Geopolitical tensions disrupt LNG flows, squeezing production and margins

India’s urea production has dropped sharply as liquefied natural gas (LNG) supply disruptions linked to escalating tensions in West Asia have forced fertiliser plants to operate at significantly reduced capacity. Force majeure declarations by suppliers disrupted cargo movement through the Strait of Hormuz, triggering gas supply curtailments by key distributors including GAIL (India), Indian Oil Corporation, and Bharat Petroleum Corporation.

Gas availability to fertiliser plants has fallen to nearly 60–65 per cent of normal levels, with some units experiencing effective supply below 50 per cent after accounting for scheduled maintenance shutdowns. As a result, urea output at affected plants has declined by around 50 per cent, creating supply-side pressure ahead of the upcoming kharif season.

Operational inefficiencies have intensified the impact, with energy consumption rising by as much as 40 per cent as large ammonia-urea plants run at sub-optimal loads, leading to lower thermal efficiency. Abrupt and uncoordinated gas supply instructions have further complicated plant operations, raising concerns around equipment stability and safety.

Adding to the uncertainty, fertiliser producers are also facing pricing volatility following the introduction of multiple RLNG pricing benchmarks, including contract and pooled prices, which remain subject to retrospective adjustments. While current urea stocks are higher year-on-year, sustained disruptions could pose risks to fertiliser availability and cost stability in the months ahead.