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The recent geopolitical conflict in West Asia has severely disrupted global energy flows, culminating in the suspension of tanker movements through the Strait of Hormuz. With Qatar forced to declare force majeure and other major producers halting shipments to South and East Asia, there are no signs of immediate reprieve for shipping companies or consumers. For India, this disruption has effectively severed 30% of its imported LNG supply—equivalent to 1 to 1.5 million tonnes, or roughly 25 to 38 cargoes per month. By March, the fallout reduced this crucial import channel to a meager 190,000 tonnes, creating a massive shortfall against the nation’s consumption needs.
Far from a swift resolution, the ongoing crisis is forcing India into the highly volatile spot market to bridge a widening supply deficit. This reliance dictates that LNG cargoes are secured at a steep premium, exemplified by the Gujarat State Petroleum Corporation’s (GSPC) recent $21/MMBtu purchase of a Nigerian cargo. Yet, even premium pricing cannot guarantee supply security. Exporters outside the Middle East face severe logistical constraints in rerouting cargoes to India on short notice; shipments from the US and West Africa typically require 20 to 45 days to reach Indian import terminals..
Even before the conflict began, India had been actively working to diversify its LNG sourcing, evidenced by the reduction of imports from Qatar from 56.83% to 42.91% in the preceding financial year—a process that inherently takes time. To mitigate pricing risks, India has rapidly increased imports from the United States, with further incremental increases promised following a recent US-India trade deal. Critically, US LNG contracts are linked to the Henry Hub natural gas benchmark, providing an essential hedge against the volatility of crude oil prices..
The ongoing conflict has driven Asian spot LNG (JKM) prices above $20 per MMBtu, a global price shock that is rapidly affecting India’s domestic supply chain. In response, the Indian government and gas distributors are implementing strict rationing measures, prioritizing critical sectors and residential households. City gas distributors have imposed emergency consumption limits and strict usage mandates for industrial customers. Given that LNG (once vaporized into gaseous form) is essential for fertilizer production (providing hydrogen), supplies are being prioritized ahead of the peak agricultural sowing season. As a result, major industrial consumers are experiencing production cuts and significant cost increases. Some are temporarily resorting to more highly-polluting alternative fuels, such as fuel oil, petroleum coke, or naphtha.
This crisis serves as a structural impetus for India to expedite its national investments in strategic LNG storage facilities, diversify its LNG imports, and enhance domestic gas production. Conversely, industrial users, having experienced the detrimental effects of gas market volatility, are likely to accelerate their shift towards renewable energy and electrification.
The Australian context
Australian LNG exports have historically been heavily skewed toward the Asia-Pacific region, with China, Japan, and South Korea collectively absorbing approximately 78% of contracted long-term shipments. The remaining volumes are allocated to smaller Asian consumers or sold on the spot market. While facilities like Gladstone and Prelude occasionally generate surplus production for spot sales, Australia’s export agility is structurally constrained. Unlike the US model, which offers flexible, Henry Hub-linked contracts, the bulk of Australian LNG is tied to traditional oil-indexed contracts with strict destination clauses. Consequently, Australian producers have historically possessed limited capacity to rapidly redirect baseline cargoes during global crises like the one in West Asia.
Historically, Australia has shown minimal inclination towards selling LNG to India in recent years, a reluctance driven by factors such as the inability to dedicate a new LNG production facility to India on a long-term basis and price sensitivities. Furthermore, previous contentious contract negotiations resulted in one LNG contractor perceiving a risk to “contract sanctity.” However, the conflict in West Asia presents a potential catalyst for India to urgently seek LNG supplies from Australia, a prospect previously overlooked due to concerns regarding price sensitivity and market volatility. Compounding this shift, India has recently improved its gas pipeline infrastructure, connecting LNG import terminals to major domestic customers, exemplified by the recently commissioned Kochi-Bengaluru pipeline. This debottlenecking of infrastructure will be crucial for the successful maintenance of long-term contracts with Australian enterprises.
The congruence of India’s substantial dependence on natural gas from Qatar and other Middle Eastern exporters, coupled with Canberra’s recognition of India as a significant, long-term growth market for Australia’s uncontracted LNG volumes, presents a mutually beneficial scenario for both nations. As India contends with potential gas shortages in a conflict environment and pursues long-term goals for a gas-based economy, secure and diversified LNG supplies are paramount. Conversely, for Australia, the maturation of traditional North Asian markets, evidenced by Japan’s nuclear reactor restarts and China’s anticipated shift toward direct Russian pipeline gas—reflected in the 28% year-on-year decline in LNG exports to China during the first half of 2025—necessitates new markets. Furthermore, geopolitical considerations, such as Australia’s participation in AUKUS and the QUAD within the Indo-Pacific region, introduce complexities to Australia-China trade relations. Should China elect to discontinue its reliance on Australian LNG, India is positioned to become Australia’s primary recourse for mitigating this substantial market deficit.
The institutional framework between Australia and India for energy trade through Australia-India Economic Cooperation and Trade Agreement (ECTA), with tariffs on Australian LNG at 0%, provides massive long-term fiscal certainty for Australia. The Australian government for instance officially offered to sell LNG to India to help replace the lost Qatari volumes recently, signaling a major strategic pivot toward direct energy partnership during the escalation of West Asia.
Australia and India maintain enduring cooperation in maritime surveillance through the QUAD framework. This collaboration can contribute to the protection of energy flows, ensuring an uninterrupted, secure, and reliable supply route for India, independent of the Middle East. Moreover, Woodside Energy Ltd., Australia’s leading LNG producer, is strategically positioned to leverage its recently acquired US-based facilities to offer India “destination flexibility”—a contractual provision often absent in agreements with Qatar. This arrangement enables Woodside to supply India with Australian gas while concurrently utilizing its US assets to serve the European market, thereby optimizing global shipping logistics and costs.
India’s ambition to increase the share of natural gas in its energy mix from about 6.5% to 15% by 2030 creates unparalleled structural growth opportunities for Australia. To achieve this 15% target, industry experts, such as the CEO of Petronet LNG, project that India will require annual LNG imports of approximately 120 million tonnes by 2030. This substantial demand is underpinned by the accelerated expansion of City Gas Distribution (CGD) networks, consistent baseload use by the fertilizer sector, and the shift away from coal in heavy industries like steel and ceramics.
Australia’s LNG producers face a critical need for strategic agility in negotiations with India. Delaying talks in an attempt to extend them far into the future jeopardises the development of this crucial trade relationship. Australia must recognise that North American suppliers are already actively targeting the Indian market, presenting a significant competitive threat. Notably, Canada, which officially enters the global LNG market in mid-2025 with its LNG Canada project, demonstrated strategic opportunism by proactively offering gas supplies to India in March 2026 to mitigate the supply shock caused by the West Asia conflict. If Australia fails to expedite its negotiations, it risks losing vital market share to these emerging North American rivals.
Australia should pivot away from a short-term, opportunistic spot-market strategy toward securing the kind of long-term LNG agreements that have historically defined its export business over the past four decades. The future structure of the Australia-India energy trade will be determined by how quickly Australian corporate boards can adapt to India’s price-sensitive demands and successfully lock in these enduring contracts.
Writer is a senior process consultant based in Perth, Australia
These pieces are being published as they have been received – they have not been edited/fact-checked by ThePrint.