Indian Oil close to signing LPG import deal with Algeria’s Sonatrach for 2027: Report

Indian Oil Corporation (IOC), India’s largest refiner, is close to finalising a long-term deal with Algeria’s Sonatrach to import liquefied petroleum gas (LPG) in 2027, Reuters reported citing sources.

The agreement is part of India’s broader effort to diversify LPG supplies and reduce dependence on the Middle East after disruptions around the Strait of Hormuz affected energy flows and prompted concerns over domestic LPG availability.

Monthly LPG shipments planned

Under the proposed agreement, IOC would lift one very large gas carrier carrying between 45,000 and 55,000 metric tonnes of LPG every month, the sources said. The cargoes would comprise a mix of propane and butane.

IOC previously had a term agreement with Sonatrach but shifted towards purchases from Middle Eastern suppliers in subsequent years, one of the sources said.

The latest arrangement would mark a renewed relationship between the Indian refiner and Algeria’s state-owned energy company as India seeks to widen its supplier base.

Algerian LPG is also priced below the Saudi Aramco Contract Price, according to a second source. The proposed IOC-Sonatrach agreement would be on a free-on-board (FOB) basis, meaning the buyer would take responsibility for transportation and associated costs after the cargo is loaded.

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Algeria emerges as an alternative supplier

India began importing LPG from Algeria in June, with preliminary LSEG trade-flow data indicating that the country is expected to receive around 110,000 tonnes of LPG in August.

The move comes as Indian refiners and fuel retailers look for alternatives to traditional Middle Eastern suppliers. India has also increased purchases of US LPG to compensate for reduced availability from the region.

India plans to source as much as 25% of its LPG imports from the United States in 2027, according to sources cited last month.

The country’s three state-owned fuel retailers—IOC, Hindustan Petroleum Corporation and Bharat Petroleum Corporation—are also expected to float a joint tender to purchase LPG from the US, Reuters reported.

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The diversification is significant for India because LPG is widely used as cooking fuel by households. Any disruption to imports can therefore have a direct impact on domestic supply.

At the same time, India is encouraging consumers to shift towards piped natural gas as part of efforts to reduce pressure on imported LPG. The proposed Algerian supply agreement would give IOC another source of seaborne LPG as the country works to strengthen the resilience of its energy supply chain.