‘Burning more energy to produce less’: Hormuz linked LNG supply cut hits urea output across India

India’s urea plants have cut output to nearly half after disruptions to LNG supplies through the Strait of Hormuz tightened fuel availability, news agency PTI reported on Sunday, citing sources.

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Upstream suppliers invoked force majeure as cargoes moving through the Strait got disrupted, forcing Petronet LNG Ltd to do the same at its receiving terminal. The impact quickly spread across the supply chain, with GAIL (India) Ltd, Indian Oil Corporation Ltd, and Bharat Petroleum Corporation Ltd reducing gas supplies to fertiliser units operating under RasGas contracts.

“Gas supplies have been curtailed to approximately 60-65 per cent of normal levels,” a senior industry official said, adding that when plants factor in scheduled turnarounds over the past six months, effective supply at some units drops below 50 per cent.

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With less fuel available, plants have cut urea output by around 50 per cent. At the same time, they are using more energy to produce less, as large ammonia-urea units lose efficiency when they run below optimal capacity.

“Plants of this scale are not designed to ramp up and down at will,” one plant operations manager was quoted as saying. “Operating under these conditions means you are burning more energy to produce less fertiliser, and that is a direct financial hit.”

Plant managers are also dealing with sudden and late instructions on gas usage after the Ras Laffan LNG Company invoked force majeure. In some cases, fertiliser units receive revised consumption limits late at night, forcing them to quickly adjust operations. “Sudden load variations of this nature are not practically feasible for large train-based ammonia-urea plants,” another industry person said. “They risk equipment failures, plant tripping, and, most critically, safety risks to operating personnel.”

To keep operations stable, some plants have temporarily drawn more gas than allocated, according to the report.

The disruption has also created pricing uncertainty. GAIL informed fertiliser companies in a March 15 letter that it will now bill long-term RLNG volumes at multiple price points, including contract price, GAIL Pooled Price and Gazette Pooled Price, effective March 1, 2026. Since the pooled price remains provisional and may be revised later, companies now face added financial uncertainty while already absorbing production losses.

India remains one of the world’s largest urea consumers, and a prolonged disruption could affect fertiliser availability ahead of the kharif sowing season.

As of March 19, the country holds 61.14 lakh tonnes of urea stock, compared with 55.22 lakh tonnes a year ago, offering some buffer for now.

(With inputs from PTI)