From Spot to Security: India’s LNG Strategy and EU Energy Security

Qatar-Petronet Deal: Cementing India as a Structural LNG Player

The bang came in February 2024: Qatar Energy and Petronet LNG Limited, a joint venture promoted by India’s four leading oil and gas PSUs, signed what Reuters called their "biggest single deal," locking in 10.35 billion cubic meters (bcm)/year of LNG from 2028 to 2048 on a delivered ex ship (DES) basis. Valued at $78 billion, the new commercial terms are projected to save India roughly $6 billion over its term. Beyond the cost savings, the extension secures about 35% of India’s LNG needs, providing volume, tenure and indexation discipline. An explicit hedge against the whiplash of spot markets that punished India’s industry in 2022-23 following Russia’s invasion of Ukraine.

"India's gas market is entering a new phase of growth, supported by significant infrastructure development and clear policy direction," said Keisuke Sadamori, Director of the IEA’s Office for Energy Markets and Security.

India’s LNG supply portfolio is anchored by LTCs with Qatar, its largest supplier, providing about 11.7 bcm/year through deals with Petronet and Gas Authority of India Limited (GAIL) that extend into the 2040s. From the United States (U.S.), India has LTCs split between Berkshire Hathaway’s Cove Point supplying ~3.2 bcm/year and Cheniere’s Sabine Pass supplying 4.8 bcm/year. While ADNOC is expected to supply a total of approximately 2.37 bcm/year of LNG through its decade-long contracts with Indian Oil Corporation Limited (IOCL) and GAIL. Looking ahead, GAIL has bid for a 26% stake in a new U.S. LNG project tied to a 15-year offtake deal for 1.4 bcm/year, expected to start around 2029-2030.

India’s existing and proposed LNG commitments fall well short of its projected import requirements, a gap that is expected to tighten the global LNG market and push spot prices higher during peak periods. While initiatives like the proposed U.S. equity stake offer more predictable supply and strengthen project economics, they address only a small portion of future needs. The remainder of India’s demand will depend on new supply contracts, renegotiations with existing suppliers, or purchases on the spot market. These factors position India as a pivotal swing buyer in the global LNG market.

Infrastructure and policy support strengthen this outlook. State-owned companies are leading this growth. Petronet is building a land-based LNG regasification terminal in Odisha with a capacity of around 6.9 bcm per year at a cost of ₹6,354.80 crore (€698 million) expected to be commissioned by 2028. These projects are supported by government initiatives such as the National Infrastructure Pipeline, and their funding comes from multiple sources: Petronet is negotiating ₹12,000 crore (€1.32 billion) in loans from Indian banks and has also secured a $150 million loan from the Asian Development Bank to expand its Gujarat terminal. While direct EU funding for LNG is limited, the EU engages through the EU-India Clean Energy and Climate Partnership and the European Investment Bank (EIB), which has backed €3.4 billion for clean energy and urban transport projects.

The Qatar-Petronet deal also advances India’s broader political economy objectives. India currently imposes a 2.5% basic customs duty and an additional 0.25% social welfare tax on LNG, but tax is not levied on supplies from the United Arab Emirates (UAE) and Australia under bilateral agreements. New Delhi has been weighing removal of import tax on U.S. LNG and pledged $10-25B in additional U.S. energy purchases alongside a $500B bilateral trade target. Against the backdrop of China’s 15% import tariff on U.S. LNG imports, this move can enhance India’s flexibility in tapping Atlantic cargoes, all while preserving its strategic anchor with Qatar.

Europe’s LNG Lessons: Trump, Trade, and India’s Takeaways

Donald Trump’s "buy American energy" drumbeat in his first term primed European buyers to consider U.S. LNG; the 2022 war then made it imperative. By 2023, the U.S. was the EU’s top LNG supplier, and Europe’s share of U.S. LNG liftings had roughly doubled compared to the pre-crisis baseline.

Trump’s second-term posture pushed harder, pressing Brussels to buy $750 billion of U.S. energy to avoid tariffs, a number the WSJ called "politically charged and logistically unrealistic". While the FT captured the stick: "buy US oil and gas or face tariffs". European capitals, already reliant on U.S. LNG, explored further top-ups to cushion trade frictions. Statements during this period conveyed the same message: more U.S. energy, fewer trade penalties.

In 2024, the European Union imported over 100 bcm of LNG, with the U.S. supplying roughly 45 bcm, making it the bloc’s largest LNG partner. By early 2025, LNG imports overtook pipeline gas for the first time, rising 12% year-on-year, with first-quarter expenditures totalling €5.3 billion. Since the 2022 gas crisis, the share of domestic production and LTCs in Europe’s primary gas supply has fallen from more than 85% in 2021 to around 50%, leaving the EU increasingly vulnerable to the swings of the global spot and flexible LNG markets.

In response, Europe undertook concrete hedging measures. EU buyers signed 15-year Qatari LTCs, including German-routed Qatari flows from 2026 via ConocoPhillips. However, under the European gas package directive, supply contracts must conclude by 2049, creating a structural tension in core markets like Germany.

India’s 2025 LNG Strategy: Navigating Europe’s Premium Pull and Trump’s Trade Pressure

The U.S. tariff hike on Indian goods to 50% in August 2025 has sharpened New Delhi’s focus on energy affordability and the wider trade balance. India has responded by increasing discounted Russian crude imports while retaining room to expand U.S. LNG purchases where they improve its trade ledger. Meanwhile, Europe has sharply increased its LNG intake from the U.S.; imports between January and August 2025 were up around 61% year-on-year, driven by tariff concerns and weaker hydro and wind output. This European demand surge is tightening prompt cargo availability, underscoring the urgency for India to diversify suppliers and strengthen price hedging.

Against this backdrop, India’s LNG playbook rests on three pillars:

1. Tariff and tax alignment - pushing for offsets such as the removal of U.S. LNG duties to reduce delivered costs and enhance energy security.
2. Supplier diversification - increasing flows from Australia and Africa to reduce reliance on Qatar and the U.S., thereby strengthening geopolitical resilience.
3. Balanced contracting - blending long-term agreements with spot purchases to stabilise feedstock costs for fertilizers, city gas, steel, and transport, while using coal flexibly during price spikes.

The domestic benefits of this approach are clear. Shifting coal-heavy sectors such as power, steel, and fertilizers to gas could cut CO₂ intensity by 20-25%. These sectors account for over 40% of India’s industrial emissions, meaning progress here directly supports the Government of India’s 2030 target of a 45% reduction in carbon intensity. It would also enhance urban air quality while safeguarding the competitiveness of Indian exports under the EU’s Carbon Border Adjustment Mechanism (CBAM), where near-carbon-neutral production is expected to become the norm by the mid-2030s and effectively unavoidable by the 2040s.

Transport adds another layer of opportunity. With India’s freight fleet projected to expand from 4 million to over 17 million trucks by 2050, LNG provides an immediate, scalable option for decarbonising long-haul trucking. If around 20% of new truck sales adopt LNG, roughly 520,000 trucks could be on the road by 2030. This would drive additional demand of 7-11 bcm per year, or about 15-24% of current LNG imports. This not only links the energy transition to logistics and manufacturing competitiveness under Make in India but also reduces dependence on diesel in a fast-growing sector.

The fiscal dimension is equally important. The International Energy Agency (IEA) projects that India’s fossil fuel import bill could triple over the next twenty years under the Stated Policies Scenario (STEPS). LNG imports alone are expected to exceed $25 billion annually by 2030, while coverage through LTCs is set to decline after 2028. This underscores the critical role of expanding long-term agreements, which can help stabilize costs, reduce exposure to price swings, and safeguard fiscal space, enhancing India’s negotiating leverage.

LNG serves as both a bridge fuel and a strategic lever for India’s energy transition. It supports the government’s goal of raising natural gas’s share of the energy mix from 6% to 15% by 2030, while paving the way toward net-zero emissions by 2070. This approach aligns directly with Prime Minister Modi’s vision of Viksit Bharat 2047, providing a practical pathway for energy security while facilitating a gradual shift toward low-carbon technologies. Recognizing the limits of fossil fuels, India is simultaneously investing heavily in green hydrogen through the National Green Hydrogen Mission (NGHM), positioning it as a long-term, carbon-neutral solution.

Can India and Europe Transform LNG Competition into Structured Cooperation?

India’s LNG supply strategy has created a structural divergence with Europe. By securing long-term volumes from Qatar while maintaining flexible supply options from the U.S., India reduces its exposure to spot-market volatility and strengthens its negotiating position. This pattern reflects the broader geopolitical backdrop, including the Trump-von der Leyen dialogue on U.S.-EU energy trade, which incentivized EU’s reliance on U.S. LNG. This contrast highlights India’s ability to manage costs for industrial and city gas users. In comparison, European markets, which are dependent on intermediaries and spot cargoes to offset lost Russian pipeline gas since 2022, face higher prices and effectively pay a "security premium" through long-term contracts with U.S. and Qatari suppliers.

In 2024, the EU spent around €41 billion on LNG imports, about 13% of its total energy imports, partly because U.S. LNG is more expensive than supplies from other countries. If the EU were to meet its $250 billion (€215 billion) annual energy purchase commitment, it would need to source roughly 70% of its energy imports from the U.S. These dynamics are reshaping global LNG markets. During tight supply periods, competition for U.S. cargoes intensifies, not just as a transactional challenge, but as a structural contest between flexible, cost-conscious buyers like India and heavily dependent markets such as the EU.

At the same time, this divergence opens avenues for structured collaboration. India’s expanding network of regasification terminals, paired with Europe’s experience in financing and operating LNG infrastructure, offers opportunities for joint investment in floating storage and regasification units (FSRUs), port facilities, and shipping logistics. Coordinated procurement and joint investment can enhance supply chain efficiency and flexibility for both India and Europe, contributing to more stable global LNG prices.

The EIB has €600 million in unallocated financing that could be utilised to support LNG infrastructure projects in India, including regasification units and strategic storage. Framed as transitional measures, these investments can support India’s shift toward lower-carbon energy, for example by enabling future blending of LNG with biomethane or hydrogen. Pairing them with EU-backed green energy initiatives would ensure that EU investments abroad remain aligned with its climate goals, offsetting LNG emissions while supporting India’s decarbonization pathway. Strengthening India’s capacity to manage LNG price swings also reduces competition for short-term cargoes, helping to mitigate rising EU import costs driven by recent U.S. tariff-related energy commitments.

In short, India’s long-term LNG strategy is shaping not only its own energy security but also the competitive and cooperative dynamics of the India-Europe energy corridor.

*Conversion assumes 1 MMT LNG = 1.38 bcm natural gas, based on an average gross calorific value of ~21 MMBtu per ton.
Copyright image : Punit PARANJPE / AFP
Dhamra LNG Terminal Private Limited (DLTPL) near Dhamra port in Bhadrak district of India's Odisha state on October 16, 2024.