India depends on long-term LNG contracts with Qatar to meet a substantial portion of its gas requirements.

The temporary suspension of cargoes has led to supply cuts of up to 40% for a range of industrial consumers and city gas distribution (CGD) companies.While some industries can switch to alternative fuels, though costlier, the CNG sector - which serves retail consumers through city gas networks, faces significant challenges. CGD operators have cautioned that replacing contracted Qatari volumes with spot LNG priced at more than double the contracted rate could undermine CNG's price advantage and result in a permanent shift of customers to electric vehicles.

India's largest LNG importer Petronet LNG Ltd is unable to dispatch vessels to Qatar to ferry LNG as the Strait of Hormuz is all but closed. Qatar supplies 40% of the 27 million tonnes a year of LNG that India imports annually.Meanwhile, the city gas firms have written to government-owned gas utility GAIL, expressing concerns over the availability of domestic gas and LNG to meet the requirements of CNG for automobiles and piped cooking gas for households. QatarEnergy has also suspended LNG production at Ras Laffan, the world's largest LNG export facility (which has been a major supplier to India), following an Iranian drone attack on its installations.In a filing to exchanges, Petronet LNG stated that it has issued a force majeure notice to QatarEnergy, citing the inability to send its LNG carriers - Disha, Raahi, and Aseem - to the loading port at Ras Laffan.

QatarEnergy has reciprocated by issuing a force majeure notice to Petronet, attributing the disruption to ongoing hostilities in the region.While domestically-produced natural gas meets just about half of the demand, India gathers the rest through LNG imports.If supply tightness persists, price-sensitive industrial consumers may seek alternative fuels, such as liquefied petroleum gas, furnace oil, or naphtha. The extent of this feedstock diversification will be a function of the cost-benefit math. Elevated LNG prices can also translate to costlier gas supplies to fertiliser plants. This, in turn, can increase the government's subsidy burden.

The Association of CGD Entities (ACE), in a March 3 letter to GAIL chairman and managing director, said the reduction in supply of low-priced gas to 60% and restriction of spot or current market supply to zero "are likely to have a significant impact on gas availability to the sector, which may adversely affect priority segments".QatarEnergy stated, "Due to military attacks on QatarEnergy's operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of LNG and associated products."For India, the strait is a transit for roughly 50% of its crude oil imports and around 54% of its LNG supplies. It is the transit for not just LNG from Qatar, but also from the UAE.

Petronet said it has also issued force majeure notices on gas offtakers - GAIL, IOC, and BPCL.Sources said GAIL and IOC are looking at tapping the spot or current market to meet the shortfall, but prices have firmed up. LNG in the spot market is now at $25 per million British thermal unit, roughly double the term contract rates.Reports suggest just 26 vessels (all segments) traversed the Strait, down sharply from 91 on February 28 and well-below February's 135 a day average, after the US-Israel strikes on Iran rattled the region.