Indian Oil has reportedly entered a five-year agreement with global commodities trader Trafigura to purchase 2.5 million tonnes (mt) of liquefied natural gas (LNG), potentially amounting to $1.4bn (Rs118.46bn), as announced by the company’s chairman A S Sahney.

The contract, set to commence in the latter half of this year, will see LNG prices tied to the US Henry Hub benchmark, according to a report by Reuters.

Trafigura is expected to deliver three to four LNG cargoes to India this year and six annual cargoes starting next year.

This deal is part of India's broader strategy to enhance its energy imports from the US, aiming to address its trade imbalance with the country.

Amidst the US-China trade tensions, traders are considering diverting some LNG shipments originally destined for China to India instead, the report said.

India, the fourth-largest LNG importer globally, brought in 26.58mt of LNG in 2024, according to data from Kpler.

The US, currently India's second-largest LNG supplier, is in discussions to further increase supply volumes to meet the demands of India's rapidly expanding economy, the report said.

In a related development, Abu Dhabi National Oil Company (ADNOC) has disclosed plans to start shipping liquefied petroleum gas (LPG) from the US to India from June, part of a strategic pivot due to the US-China trade disputes.

This move by ADNOC is expected to reduce India's LPG import costs while simultaneously allowing the company to meet growing demand in China.

Furthermore, India has introduced major reforms to its domestic gas allocation policy, which will take effect from the first quarter of fiscal year 2026.

The policy revamp includes allocations for compressed natural gas and piped natural gas being made on a two-quarter advance basis and incorporates new well gas from the nomination fields of state-owned enterprises Oil and Natural Gas Corporation and Oil India.