In the contemporary global energy dynamics, the Indo-American hydrocarbon nexus has emerged as a focal point of strategic and economic significance. The United States has grown to become India’s sixth-largest energy trade partner, with bilateral hydrocarbons trade reaching a commendable $13.6 billion in FY23-24. This growing relationship is poised for further augmentation, underpinned by recent diplomatic engagements and mutual commitments to energy security and diversification.
Historically, India’s energy import portfolio has been characterised by a diversified array of sources, with a pronounced reliance on Middle Eastern nations. However, recent geopolitical shifts and economic imperatives have catalysed a recalibration of this paradigm. In the first quarter of 2021, India emerged as the foremost purchaser of U.S. crude oil, importing approximately 4,21,000 barrels per day. This trajectory, however, experienced a modulation, with U.S. oil accounting for less than 5% of India’s total imports in the first eleven months of 2024, as Indian refiners capitalised on economically advantageous Russian crude.
In the liquefied natural gas (LNG) sector, India’s imports from the U.S. have exhibited a discernible upward trajectory. The nation’s LNG procurement strategy has been predominantly oriented towards Qatar, which supplied 45% of India’s LNG imports in 2023-24. Nonetheless, Indian entities such as GAIL (India) Ltd have been proactively engaging in negotiations to amplify LNG imports from the U.S., with considerations extending to acquiring equity stakes in American LNG projects.
The recent meeting between PM Modi and President Trump has imparted renewed impetus to the Indo-U.S. energy partnership. Both leaders have reaffirmed their commitment to bolstering energy trade, with a concerted focus on establishing the U.S. as a principal supplier of crude oil, petroleum products, and LNG to India. This diplomatic concord is emblematic of a shared resolve to fortify energy security, diversify supply chains, and mitigate trade imbalances.
In alignment with these strategic objectives, India has pledged to escalate its procurement of American energy commodities. This commitment encompasses not only augmenting imports of oil and gas but also exploring collaborative ventures in the realm of civil nuclear energy. Such initiatives are poised to engender a more resilient and multifaceted energy architecture, conducive to the exigencies of both nations.
The envisaged amplification of U.S. hydrocarbons within India’s energy matrix is predicated upon a confluence of economic, strategic, and geopolitical determinants. From an economic vantage point, the procurement of U.S. energy resources is anticipated to attenuate India’s trade surplus with the United States, which stood at $35 billion as of the latest assessments. This recalibration is set to assuage trade tensions and establish a more equilibrated bilateral economic rapport.
Strategically, the diversification of energy imports serves as a bulwark against supply chain vulnerabilities and market volatilities. By integrating a more substantial quotient of U.S. hydrocarbons into its energy portfolio, India can diminish its overreliance on traditional suppliers and enhance its energy autonomy. This stratagem is particularly germane in the context of contemporary geopolitical vicissitudes and the imperative for energy self-sufficiency.
Geopolitically, the deepening of energy ties between India and the U.S. is emblematic of a broader realignment of alliances and partnerships. This synergy not only augments bilateral relations but also contributes to the stabilisation of global energy markets. The collaborative endeavours in energy infrastructure development, technological exchange, and policy harmonisation are in the hopes to yield dividends that transcend the confines of the energy sector, permeating into broader economic and strategic domains.
The share of U.S. hydrocarbons and their derivatives in India’s energy basket is to grow by the day, catalysed by strategic diplomacy, economic pragmatism, and a mutual commitment to energy security.