VLGC) every month, each carrying between 45,000 and 55,000 metric tonnes of LPG. The cargoes would consist of a mix of propane and butane, the two components that make up cooking gas supplies in India. The agreement is structured on a free-on-board (FOB) basis, meaning IOC would take on responsibility for shipping and associated logistics costs once the cargo is loaded at Algerian ports, rather than Sonatrach delivering it to Indian shores.

Notably, this would not be IOC's first engagement with the Algerian supplier. The two companies previously had a term agreement, but IOC shifted the bulk of its LPG purchases toward Middle Eastern suppliers in the years that followed. The renewed talks mark an attempt to re-establish that older supply relationship at a moment when India is actively rethinking its energy sourcing strategy.

Why India is diversifying away from the Middle East

The push toward Algerian supply is part of a broader, deliberate strategy by Indian refiners to reduce their reliance on Middle Eastern LPG after recent disruptions around the Strait of Hormuz exposed how vulnerable the country's energy supply chain is to a single choke point. The strait, through which a significant share of the world's seaborne oil and gas trade passes, has seen repeated bouts of tension this year, prompting Indian tankers to occasionally reroute or delay shipments as a precaution.

Algerian LPG carries an additional commercial incentive: it is currently priced below the benchmark Saudi Aramco Contract Price, making the Sonatrach deal attractive on cost grounds as well as supply-security grounds. India began importing LPG from Algeria again in June, and preliminary trade-flow data suggests the country could receive around 110,000 tonnes of Algerian LPG in August alone, indicating that volumes are already ramping up ahead of any formal long-term agreement.

Part of a wider sourcing shake-up

The Sonatrach talks are just one piece of a larger reshuffling of India's LPG import book. State-owned fuel retailers IOC, Hindustan Petroleum Corporation and Bharat Petroleum Corporation are also reportedly expected to float a joint tender to purchase LPG from the United States, with India targeting as much as 25% of its LPG imports from the US by 2027. Taken together, the moves suggest Indian oil marketing companies are trying to build a more geographically diversified supply base, spreading risk across the Middle East, North Africa and North America rather than concentrating exposure in one region.

For Indian consumers, the immediate impact of these negotiations is limited, since domestic LPG cylinder prices are influenced by a mix of import costs, subsidies and government pricing policy. But over the medium term, a more diversified supply chain could help cushion India from the kind of price spikes and availability concerns that have periodically followed geopolitical flare-ups near the Strait of Hormuz.

Neither IOC nor Sonatrach has issued an official confirmation of the deal's terms, and the agreement is still described as being in the final stages of negotiation rather than signed.

This article is an original editorial summary based on publicly reported information. It has been independently written for publication and does not reproduce content from any single source.