How India’s Oil and Gas Supply Chain Works and Why West Asia Tensions Matter

India’s daily life depends on a vast oil and gas supply chain that quietly links households, transport and industry. From LPG stoves and diesel trucks to jets using aviation turbine fuel, almost all rely on crude oil imported from abroad, refined domestically and then moved across an intricate national network.

This system now faces stress from conflict in West Asia. Opposition parties have warned of an LPG crunch, flagging an 'Emergency Situation' and criticising the Modi government as worries grow over supplies. Geopolitical tension is raising concerns about how secure India’s fuel flows really are.

India oil and gas supply chain under Strait of Hormuz and West Asia risk

The biggest vulnerability for India’s oil and gas supply chain lies at sea. The Strait of Hormuz, a narrow passage between Iran and Oman, carries more than 40% of India’s crude imports and almost half of its LNG and LPG cargoes. Any disruption here can quickly disturb shipping schedules and freight rates.

Events in the wider region add to the strain. US-Israel-Iran War News Live Updates: Iran says it targeted Israeli military intelligence & naval base; fresh explosions heard in Dubai 'Legitimate targets': Iran issues warning to US tech firms including Google, Amazon, Microsoft, Nvidia. The Middle East war enters day 12 as US and Israel launch what officials describe as the 'heaviest strikes' on Iran, while Tehran rules out a ceasefire.

India oil and gas supply chain buffers, stocks and current fuel demand

Officials quoted earlier on March 4 said India’s crude stocks could cover about 25 days of demand. Petrol and diesel inventories were also considered sufficient for roughly 25 days, with strategic reserves available to soften short-term supply shocks. Cooking gas availability was estimated at 25–30 days, while LNG cover stood near 10 days.

Despite these risks, consumption in the oil and gas supply chain keeps rising. The Petroleum Planning and Analysis Cell reported India used 21.05 MMT of petroleum products in January 2026, up 2.5% year-on-year. Between April and January of FY2025-26, demand averaged about 5.43 million barrels each day.

India oil and gas supply chain demand outlook and product mix

Government forecasts indicate this demand strength is likely to continue. For FY2026-27, official estimates place total petroleum product use at 250,790 TMT, or around 250.8 million tonnes. Diesel remains the workhorse fuel, followed by petrol and LPG, with smaller shares for aviation turbine fuel, naphtha, bitumen and industrial fuel oils.

The table below summarises the projected product breakdown within India’s oil and gas supply chain for FY2026-27, based on PPAC data:

India oil and gas supply chain basics and crude benchmark prices

Understanding the oil and gas supply chain starts with crude itself. Crude oil is a mix of hydrocarbons formed from ancient marine life compressed over millions of years. Each field produces crude with different qualities, which influence price and how easily refineries can process it into fuels.

Two measurements define crude quality. API gravity shows how light or heavy the crude is compared with water; lighter crude usually yields more high-value fuels like petrol and diesel. Sulphur content is the second factor, splitting crudes into sweet, with low sulphur, and sour, with higher sulphur needing extra treatment.

India oil and gas supply chain pricing and the Indian Basket

Because crude types vary widely, global trade relies on benchmark prices. Brent from the North Sea, West Texas Intermediate in the United States, and Dubai/Oman grades for Gulf exports set reference levels. Contracts for many other crude streams are priced at premiums or discounts to these markers.

India tracks its own reference price called the Indian Basket, calculated daily by the Petroleum Planning and Analysis Cell. This reflects the actual blend processed by domestic refineries, not a single crude. According to PPAC, the basket comprises 78.71% sour grades, averaged from Dubai and Oman, and 21.29% sweet Brent Dated.

During FY2025-26, the Indian Basket averaged $63.08 per barrel in January 2026. The latest PPAC figure for February 2026 placed it near $70.70 per barrel. Since India imports most of its crude, these shifts influence the import bill, inflation and public finances.

India oil and gas supply chain import dependence and shipping routes

Domestic crude output covers only a small slice of the nation’s needs, so India’s oil and gas supply chain leans heavily on imports. Iraq, Saudi Arabia, Russia and the United Arab Emirates are among the main suppliers. After Western sanctions on Russia following the Ukraine conflict, Indian refiners sharply raised purchases of discounted Russian barrels.

New trade patterns have appeared, but exposure to maritime chokepoints continues. The Strait of Hormuz remains particularly sensitive since around one-fifth of global oil trade passes through each day. India has tried to reduce risk by widening its supplier list from about twenty-seven countries a decade ago to around forty now.

India oil and gas supply chain refining strength and exports

The next stage of the oil and gas supply chain lies in refining, where India has built significant capacity. Crude arriving at ports feeds twenty-three refineries, whose combined capacity exceeds 258 million tonnes each year, according to PPAC. These facilities convert raw crude into fuels used in transport, homes and industry.

Refining starts in a distillation unit where crude is heated and separated by boiling point. Light fractions rise to the top, forming gases and petrol-range products. Heavier parts stay lower, becoming diesel, fuel oils and residues. Further units such as catalytic crackers and hydrocrackers then upgrade heavier molecules into lighter, more valuable fuels.

The Jamnagar complex in Gujarat, operated by Reliance Industries, is the world’s largest refinery hub at a single site. Along with refineries run by Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, it forms the backbone of India’s oil and gas supply chain. Strong refining capacity also allows large exports of petrol, diesel and aviation turbine fuel to Asia, Africa and Europe.

India oil and gas supply chain household link through LPG

Among all products in the oil and gas supply chain, LPG is most visible inside Indian homes. Liquefied Petroleum Gas is a blend of propane and butane separated during crude refining or natural gas processing. Under moderate pressure, these gases liquefy and can be stored and moved safely in cylinders.

PPAC data shows India used about 3.03 MMT of LPG in January 2026, a 7% rise from a year earlier. The network delivering this fuel is huge. As of January 2026, there were over 33 crore active domestic LPG connections, including more than 10 crore under the Pradhan Mantri Ujjwala Yojana for low-income households.

Imported LPG lands at coastal terminals before moving to bottling plants, where it is filled into cylinders and then distributed through a national grid of dealers and delivery staff. Usage patterns are shifting though. Auto LPG consumption is falling as compressed natural gas grows, while bulk industrial LPG demand has climbed because it can be cheaper than LNG for certain uses.

India oil and gas supply chain role of natural gas and LNG

Natural gas occupies a different niche in India’s oil and gas supply chain. It burns cleaner than coal or oil, which makes it important for fertiliser production, city gas networks, power generation and various industries. However, moving gas across oceans is technically demanding and cost sensitive.

To ship gas, exporters chill it to around minus 162 degrees Celsius, producing Liquefied Natural Gas. At Indian receiving terminals, including the major facility at Dahej in Gujarat, LNG is warmed and turned back into gas through regasification units, then transported via pipelines to consumers inland.

Expectations had been that gas demand would rise steadily as India shifted to cleaner fuels. Recent PPAC data, however, points to a more mixed picture. Cumulative natural gas use during April–January FY2025-26 was about 4.4% lower than in the same months the previous year, mainly because of higher LNG import prices and softer industrial demand.

India oil and gas supply chain changes from ethanol blending

Ethanol blending in petrol is another key change within the oil and gas supply chain. Ethanol, typically made from sugarcane or grains, can mix with petrol to cut crude use and reduce emissions. Government figures indicate the blending level reached 19.99% in January 2026, effectively meeting the national 20% goal.

Each percentage of ethanol blended means a smaller volume of crude oil is needed to produce the same amount of motor fuel. This helps lower import dependence and supports farmers who supply feedstock, while also trimming tailpipe pollution from vehicles.

India oil and gas supply chain and the broader energy transition

India has pledged to reach net-zero carbon emissions by 2070 and is rapidly adding renewable power. Solar and wind projects are expanding, and electric mobility is starting to influence parts of the transport sector. Yet oil consumption still grows as the economy and population expand.

Higher incomes bring more vehicles, increased aviation and greater industrial output, all of which raise fuel demand. Government and industry therefore keep investing in refineries, pipelines and gas infrastructure even while spending heavily on renewables that should eventually reduce fossil use. The result is an energy system moving in two directions at once.

Crude price movements in this oil and gas supply chain affect every Indian household. When global prices climb, the costs of transport, electricity, fertilisers and cooking fuel often follow, increasing inflation pressure. When prices fall, they provide some relief. As India’s economy grows, the route from distant oilfields to the blue LPG flame in a kitchen will remain one of its most critical economic links.