Government Regulates Natural Gas Supply Amid Middle East Crisis

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The Government of India has issued the Natural Gas (Supply Regulation) Order, 2026, invoking powers under the Essential Commodities Act, 1955, to regulate the production, allocation, and distribution of natural gas in the country following disruptions in global LNG supplies caused by the ongoing conflict in West Asia.

The order, issued by the Ministry of Petroleum and Natural Gas, comes amid disruptions to liquefied natural gas (LNG) shipments passing through the Strait of Hormuz, after several suppliers invoked force majeure due to the escalating crisis in the Middle East.

Priority Allocation Framework Introduced

Under the new regulation, the government has introduced a four-tier priority framework for natural gas supply to ensure essential sectors remain protected.

Priority Sector I – 100% Supply

The following sectors will receive 100% of their average gas consumption over the past six months, subject to operational availability:

• Domestic Piped Natural Gas (PNG) supply
• Compressed Natural Gas (CNG) for transport
• LPG production, including shrinkage requirements
• Pipeline compressor fuel and operational pipeline requirements

Priority Sector II – 70% Supply

The fertilizer sector will receive 70% of its average gas consumption over the last six months, ensuring continuity in fertilizer production critical to agriculture.

However, fertilizer plants must certify that the gas supplied is used exclusively for fertilizer production.

Priority Sector III – 80% Supply

Industries connected to the national gas grid, including:

• Tea industry
• Manufacturing units
• Other industrial consumers

will receive 80% of their average gas consumption.

Priority Sector IV – 80% Supply through CGD Networks

Industrial and commercial consumers supplied through City Gas Distribution (CGD) networks will also receive 80% of their average consumption.

Curtailment of Gas Supply to Certain Sectors

To meet the priority allocations, gas supplies will be curtailed in the following order:

1. Petrochemical facilities, including
   • ONGC Petro additions Limited
   • GAIL (India) Limited’s Pata Petrochemical Complex
   • Reliance Industries Limited’s O2C business and other HPHT gas consumers
2. Gas-based power plants, if required.

In addition, oil refining companies will have to reduce natural gas consumption to around 65% of their six-month average usage, subject to operational feasibility.

GAIL to Coordinate Supply and Pooling

The government has designated GAIL (India) Limited, in coordination with the Petroleum Planning and Analysis Cell (PPAC), to manage the diversion and redistribution of natural gas supplies.

PPAC will also notify a pooled price for diverted gas supplied to priority sectors.

Entities receiving the diverted gas will be required to:

• Accept the pooled pricing mechanism
• Undertake not to challenge the arrangement legally
• Ensure the diverted gas is not resold

Mandatory Compliance by Gas Sector Entities

The order directs all stakeholders in the natural gas ecosystem to comply immediately, including:

• Domestic producers such as
  • Oil and Natural Gas Corporation
  • Reliance Industries Limited
  • Oil India Limited
  • Vedanta Limited
• Gas marketing companies
• LNG terminal operators
• Pipeline operators
• City Gas Distribution companies

The order will override existing Gas Sale Agreements (GSAs) wherever necessary to ensure compliance.

Strategic Significance

The regulation highlights the government’s attempt to shield critical sectors such as households, transport, and agriculture from global energy shocks, particularly amid geopolitical tensions affecting energy routes like the Strait of Hormuz.

The move also signals the government’s readiness to use the Essential Commodities Act framework to manage energy supplies during international crises.