Published : Apr 08, 2026 22:06 IST
Paranjoy Guha Thakurta, Ayush Joshi
A company set up 28 years ago with public money to facilitate imports of natural gas for India’s industries and households is now caught in uncertainty amidst the war in West Asia.
When the government established Petronet LNG Ltd (PLL) in 1998, it kept a calculated loophole in the ownership structure. (LNG stands for liquefied natural gas.) Although the company was set up by government entities that own exactly half of its shares, PLL was designated as a “private” company that shielded it from government scrutiny and audit oversight. However, the Union Ministry of Petroleum and Natural Gas denies that PLL’s ownership design has compromised the company’s working, although independent observers deny this contention.
The war in West Asia has forced PLL to declare force majeure on its suppliers in Qatar after tankers were stranded near the Strait of Hormuz. A force majeure (French for “superior force”) clause is a provision in a contract that relieves those party to the contract from fulfilling their contractual obligations when certain circumstances beyond their control arise (such as natural calamities or “acts of God”), making the fulfilment of the contract inadvisable, commercially impracticable, illegal, or impossible.
The Petronet LNG story stands as a stark reminder of what happens when a company’s structure is meticulously built to evade scrutiny by government auditors, leaving the public at large to pay the price when energy supplies are disrupted, as they have been recently, in a country like ours that imports nearly 90 per cent of its total requirements of crude oil and petroleum products.
The Ministry of Petroleum and Natural Gas, however, believes that PLL has done its job exceedingly well, and that there is nothing wrong with its ownership structure. However, the company’s track record tells a different story. In the past it has entered into more than one controversial deal that was against the public interest. We present a detailed analysis of PLL here, including the government’s version of the company’s functioning.
LNG is the lifeblood of many of India’s industries. It is the invisible fuel that powers fertilizer plants and sustains electricity grids when demand peaks, and feeds millions of city gas networks that snake into the kitchens of citizens. To secure this vital, imported resource for a developing nation such as ours, the government incorporated PLL on April 2, 1998, pursuant to an order of the government of India dated July 4, 1997. The explicit mandate of the company was to build state-of-the-art import terminals across the country’s coastline and negotiate complex global procurement contracts.
The government decided to establish PLL because it was of the opinion that the use of natural gas, “being a cleaner fossil fuel”, should be promoted and that the country should also consider importing LNG.
Since LNG was being imported for the first time, it was decided that four major public sector undertakings (PSUs), namely GAIL (earlier Gas Authority of India Ltd), Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Ltd (BPCL), would hold stakes in the new entity “to ensure development of critical capital-intensive infrastructure and marketability of LNG”.
However, the combined equity stake of the four PSUs was strictly and rigidly capped to add up to exactly 50 per cent, with each of them holding exactly 12.5 per cent. The other half of PLL’s equity capital was held by domestic and foreign institutional investors, mutual funds, and individuals.
By ensuring that the stake of government entities did not exceed 50 per cent, PLL was legally classified as a “private” corporate entity. This decision meant that it was shielded from the mandatory financial audits by the Comptroller and Auditor General of India (CAG), the constitutional authority meant to oversee public finances. PLL was also kept out of anti-corruption oversight by the Central Vigilance Commission (CVC).
E.A.S. Sarma, a retired senior civil servant turned social activist, questioned the implications of this unusual ownership structure in a 2013 letter to the Prime Minister’s Office (PMO). He warned that because a significant amount of public money was invested in PLL through the four PSUs, keeping the company outside the purview of the CAG and the CVC was highly objectionable and left the public stake entirely unguarded.
Conflict of interest
Petronet’s supposedly “private” status is, however, a contradiction in terms if one examines the boardroom activities of the company. The ex-officio Chairman of Petronet LNG is the incumbent Secretary to the Ministry of Petroleum and Natural Gas. This structural arrangement creates an immediate, glaring, and virtually insurmountable conflict of interest. The Petroleum Secretary directly controls the dominant bloc of PSU shareholders and is in a position to influence and guide the company’s commercial decisions. He simultaneously serves as the most senior government official accountable to Parliament for the performance of these very same PSUs.
Sarma highlighted this paradox when he wrote that there was a “serious conflict of interest” in the management of Petronet, and demanded that the arrangement wherein the Secretary of the Ministry serves as Chairman of PLL be discontinued to “protect” the public interest. He pointed out that whenever questions relating to financial propriety or operational efficiency were raised, the Ministry conveniently used the company’s “private” label to dodge statutory accountability, effectively creating a sovereign entity that operated in the shadows.
The government aggressively defended this corporate structure when we sent detailed questionnaires to Hardeep Singh Puri, Union Minister of Petroleum and Natural Gas, and Neeraj Mittal, the Ministry’s Secretary and ex-officio Chairman of PLL.
Ministry rebuttal
In a response sent through the Press Information Bureau, the Ministry stated that classifying Petronet as a private entity was not a loophole but “a deliberate and carefully calibrated design”.
It claimed that the virtues of a 50:50 joint venture were proven in countries such as China and Oman, and the model has been successfully rolled out in the case of HMEL and IndianOil Petronas domestically. (HMEL is a joint venture between Hindustan Petroleum Corporation Ltd or HPCL, a PSU, and Mittal Energy Investments Private Ltd, which is part of the Lakshmi Mittal group. IndianOil Petronas is a joint venture between IOC and Petronas of Malaysia.)
The government pointed out that in China, foreign automobile makers such as Volkswagen and General Motors have formed 50:50 joint ventures with state-owned enterprises such as SAIC Motor or FAW to operate within that country. It added that the government of Oman “uses 50:50 splits with global giants like Shell or BP [British Petroleum] for specific block explorations, ensuring the state retains half [of] the profit and half [of] the decision-making power”.
In India, there are 50:50 joint ventures between PSUs such as those between National Thermal Power Corporation (NTPC) and General Electric (GE) and between Bharat Heavy Electricals Ltd (BHEL) and an entity in the GE group. The government stated that these companies had “proven that such a structure can co-exist with robust governance, commercial discipline, and strong public-policy outcomes”.
The Ministry completely dismissed the conflict of interest allegations, arguing that government servants routinely serve on corporate boards and that the Petroleum Secretary’s role as Chairman of Petronet served a “critical function of a strategic and smooth navigation” for the four PSUs rather than creating any conflict.
It added that Petronet operates as a professional, board-managed company with a “strong and effective corporate governance framework” and that several “oversight controls” are in place.
The Ministry also said that any “perceived notion raising doubts on the institutional framework in the board’s functioning and adherence to statutory and regulatory norms in Petronet is devoid of facts and reflects inadequate understanding of governance framework”.
It added that the board approved “well-defined policies and procedures for procurement and sale of goods and services” and that allegations of misgovernance are “tantamount to denigrating the standards of accountability just because it is private sector in nature, which is absurd”.
According to the Ministry, more than 96 per cent of PLL’s sales and service turnover is from its promoters—GAIL, IOC, BPCL and ONGC—which reflected “the confidence of these promoters in Petronet LNG”.
A natural gas carrier from Qatar that berthed at Petronet LNG’s terminal in Kochi, a file photograph. | Photo Credit: BY SPECIAL ARRANGEMENT
It said that the 50:50 shareholding model was a strategic arrangement where the government and another entity or entities share equal ownership, risks, and rewards. In such cases, the company is governed by a joint board where no one can make unilateral decisions.
The Ministry also said that as a private-entity-classified, PSU-backed, but professionally managed company, Petronet has operated “exceptionally well” and delivered “excellent financial results and policy outcomes”.
Corporate success
The government brags of PLL’s financial success, stating that it has paid Rs.14,906 crore by way of dividends so far against an equity base of a “mere” Rs.750 crore. After a 1:1 bonus issue of shares in July 2017, the company’s paid-up capital went up to Rs.1,500 crore. Further, it said that Petronet’s market capitalisation rose to touch Rs.48,975 crore in February 2026 right before the war in West Asia. Market capitalisation is the amount arrived at after multiplying the number of shares of a company with the market price of the share at a particular point in time. After the conflict, on March 27, 2026, PLL’s market capitalisation had fallen to Rs.36,930 crore.
The Ministry said: “In our well-considered opinion, there is no valid rationale to reclassify Petronet as a government company or to disturb this structure. Any such proposal appears ill-conceived and retrograde, ignoring both the track record and the underlying logic of the chosen model. Raising suspicion about the rationale of this framework at this stage amounts to questioning the wisdom of the sovereign and undermines the robust, results-oriented foundation on which Petronet and similar high-performing companies rest. This is an ill thought and mischievous allegation that has no basis and designed to damage the reputation of PLL.”
But this is only one side of the story.
While the Petroleum Ministry’s defence relies on citing successful precedents such as HMEL, a rigorous fact-check reveals a critical distinction: the source of capital. HMEL is driven by private investment (Mittal Energy), whereas Petronet was built entirely on the back of public money channelled through government-owned entities.
By rigidly capping the public equity at exactly 50 per cent, it can be argued, as Sarma does, the company’s architects did not just secure “operational flexibility”, they legally took Petronet out of the purview of the CAG and the CVC.
Governance standards
Further, dismissing the Petroleum Secretary’s dual role as mere “navigation” ignores universally accepted corporate governance standards laid down by organisations such as the Organization for Economic Cooperation and Development (OECD), a group of the governments of some of the richest countries in the world, which explicitly classify a government regulator chairing a corporate board as a profound and inescapable conflict of interest.
Sarma had also pointed out that if the government truly believes that PLL is a “private” company under the Companies Act of 2013, it “cannot justify” exercising a veto against its PSU shareholders from buying the stake of Asian Development Bank (ADB), a multilateral, international financial institution.
He said that such a veto “can be exercised only under extraordinary circumstances, by adopting the procedure prescribed in the Companies Act” and that the Ministry had not followed the “prescribed procedure”.
According to him, this was an extreme and arguably anti-competitive decision during the sale of ADB’s stake in PLL between 2011 and 2014. When ADB decided to exit its strategic 5.2 per cent investment in Petronet, the four promoter PSUs were eager and financially prepared to acquire its shares. As the original promoters, they believed they possessed the right of first refusal to buy ADB’s shares. In fact, the boards of directors of these four PSUs formally approved the buyout to consolidate their control over the company. However, the government, that is the Petroleum Ministry, intervened and vetoed the purchase.
The rationale behind this veto was criticised by Sarma in another scathing letter dated July 24, 2015, addressed to the Cabinet Secretary and the PMO, in which he claimed that the PSUs were prevented from purchasing the shares for the sole reason that if the combined shareholding of the PSUs exceeded 50 per cent, Petronet would come under the scrutiny of the CVC and the CAG.
Forced by the Ministry’s absolute veto, the PSUs reversed their board decisions. In September 2014, ADB sold its entire stake via block deals to private financial entities, including Citigroup and HDFC Mutual Fund, for Rs. 714.5 crore.
LNG deal with Qatar
How is LNG processed? Natural gas is extracted from the earth, cooled to -162°C to a liquid state (shrinking its volume by 600 times), shipped across oceans in massive, specialised cryogenic tankers, and then “regassified” at the destination port.
PLL signed its first LNG sales and purchase agreement in 1999 with RasGas of Qatar, with first supplies commencing in 2004 to a terminal developed by Petronet at Dahej in Gujarat with capacity of 5 million metric tonnes per annum (MMTPA). As the government points out, the company steadily augmented its capacity to 22.5 MMTPA at its two LNG terminals at Dahej and Kochi in Kerala, which together constituted 43 per cent of the country’s total regassification capacity.
PLL currently handles around two-thirds of the country’s total LNG imports and supplies around one-third of the natural gas consumed. The Dahej terminal is the largest “regassification” terminal in India and is considered the world’s “busiest” such terminal.
Petronet has said that it intends to augment its total capacity to 32.5 MMTPA and venture into the manufacture of petrochemicals.
Contracts and pricing
Since the infrastructure for processing LNG requires billions of dollars of capital investments made upfront, buyers and sellers sign long-term contracts—often lasting between 20 years and 25 years—with complex pricing formulae that are frequently tied to global crude oil prices.
To be clear, linking LNG prices to crude oil is not, and was not, in itself, a mistake. In the 1990s and the first decade of the new millennium, oil indexation was the inescapable standard for Asian energy markets lacking a localised pricing hub. Standard international contracts almost universally employed an “S-curve” formula—a mathematical ceiling designed to protect buyers from infinite price spikes.
Petronet’s failure was not in adopting oil indexation, but rather in abandoning these vital industry-standard protections and agreeing to aggressive formulae that far exceeded global norms.
In 1999, operating under its veil of private autonomy, Petronet signed a 25-year contract to buy 7.5 million tonnes of LNG per annum from Qatar’s RasGas (later renamed QatarEnergy). Initially, the tender was won with a protective price ceiling—a cap that mathematically shielded the Indian economy if global oil prices spiked unpredictably.
However, the contract was secretly and inexplicably renegotiated into a different unique formula that was linked to a five-year average of benchmark crude oil prices with absolutely no price ceiling. When global crude prices soared well past $100 a barrel in the ensuing years, the cost of Qatari gas for Indian consumers skyrocketed to an unbearable $12-13 per million British thermal units (MMBTU).
Worse still was the “lean” gas concession, a move that baffled industry veterans. The original RasGas contract mandated the supply of “rich” LNG, which contains highly valuable higher hydrocarbons such as ethane and propane that are essential for the downstream petrochemical industry.
In its 2006 contract revision, Petronet inexplicably allowed the Qatari supplier to substitute a massive portion of this premium “rich” gas with “lean” gas—methane stripped of these lucrative byproducts—without demanding any corresponding reduction in the purchase prices.
In a letter to the then Prime Minister Manmohan Singh on January 15, 2013, Sarma said that RasGas “violated the contract and started supplying 2.5 million metric tonnes of “lean” gas every year, without any corresponding change in the price of LNG, causing a loss assessed at Rs.27,000 crore over the life of the contract”.
In the letter, Sarma also revealed that Petronet held a contractual first right to pick up a 5 per cent equity stake in the Qatari LNG terminal without paying any premium, but for some “inexplicable reason, Petronet desisted from exercising its right,” effectively throwing away an opportunity to purchase a highly lucrative sovereign asset.
In its response to our questions, the Ministry vehemently defended this 2006 concession, arguing that globally, LNG is priced strictly on energy content ($ per MMBTU). It said that “PLL buys energy, molecules are incidental”, adding that whether the gas is “rich” or “lean” is effectively independent of the price. The Ministry also claimed that the shift of the 2.5 MMTPA tranche to Dahej as “lean” gas was a “pragmatic and commercially logical decision” designed to optimise national gas supply security.
Ministry clarification on gas supply
Here is the full text of what the Ministry wrote in response to our questions. The Ministry stated that in 2025-06, “in the national interest and to meet the growing demand of natural gas in the country, a mutual agreement was arrived at to supply 2.5 MMTPA lean LNG for Dahej terminal from 2009 onwards, when the terminal’s capacity gets augmented from 5 to 10 MMTPA.”
The Ministry added: “To secure these additional volumes, Petronet agreed to a revised deal where the 2.5 MMTPA would be supplied as “lean” gas rather than “rich” gas.”
“It may also be noted that RasGas supplied LNG at prices ranging (between) $5 and $7 per MMBTU in 2009 and 2010 wherein spot LNG prices were significantly higher hovering in the range of $7-9. Be it known that in 2008-09, RasGas also agreed to supply the second tranche as “rich” on best endeavour basis and RasGas has been supplying significant portions (roughly 1.2 to 1.5 MMTPA) as “rich” LNG since 2009.
“The 2006 amendment was an initiative to ensure fuel availability in the country. Furthermore, a major price renegotiation in 2015, reducing the prevailing price of LNG by more than 50 per cent was successfully carried out with RasGas. It is also worth pointing that RasGas has been a reliable and consistent supplier of LNG to India. This was also demonstrated in 2022 during the Russia-Ukraine war, when at the start of war, spot LNG prices touched an all-time high of $84.4/MMBTU and remained 2-3 times more than the long-term contract price for a prolonged duration. RasGas continued its supplies to Petronet LNG at contract prices (around $12-13 per MMBTU) without any disruption despite the fact that many of the suppliers defaulted on their long-term contract commitments during the said period.
“Therefore, the notion that Petronet granted RasGas a financially damaging concession in 2006 is simply devoid of understanding of this sector. The shift of the 2.5 MMTPA tranche to Dahej was a pragmatic and commercially logical decision, designed to optimise national-level gas-supply security. The criticism that this amounted to a sacrifice of value appears to have misunderstood; both the pricing basis of LNG and the broader energy-policy context of that period.”
“It seems that such allegations are aimed to malign reputation of the company despite the facts that would attest to the contrary,” the Ministry stated.
On the Ministry’s defence of its decision, Sarma told us over email: “The calorific value of “rich” LNG is higher compared to that of “lean” gas. Therefore, going by the explanation given by the Ministry, any reduction in the calorific value should correspondingly result in a lower price per MMBTU.”
Loss in downstream value
Our own investigation revealed that the Ministry’s assertion that “molecules are incidental” is technically accurate but commercially evasive. It is true that gas is billed by energy content; “rich” LNG contains highly valuable “heavier” hydrocarbons which, as stated, are the foundational raw materials for the manufacture of petrochemicals. When Petronet surrendered this “rich” gas without demanding a discount, the country lost billions of dollars in downstream value.
If the Qatari deal caused enormous notional losses, the Australian Gorgon contract nearly broke the back of the entire Indian gas market. The Ministry stated that PLL “signed a sales and purchase agreement with Mobil Australia Resources Company Ltd (MARC) in August 2009 on FOB [free-on-board] basis which was linked to supplies from Gorgon project in Australia.”
It added: “The price of LNG was linked to [the price of] JCC [Japanese crude cocktail, [used as] a benchmark price] based on then prevailing global prices of LNG. The first supplies under the contract started in January 2017. Therefore, the company did not import any LNG from the Gorgon Project in 2013-14.”
This does not tell the full story. The August 2009, 20-year agreement to purchase LNG from ExxonMobil’s Gorgon project in Western Australia was hastily signed at a notoriously steep price of 14.5 per cent of the prevailing crude oil rates at the port of loading. By 2013, with global oil prices high and the Indian rupee depreciating against the US dollar, the delivered cost of Gorgon LNG was projected to hit a staggering $17-18 per MMBTU. Domestic consumers simply could not afford the electricity or urea produced from gas priced at $17 per MMBTU.
In July 2013, a panic-stricken GAIL officially asked PLL’s management for a renegotiation of the contract, warning that the gas would find virtually no takers in the Indian market and trigger catastrophic “take-or-pay” penalties—a contractual clause forcing the buyer to pay for the gas even if they refuse delivery. The company’s immediate response to GAIL’s panic call in 2013 was to push back and demand a legal justification. Because the original 2009 Gorgon agreement explicitly lacked any price renegotiation clause, PLL asked GAIL to formally explain the basis on which a signed, binding international contract could simply be “reopened”.
The PLL management was hesitant to unilaterally approach ExxonMobil and take on the legal and diplomatic risks. Instead, they demanded that the other three PSU promoters of Petronet—ONGC, IOC, and BPCL—also formally weigh in and give their opinions on the matter before any approach was made to the Australian company.
Despite initial stonewalling, the grim market realities GAIL warned about could not be ignored. Recognising that the imported gas would indeed find no buyers in India at $17-18 per MMBTU, Petronet eventually yielded to the pressure and went to the negotiating table with ExxonMobil.
Executive payouts
One might reasonably assume that leading a major national infrastructure company into such a perilous financial crisis—threatening the viability of downstream power and fertilizer plants—would result in a severe reckoning for its executive leadership. Instead, PLL’s key management personnel obtained a financial bonanza.
According to the company’s 2013-14 annual report, it paid a “commission-on-profit” to its top brass while the company’s core procurement strategies were imploding. CEO A.K. Balyan, Director (Finance) R.K. Garg, and Director (Technical) Rajendra Singh each received Rs.15 lakh in commissions over and above their already substantial base salaries.
Even more controversial was the payout to “independent” directors. Under standard corporate governance norms, independent directors are supposed to serve as objective watchdogs to protect the public interest and challenge the executive board, if required.
Yet, independent directors Ashok Sinha and B.C. Bora—both former PSU executives themselves—received Rs.5 lakh each in commissions. In his July 2015 letter to the Cabinet Secretary, Sarma condemned the “huge remuneration amounts granted by Petronet to its “independent” directors who are expected to remain independent as envisaged in the Companies Act”.
When asked by us, the Ministry offered a rigid technical deflection. First, it dismissed the timeline of the Gorgon crisis, arguing that because actual supplies from Australia did not commence until January 2017, our suggestion that there was a crisis in 2013 crisis was “misplaced and grossly incorrect”.
More importantly, the Ministry defended the payouts to PLL’s top personnel by citing Section 149(9) of the Companies Act, 2013, which legally permits independent directors to receive profit-related commissions. It argued that this money is viewed “not as a bonus for operational success, but as compensation for the significant fiduciary responsibility and time commitment required for objective oversight”. The Ministry also said that our query reflected an “inadequate understanding” of corporate law.
We believe that the Ministry is attempting to rewrite the history of the Australian deal. By claiming that our contention of a crisis in 2013 was “misplaced” simply because physical gas deliveries did not begin until 2017, the Ministry is ignoring the reality of long-term contracting. The Gorgon deal was signed in 2009 with what can be argued as a “toxic” formula tied to a price that was 14.5 per cent of the benchmark prices of crude oil. By 2013, with crude prices soaring, it was clear that the company would not be able to sell the gas at such high prices in India.
GAIL’s letters that year expressing not just concern but panic were not premature; they were the desperate cries of a public distributor staring down a catastrophic, legally-binding liability long before the first ship set sail. The bottom line for us is that the Ministry claiming there was no crisis in 2013 because the gas had not physically arrived is like a passenger noticing that a ship is heading straight for an iceberg, but the captain refuses to steer the vessel away because the collision will not happen for another three miles. For PLL, the liability was locked; the panic in 2013 was entirely justified.
While the Ministry correctly cited Section 149(9) of the Companies Act, this legal shield sidesteps the deeper ethical rot. We argue that paying massive profit bonuses to the very watchdogs tasked with auditing the company’s risk profile fundamentally compromises their objectivity.
In his July 2015 letter, Sarma revealed an even darker downstream effect of these overpriced contracts: the government was using Petronet’s exorbitant import costs as a justification to inflate domestic gas prices. He alleged that the Ministry was “touting the Petronet prices as one of the benchmark prices for fixing the price of domestic natural gas from the KG [Krishna-Godavari] basin [in the Bay of Bengal], thus passing on the artificial profitability margins to private oil companies, all at the expense of consumers of electricity, fertilizers, and so on”.
Renegotiating contracts
The structural loophole in Petronet was being weaponised to extract wealth from the domestic market. By late 2015, the company realised that imported gas was too expensive to sell domestically and failed to lift its contracted volumes. As a result, it was staring at a staggering Rs.12,000-crore liability to Qatar under take-or-pay clauses. This warranted a high-level diplomatic rescue mission orchestrated by the Prime Minister’s s Office. Leveraging a sudden crash in global oil prices and India’s substantial purchasing power, the government successfully renegotiated the RasGas contract in December 2015. The aggressive diplomacy slashed the price of Qatari gas to $6-7 per MMBTU and secured an almost-miraculous, complete waiver of the Rs.12,000-crore penalty.
QatarEnergy's LNG production facilities amid the war in Iran, in Ras Laffan Industrial City on March 2, 2026. | Photo Credit: REUTERS
Emboldened by this victory, and also the requests by GAIL, India forced the renegotiation of the contract with ExxonMobil in Australia for supply of LNG from its Gorgon gas project in September 2017. (The project that was completed in 2017 entails the extraction of natural gas from under the sea in Western Australia and an LNG plant, that country’s “most expensive-ever resources development” project.)
India was able to lower the indexation proportion from 14.5 per cent to 13.9 per cent of the price of the benchmark Brent crude at the port of delivery, saving the company an estimated Rs.10,000 crore over the remaining life of the contract. Still, the celebrated diplomatic triumphs of 2015 and 2017 merely masked the underlying, systemic fragility of India’s energy supply chain.
Iran crisis and impact on suppply
In 2026, simmering geopolitical tensions between the US, Israel, and Iran rapidly escalated into a direct, sustained, and kinetic military confrontation following deadly joint military strikes from February 28 onwards, a war that was continuing at the time of writing this article. The Strait of Hormuz effectively became a militarised dead zone. This incredibly narrow waterway is the vital, irreplaceable maritime chokepoint through which roughly 54 per cent of India’s LNG and over 85 per cent of its liquefied petroleum gas (LPG) imports must pass.
The geopolitical shock instantly tested the resilience of Petronet’s opaque, heavily concentrated procurement strategies. The theoretical risk of supply chain concentration became an acute, system-wide crisis when a coordinated swarm of drone strikes reportedly hit critical industrial facilities in Ras Laffan, Qatar, forcing the world’s second-largest LNG exporter to abruptly halt production.
Trapped by maritime blockades, soaring insurance premiums, and acts of war that nullified standard shipping policies, Petronet LNG was forced to issue a formal force majeure notice to its primary supplier, QatarEnergy, on March 3, 2026.
Ship-tracking data showed Petronet’s LNG tankers—Disha, Raahi, and Aseem—stranded or forcibly rerouted, unable to safely go through the strait. Corresponding notices of supply failure were immediately fired off to Petronet’s domestic buyers, including GAIL, IOC, and BPCL. The downstream fallout was instantaneous and brutal: by March 4, the allocation of Qatari LNG to GAIL’s national grid was slashed to zero.
As global spot LNG prices went up by 150 per cent overnight—surging from roughly $10 per MMBTU to a crippling $24-25—QatarEnergy formally declared its own force majeure on March 4, 2026, officially suspending its supply obligations to affected buyers. Panic gripped the financial markets, sending Petronet’s shares crashing to their lower circuit limits on the Bombay Stock Exchange. India’s fertilizer plants were immediately offered take-or-pay contracts to absorb the price spikes, directly threatening the country’s food security.
It took less than a week for the international supply vacuum to directly hit Indian kitchens. The corporate boardroom manoeuvres eventually impacted the citizen. Under immense pressure, state-run oil marketing companies quietly updated their retail pricing portals.
On the morning of March 7, households woke up to a Rs.60 hike in the price of a standard 14.2-kilogram domestic LPG cylinder. This pushed the household cooking cost to Rs.913 in New Delhi and Rs.939 in Kolkata. Commercial establishments, the backbone of the urban food economy, bore an even heavier burden, with 19-kg cylinders spiking by Rs.115 in a single day, driving up food prices.
The surge exposed the immediate, terrifying vulnerability of everyday Indian consumers to the volatility of imported gas. The timing of the crisis forced the government into an aggressive, highly defensive political posture regarding its broader energy security architecture.
Attempting to calm panicked markets and angry voters ahead of crucial State Assembly elections, the government quickly released reports highlighting a massive domestic energy buffer. It said that over 250 million barrels of crude oil and refined products were securely distributed across strategic, bomb-proof underground caverns in Mangalore, Padur, and Visakhapatnam. In early March, the Central government also invoked the Essential Commodities Act (ECA), 1955, and directed all public and private oil refineries to maximise LPG production to ease domestic supply concerns.
While such political manoeuvres and strategic petroleum reserves provide a robust, mathematically sound cushion for liquid crude oil used in transportation, the on-the-ground reality of the distinct, highly specialised supply chains of super-cooled LNG and pressurised LPG is different. These critical gases cannot be easily stored in vast quantities underground for years at a time. Their supplies remain fundamentally tethered to the explosive geopolitics of West Asia.
The Petronet saga, stretching from its inception in the late 1990s through the highly controversial contracts and executive payouts of the 2010s, all the way to the devastating disruptions of March 2026, encapsulates the frailty of India’s energy dependency.
The authors are independent journalists. Paranjoy Guha Thakurta is the lead author of the book titled Gas Wars: Crony capitalism and the Ambanis published in 2014.
