India targets raising US energy purchases to $25 billion following PM Modi-Trump meet

India aims to increase its purchase of US energy by two-thirds to $25 billion in the near future, foreign secretary Vikram Misri said following the meeting between Prime Minister Narendra Modi and US President Donald Trump in Washington. Earlier, at a joint address by the two leaders, Trump said the trade imbalance between the two countries could be addressed “very easily” by selling more US oil and gas to India. “Prime minister and I have also reached an important agreement on energy that will ensure the United States as the leading supplier of oil and gas to India, hopefully number one supplier,” Trump said.

The US is the fifth-largest crude exporter to India, behind Russia, Iraq, Saudi Arabia and the UAE, supplying about 5% of imports. It accounts for about 30% of India’s long-term contracted LNG imports.

“I think last year we purchased about $15 billion in US energy output. There is a good chance that this figure will go up to as much as $25 billion in the near future,” Misri said.

India’s state-run companies will be under pressure now to look for opportunities to buy more US oil and gas, which aren’t always competitive due to higher freight. Russia, the top crude supplier to India, beats West Asia’s advantage of proximity to India by offering price discounts. Private Indian refiners are unlikely to be affected by the US pressure.

“US suppliers will have to be commercially attractive,” an Indian state refinery executive said on condition of anonymity. Executives said minor volumes can be bought under pressure but for a sustained increase, the US oil must be competitively priced, offsetting the higher freight. The travel cost to India for a barrel of US oil is nearly thrice that from West Asia. Petroleum and natural gas secretary Pankaj Jain said earlier this week that Indian state firms are looking to source more energy from the US but gas is the priority as oil has many suppliers across the globe. The US is the largest LNG exporter in the world.

State-run GAIL already has a long-term LNG import deal from the US. Indian Oil, GAIL and BPCL are in talks for long-term US LNG deals, Jain said.

Some Indian gas companies are, however, against stitching US LNG deals as they are linked to gas benchmark Henry Hub. They prefer crude-linked LNG contracts since the crude market is considered more global and stable.

LNG term deals are usually for ten or more years and have the so-called “take or pay” clause, which means the buyers get locked in for a long time and must pay for the volume even if they have no use for it.