U.S. seeks bigger energy foothold in India. Why it could be a problem for New Delhi

The United States is stepping up efforts to sell oil and gas to India as the world’s third-largest energy market grapples with supply disruptions from the Middle East and finds its alternatives shrinking after Washington ended waivers for Iranian and Russian crude.

But replacing oil and gas from the Gulf countries and Russia with American energy is a hard choice for India, experts said.

High freight costs, refinery infrastructure that is not fully compatible with U.S. crude, and longer delivery times are among the key obstacles to deepening energy trade with Washington.

On Wednesday, U.S. Ambassador to India Sergio Gor met India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri to discuss “energy security and unlocking new opportunities for accelerating growth.”

While Puri did not disclose details of the discussions, Gor said in a post on X that the talks were focused on “expanding access to reliable American energy” to India and “supporting long-term energy security and diversity for both nations.”

Gor is not the first U.S. official to press India to buy more American energy. U.S. President Donald Trump has raised the issue repeatedly, at times even urging India to purchase Venezuelan oil supplied through Washington.

Disruptions in the Strait of Hormuz threaten about 50% of India’s crude imports, 60% of its liquefied natural gas, and almost all liquefied petroleum gas (LPG) supplies, according to a March 2 report by Citi. The impact is already being felt domestically.

Last month, even as U.S. Treasury Secretary Scott Bessent announced a 30-day waiver allowing Indian refiners to continue buying Russian oil, he said India was an “essential partner of the United States” and that Washington expected New Delhi to ramp up purchases of U.S. crude.

On Thursday, Bessent said the U.S. will not be renewing the “general license” on Russian or Iranian oil, and a previous waiver was meant only for sanctioned oil “that was on the water prior to March 11th.”

This has deepened New Delhi’s energy worries,  removing key sources of energy supply as global markets remain tight.

In February, as part of a broader U.S.-India trade deal, New Delhi said it “intends” to import more than $500 billion worth of U.S. energy, information and communication technology, coal, and other products.

With India facing an acute energy supply crunch, Washington is now pressing for those intentions to turn into near-term commitments.

But India is a net energy importer, and fuel accounts for a major share of its import bill. Any sustained rise in energy prices risks widening the current account deficit and undermining macroeconomic stability.

The U.S. wants India to sign an energy deal sooner rather than later, said Mukesh Sahdev, chief oil analyst at energy intelligence firm XAnalysts.

India is in a “stressful situation” as it scrambles to secure oil and gas supplies, and if Washington seals a deal before the conflict in the Middle East eases, it could extract higher prices and more favorable terms, he said.

Since the start of the Iran war, the government has prioritized LPG supplies for households — where it represents the primary cooking fuel — over commercial use. This has led to the permanent closure of around 10% of restaurants and eateries, according to a report released by the PHD Chamber of Commerce and Industry industry body on Thursday.

Following reports that it may take India 3-4 years to restore LPG supply to pre-Iran war levels, the Ministry of Petroleum and Natural Gas on Thursday shared details of the country’s LPG stock.

India’s daily LPG demand stands at about 80,000 metric tons, it said in a post of X, noting that domestic supply accounts for only around 50,000 tons. To bridge the gap between domestic supply and weaker imports from the Gulf, the ministry said it has secured 800,000 metric tons of “assured import cargoes” which are en route from the U.S., Norway, Canada, Algeria, and Russia.

The U.S. is keen to export LPG — a mix of propane and butane — to India as it builds up excess stockpiles, experts said. China had been a major buyer of U.S. propane, but in the absence of a trade deal between Beijing and Washington, the U.S. is seeking new markets.

That dynamic does not extend as easily to liquefied natural gas, where India is a highly price-sensitive buyer and can switch to coal for power generation and fertilizer production if gas prices rise, Sahdev said.

India is already rationing LNG supplies, according to a note S&P Global Energy shared with CNBC, which said power generation, refining, and petrochemicals are lower-priority sectors and therefore more exposed to curtailments. Fertilizers, city gas for residential and commercial use, and transport are among higher-priority sectors, it said.

Most of India’s crude oil imports still come from Russia, Saudi Arabia, Iraq, the U.A.E, and Kuwait. With sanctions once again limiting access to Russian oil and Middle East disruptions squeezing supply, India’s options are narrowing.

However, large-scale imports of U.S. crude are unlikely, experts said, citing a mismatch between crude quality, refinery configurations, and India’s demand requirements. India’s refineries are also geared to maximize diesel output, making U.S. crude less attractive.

There is greater potential for U.S. exports of LNG, LPG, ethane, and propane to India, said Pankaj Srivastava, senior vice president at energy research firm Rystad Energy.

“With infrastructure in the Middle East — particularly in Qatar — damaged, LNG and LPG supply reliability could be in question, and the U.S. can emerge as a natural partner,” he said.

But he cautioned that imports would remain expensive due to the Middle East conflict and broader global supply shocks. Without meaningful discounts, he added, “the economics will not favor U.S. sourcing.”