New Delhi, Aug 8 (NationPress) India has increased its procurement of liquefied natural gas (LNG) from the United Arab Emirates, with the public sector oil conglomerate Hindustan Petroleum Corporation Limited (HPCL) entering into a 10-year supply agreement with the state-owned ADNOC Gas. This initiative marks a significant step in the evolving energy collaboration between the two nations.

As per the agreement, ADNOC Gas will provide 500,000 metric tonnes per annum (mtpa) of LNG to HPCL, commencing in 2026. The LNG will be sourced from ADNOC Gas’ Das Island liquefaction facility, renowned for its production capacity of 6 mtpa and its status as one of the longest-operating LNG plants globally, having delivered over 3,500 cargoes since its establishment in 1977.

HPCL is set to receive LNG at the newly launched Chhara LNG Terminal in Gujarat, catering to the needs of its refineries, City Gas Distribution Network, and downstream customers. This strategy enables HPCL to curate a diversified portfolio that includes both long-term and short-term LNG contracts, while also ensuring the supply of LNG to meet the increasing energy demands in the Indian market.

This agreement represents ADNOC Gas’s third LNG supply contract with an Indian energy firm within the past year, following deals with the Indian Oil Corporation (IOCL) and GAIL India. The IOCL contract is a 14-year agreement valued between $7 billion and $9 billion, committing ADNOC Gas to supply 1.2 mtpa of LNG, while the GAIL agreement covers 0.52 mtpa over 10 years, also starting in 2026.

Beyond economic factors, the energy partnership between the UAE and India symbolizes a geopolitical strategy. The UAE has become a dependable energy ally for India, especially amidst increasing global LNG competition triggered by disruptions like the Russia-Ukraine conflict. Strengthening energy ties with the UAE lessens India's dependency on other suppliers and aids in addressing challenges such as potential US tariffs on Indian goods linked to oil imports from Russia.

India, ranked as the fourth-largest LNG importer worldwide, aims to elevate the share of natural gas in its primary energy mix from 6.2 percent to 15 percent by 2030, driven by industrial growth, oil refining, and the pursuit of cleaner energy options compared to coal.

The nation's consumption of natural gas is anticipated to triple by 2050, propelled by expansion in sectors like fertilizers, steel production, and construction. Nevertheless, domestic production is not expected to meet this escalating demand, making long-term import agreements like the one with ADNOC Gas crucial for ensuring energy security.

The partnership with HPCL aligns with India's overarching energy strategy under Prime Minister Narendra Modi, who advocates for a transition away from coal to decrease carbon emissions.

Furthermore, the UAE-India Comprehensive Economic Partnership Agreement (CEPA), established in 2022, facilitates these arrangements by abolishing a 2.5 percent import tax on LNG, enhancing the competitiveness of UAE gas in the Indian market. Non-oil trade between the two countries surged to $50.5 billion in the first year post-CEPA implementation, with aspirations to reach $100 billion by 2030.

For ADNOC Gas, this deal is a component of a broader initiative aimed at capturing a larger segment of the global LNG market, anticipated to expand by 15 percent over the next decade, driven by demand in Asia. The company, a subsidiary of the Abu Dhabi National Oil Company (ADNOC), fulfills about 60 percent of the UAE's domestic gas requirements and caters to clients in over 20 countries.

This agreement coincides with ADNOC's efforts to broaden its international footprint, including acquisitions in the US, where it has invested in LNG and green energy projects. This global expansion, coupled with domestic investments like the $13 billion earmarked for LNG capacity growth by 2029, reinforces ADNOC’s ambition to emerge as a key player in the energy transition.